Indoor Harvest Corp - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

or

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ YES ☐ NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

☐ YES ☒ NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 2,483,396,041 common shares issued and outstanding as of September 30, 2021.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue” or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:

Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.

When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.

PART I - FINANCIAL INFORMATION

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

For the Nine months Ended September 30, 2021

For the Nine months Ended September 30, 2020

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INDOOR HARVEST CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Organization

Indoor Harvest Corp (the “Company,”) is a Texas corporation formed on November 23, 2011. Our principal executive office was located at 7401 W. Slaughter Lane #5078, Austin, Texas 78739, and such address is used in the interim. We are in the process of establishing new offices.

On August 14, 2019, the Company established a wholly owned subsidiary, IHC Consulting, Inc. (“IHC”), in the State of New York of the United States of America. IHC Consulting will provide consulting and other services to the Company and others on a contracted basis.

COVID-19

A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. The Company has instituted some and may take additional temporary precautionary measures intended to help ensure the well-being of its managers and minimize business disruption. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at September 30, 2020. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to develop its business plan.

Interim Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they may not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020, as not all disclosures required by generally accepted accounting principles for annual financial statements may be presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended December 31, 2020.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the U.S. Securities and Exchange Commission. Accordingly, they may not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020, as not all disclosures required by generally accepted accounting principles for annual financial statements may be presented.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates include, but are not limited to, the estimate of percentage of completion on construction contracts in progress at each reporting period which we rely on as a primary basis of revenue recognition, estimated useful lives of equipment for purposes of depreciation and the valuation of common shares issued for services, equipment and the liquidation of liabilities.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant inter-company accounts and transactions have been eliminated in consolidation.

Earnings (Loss) per Share

Basic earnings (loss) per share amounts are calculated based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is based on the weighted average numbers of shares of common stock outstanding for the periods, including dilutive effects of stock options, warrants granted and convertible preferred stock. Dilutive options and warrants that are issued during a period or that expire or are cancelled during a period are reflected in the computations for the time they were outstanding during the periods being reported. Since Indoor Harvest has incurred losses for all periods, the impact of the common stock equivalents would be anti- dilutive and therefore are not included in the calculation.

Derivative Liability

The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2021 and December 31, 2020, the Company did not have any derivative instruments that were designated as hedges.

Fair Value of Financial Instruments

As defined in ASC 820” Fair Value Measurements,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The following table summarizes fair value measurements by level at September 30, 2021 and December 31, 2020, measured at fair value on a recurring basis:

 SCHEDULE OF FAIR VALUE OF ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS

Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

NOTE 2 - GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company had minimal cash as of September 30, 2021, incurred losses from its operations and did not generate cash from its operation for past two years and the nine months ended September 30, 2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s continued existence is dependent upon management’s ability to develop profitable operations, continued contributions from the Company’s executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company’s products and business.

NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at September 30, 2021 and December 31, 2020 are as follows:

 SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

NOTE 4 - CONVERTIBLE NOTES PAYABLE

Convertible notes payable at September 30, 2021 and December 31, 2020 are as follows:

 SCHEDULE OF CONVERTIBLE NOTES PAYABLE

During the nine months ended September 30, 2021 and 2020, the Company recorded interest expense of $31,720 and $492,162, and amortization of discount of $14,444 and $111,685, respectively. As of September 30, 2021 and December 31, 2020, the Company had accrued interest of $1,362 and $35,350, respectively.

Repayment

The Company had a dispute with Power Up, the holder of certain promissory notes dated October 22, 2019, and December 19, 2019, issued by the Registrant, including allegations or claims of default and a suit. As part of the Company’s recovery efforts after COVID-19, it reached an amicable resolution with “Power Up”, in third quarter of 2021, whereby the Company and Power Up agreed on an amount of $80,000 to settlement this dispute in its entirety. During nine months ended September 30, 2021, the Company repaid $80,000 to Power Up for Note 2 and 3 and accrued interest. As a result, the Company recorded loss on settlement of debt of $4,987.

Note 1

On October 12, 2017, the Company issued a fixed convertible promissory note to Tangiers for the principal sum of $50,000 as a commitment fee for the Investment Agreement. The promissory note (“Note 1”) maturity date is May 12, 2018. The principal amount due under Note 1 can be converted by Tangiers any time, into shares of the Company’s common stock at a conversion price of $0.1666 per share. The promissory note is in a “Maturity Default,” which is defined in Note 1 as the event in which Note 1 is not retired prior to its maturity date, Tangiers’ conversion rights under Note 1 would be adjusted such that the conversion price would be the lower of (i) $0.1666 or (ii) b) 65% of the average of the two lowest trading prices of the Company’s common stock during the 10 consecutive trading days prior to the date on which Tangiers elects to convert all or part of the note. The default interest rate is 20%. During nine months ended September 30, 2021, the note was fully forgiven and the Company recorded gain on settlement of debt of $89,451.

Note 2

On October 22, 2019, the Company issued and sold an 10% Fixed Convertible Promissory Note (“Note 2”) to Power Up Lending Group Ltd. (“Power Up”), in the principal amount of $48,000, which includes a $3,000 original issue discount. Note 2 is convertible into shares of the Company’s common stock one hundred eighty (180) days from October 22, 2019. Note 2 is convertible at a conversion price of 61% of the average of the two (2) lowest trading prices of the Company’s common stock during the twenty (20) consecutive trading days prior to the date of on which Power Up elects to convert all or part of the Note 2.

Note 3

On December 19, 2019, the Company issued and sold an 10% Fixed Convertible Promissory Note (“Note 3”) to Power Up Lending Group Ltd. (“Power Up”), in the principal amount of $38,000, which includes a $3,000 original issue discount. Note 3 is convertible into shares of the Company’s common stock one hundred eighty (180) days from December 22, 2019. Note 3 is convertible at a conversion price of 61% of the average of the two (2) lowest trading prices of the Company’s common stock during the twenty (20) consecutive trading days prior to the date of on which Power Up elects to convert all or part of the Note 3.

Note 4 – related party

On September 28, 2020, the Company issued and sold an 10% Fixed Convertible Promissory Note (“Note 4”) to a related party, in the principal amount of $10,000. Note 4 is convertible into shares of the Company’s common stock ninety (90) days from September 28, 2020. Note 4 is convertible at the lower conversion price of $0.002 or 65% of the lowest trading prices of the Company’s common stock during the fifteen (15) consecutive trading days prior to the date of on which a noteholder elects to convert all or part of the Note 4. The note is currently in default.

Note 5

In March 2021, a third party advanced $25,000 to assist the Company in operating expenses and the Company is in the process of confirming arrangements for the repayment of said amount. The advance has non-interest bearing.

On August 9, 2021, the Company issued and sold an 10% Fixed Convertible Promissory Note (“Note 5”), in the principal amount of $25,000. Note 5 is convertible into shares of the Company’s common stock sixty (60) days from August 9, 2021. Note 5 is convertible at the lower conversion price of $0.00225 or 65% of the lowest trading prices of the Company’s common stock during the fifteen (15) consecutive trading days prior to the date of on which a noteholder elects to convert all or part of the Note 5.

NOTE 5 - DERIVATIVE LIABILITIES

The Company identified the conversion features embedded within its convertible debts as financial derivatives. The Company has determined that the embedded conversion option should be accounted for at fair value.

At September 30, 2021, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 SCHEDULE OF ESTIMATED FAIR VALUE OF LIABILITIES MEASURED ON RECURRING BASIS

The following schedule shows the change in fair value of the derivative liabilities at September 30, 2021:

 SCHEDULE OF CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES

The aggregate (gain) loss on derivatives during the nine months ended September 30, 2021 and 2020 was ($43,976,337) and $23,849,072, respectively. The Company values these derivative liabilities using Black-Scholes model or flexible the pricing models that include quantitative input such as the risk free rate, market volatility, time to maturity, conversion price, and other qualitative factors such as whether the underlying indexed security is in good standing or in default.

NOTE 6 - SHAREHOLDERS’ EQUITY

Series A Convertible Preferred Stock

As of September 30, 2021 and December 31, 2020, there were 750,000 shares of Series A Convertible Preferred Stock issued and outstanding.

On August 27, 2021, the Company completed an initiative where it entered into a Modification Agreement (the “Modification”) with current Series A Convertible Preferred Stockholders to modify their conversion privileges to align and support the current management team’s initiatives with the goal of benefiting shareholders. The modification agreement provides the preferred stockholders the right to convert their preferred shares into common shares at a conversion price at the lower of $0.40 (per the original agreement), or the subsequent per share pricing of a future equity raise greater than Five Hundred Thousand ($500,000) Dollars. This Modification was pursued for the benefit of the Company’s common shareholders to mitigate the potential risk of diluting their shareholding in the event that the Company undertakes additional financing transactions to fund the Company’s expansion initiatives.

Common Stock

During the nine months ended September 30, 2021, there were no share issuances.

On August 26, 2021, the Company entered into subscription agreements, with certain accredited investors for the sale of 82,000,000 shares of the Company’s common stock, par value of $0.001 per share, for a total consideration to the Company of $410,000.

As of September 30, 2021 and December 31, 2020, there were 2,483,396,041 and 2,401,396,041 shares of Common Stock issued and outstanding.

Additional paid in capital

During the nine months ended September 30, 2021, the amount due to related party of $52 was forgiven and the Company recorded additional paid in capital.

Stock Options

On August 4, 2021, the Board has recognized the substantive efforts of Messrs. Leslie Bocskor, Benjamin Rote, and Dennis Forchic to sustain and support the Company over the past year without compensation while laying the foundation for the future. The Board has voted to formalize employment agreements with Messrs. Bocskor and Rote, and an advisory agreement with Mr. Forchic. Stock option agreements reflecting past contributions and incentives for the future have been issued to all three parties. Stock options plans were offered with an exercise price of $0.01 and consideration of 150 million options to Mr. Bocskor, 100 million options to Mr. Rote, and 150 million options to Mr. Forchic vesting immediately. On the 1-year anniversary of their respective agreements, additional stock options priced at $0.015 will vest with consideration of 150 million options to Mr. Bocskor, 100 million options to Mr. Rote, and 150 million options to Mr. Forchic.

In addition, the Board, consisting of Directors Rick Gutshall and Lang Coleman, having not received any consideration over the past 2 years, will receive stock options of 5 million options each at a price of $0.01 vesting immediately. The company’s legal counsel will be receiving 10 million options at a price of $0.01 vesting immediately, under the same terms as the Board, in recognition of their valuable work and support.

Valuation

The Company utilizes the Black-Scholes model to value its stock options. The Company utilized the following assumptions:

 SCHEDULE OF UTILIZES THE BLACK-SCHOLES MODEL TO VALUES TO STOCK OPTIONS ASSUMPTIONS

During the nine months ended September 30, 2021, the Company granted 820,000,000 options valued at $8,004,855. During the nine months ended September 30, 2021, the Company recognized stock option expense of $4,753,205, of which $4,655,518 was to related parties, and as of September 30, 2021, $2,763,902 remains unamortized, of which $2,763,902 is with related parties. The intrinsic value of the 820,000,000 options outstanding as of September 30, 2021 is $9,398,000.

The following is a summary of stock option activity during the nine months ended September 30, 2021:

 SCHEDULE OF STOCK OPTION

NOTE 7 - NET INCOME (LOSS) PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods. Diluted net income per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Common equivalent shares consist of convertible preferred stock and convertible notes that are computed using the if-converted method, and outstanding warrants that are computed using the treasury stock method. Antidilutive stock awards consist of stock options that would have been antidilutive in the application of the treasury stock method.

 SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED

For the nine months ended September 30, 2020, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

NOTE 8 - SUBSEQUENT EVENTS

The Company evaluates subsequent events that have occurred after the balance sheet date of September 30, 2021, and up through November 15, 2021, which is the date that these financial statements are available to be issued. There are two types of subsequent events: (i) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (ii) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.

On October 1, the Company converted the Electrum Partners outstanding Convertible Promissory Note of $10,000 issued September 28, 2021 into 5,125,000 restricted common shares of the Company.

On November 8, 2021, the Company finalized a Supplemental agreement with the Series A Preferred shareholders to convert their holdings into common shares of the Company at $0.0125 in alignment and support of the current management team’s initiatives with the goal of benefiting shareholders. This agreement was pursued for the benefit of the Company’s common shareholders to mitigate the potential risk of diluting their shareholding in the event that the Company undertakes additional financing transactions to fund the Company’s expansion initiatives.

Pursuant to the Preferred Shareholder’s Supplemental Agreement dated November 8, 2021 (the “Supplemental Agreement”) by and between the Company and holders of its Series A Preferred shares, under which holders of the Series A Preferred shares agreed to convert all of the Series A Preferred shares into common shares of the Company effective November 8, 2021, the Company has issued an aggregate of sixty (60) million restricted common shares. The restricted common shares issued are subject to Rule 144 required holding periods.

On November 8, 2021, the Company entered into subscription agreements with certain accredited investors for the sale of Sixteen Million (16,000,000) common shares of the Company, par value of $0.001 per share, for a total consideration to the Company of Two Hundred Thousand ($200,000) Dollars. The issued shares will be restricted under Rule 144 required holding periods. The Company intends to use the net proceeds from the sale for general corporate purposes and working capital.

On November 9, the Company converted the $25,000 10% Fixed Convertible Promissory Note, including interest, issued on August 9, 2021 into 11,388,889 common shares.  The issued shares will be restricted under Rule 144 required holding periods.

Results of Operations

The following tables presents our operating results for the three and nine months ended September 30, 2021 compared to September 30, 2020:

Three months ended September 30, 2021 compared to three months ended September 30, 2020

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

Revenues

During the nine months ended September 30, 2021 and 2020, the Company generated no revenue.

Operating Expenses

Total operating expenses for the nine months ended September 30, 2021 and 2020 were $4,879,842 and $191,938, respectively, for an aggregate increase of $4,687,904 or 2442%. The aggregate increase was primarily driven by an increase in general and administrative expenses of $4,707,703 or 46335% associated with executive stock options compensation.

Other Income (Expense)

Total other income (expense) for the nine months ended September 30, 2021 and 2020 were $43,932,158 and ($24,341,234), respectively. The decrease in other expense is primarily related to the change in the fair value of the embedded derivative liability from ($23,849,072) to $43,879,414 .

Net Loss

As a result of the factors discussed above, net income for the nine months ended September 30, 2021 and 2020 was $39,052,316 and ($24,533,172), respectively, for an increase of $63,585,488 or 259%.

Liquidity and Capital Resources

The following table provides selected financial data about our Company as of September 30, 2021 and December 31, 2020, respectively.

Working Capital

Cash Flows

As of September 30, 2021, our Company’s cash balance was $191,224 and total assets were $193,444. As of December 31, 2020, our Company’s cash balance was $1,207 and total assets were $3,083.

As of September 30, 2021, our Company had total liabilities of $727,311 compared with total liabilities of $44,752,523 as at December 31, 2020.

As of September 30, 2021, our Company had a working capital deficiency of $533,867 compared with a working capital deficiency of $44,749,440 as of December 31, 2020. The decrease in working capital deficiency was primarily attributed to a decrease in derivative liabilities.

Cash Flow from Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2021 and 2020 were $181,783 and $18,335 respectively, for an increase of $163,448. The increase in net cash used in operating activities is primarily related to retirement of outstanding debt, payments on accounts payables and accrued liabilities, and payment for vendor services

Cash Flow from Investing Activities

For the nine months ended September 30, 2021 and 2020, our Company did not have any investing activities.

Cash Flow from Financing Activities

Net cash provided by (used in) financing activities for the nine months ended September 30, 2021 and 2020 were $371,800 and $7,240, respectively. During the nine months ended September 30, 2021, our Company repaid convertible notes of $63,200.

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer, Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company’s management, consisting solely of the Company’s Chief Executive Officer, Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that, as of September 30, 2020, the Company’s disclosure controls and procedures were not effective because of the following internal control over financial reporting deficiencies:

● We currently have an insufficient complement of personnel with the necessary accounting expertise and an inadequate supervisory review structure with respect to the requirements and application of US GAAP and SEC disclosure requirements.

● We currently have insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

● We currently lack a formal process and timeline for closing the books and records at the end of each reporting period and such weaknesses restrict the Company’s ability to timely gather, analyze and report information relative to the financial statements.

● Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

From time to time we may become involved in various legal proceedings that arise in the ordinary course of business. We are not currently a party to any material legal proceeding.

As a “smaller reporting company”, we are not required to provide the information required by this Item.

None.

None.

Not Applicable.

(a) Not applicable.

(b) Not applicable.

The following exhibits are included as part of this report:

* Filed herewith. In addition, in accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.