Indoor Harvest Corp - FORM 10-Q - EX-99.1 - November 13, 2015

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Exhibit 99.1
 
Indoor Harvest Corp Releases Key Third Quarter Summary, Sets Out Future Plans.

Houston, Texas, November 13, 2015 — Indoor Harvest Corp (OTCQB:INQD), through its brand name Indoor Harvest®, is a full service, state of the art design-build engineering firm for the indoor and vertical farming industry. Providing production platforms and complete custom designed build outs for both greenhouse and building integrated agriculture grows, tailored to the specific needs of virtually any cultivar. The Company is pleased to announce results for the nine months ended, September 30, 2015 as well as subsequent events. Our complete Third Quarter Form 10-Q Report can be downloaded from our website under the "investors" section, or through the SEC's website at http://www.sec.gov.


Mr. Chad Sykes, Chief Executive Officer of Indoor Harvest, stated, "With our current revenue generating operations we have reached another key milestone in our Company's operating history. In the third quarter of 2015 we began offering design-build and equipment packages to commercial clients. To date we have secured two design-build agreements and equipment orders and are in serious negotiations for several more which, although there’s no assurance, we hope to close in the near future. The full performance of our existing design-build agreements exceed a rough order magnitude (ROM), pre-construction estimate of $3.5M.  This ROM estimate is a ‘ball park’ price and not considered the final price. Once the design process is complete a detailed, or definitive full performance estimate is provided. There is no guarantee that we will reach full performance on any of our existing or future contracts, but we have received earnest money payments and begun the design and engineering process for actual design-build and equipment packages. In addition, we have begun work on a $16,000 equipment order and just today received a $30,000 deposit on a $89,000 equipment package.”

Commenting on the implementation of the Company’s strategy, Mr. Sykes noted "We have received several multi-million dollar requests for proposal for our design-build services and are currently responding to requests in Europe, Asia and the Mideast for distribution of our fixtures. Because we believe that the vertical farming industry is poised for significant future growth, we've strategically positioned ourselves in front of that growth with engineered solutions. I'd like to note that we've achieved this without any significant outbound marketing efforts to date. As our project portfolio grows and reputation spreads, outbound marketing may not even be required. Our initial strategy, which we are now proving to be correct, has been to position our company as a technology leader rather than chasing easy cash flow on legacy systems. We are beginning to see objective proof that this strategy is now paying off. To further this strategy, we anticipate that we will soon be filing additional applications for patent on new products we have developed through collaborative R&D."

In October 2015, we entered into design-build, original equipment manufacturer ("OEM") agreements, with a specialty building integrated agricultural cultivation facility in Colorado and a Maryland production facility. Both facilities encompass over 40,000 square feet of production footprint with $15,000 in earnest money payments already received, to initiate our design process.

On December 18, 2014, Indoor Harvest entered into the Pilot Project Agreement with Canopy Growth, a TSX Venture Exchange listed company whose wholly-owned subsidiaries Tweed Inc. ("Tweed"), Tweed Farms Inc. ("Tweed Farms"), and Bedrocan Canada Inc. ("Bedrocan") which are federally licensed producers of medical cannabis in Canada. The principal activities of Canopy Growth’s subsidiaries are the production of cannabis at Tweed Farms’ facility in Niagara-on-the-Lake, Ontario and the production and sale of cannabis from Tweed Inc.'s facility in Smiths Falls, Ontario and Bedrocan’s facility in Toronto, Ontario as regulated by the Canadian Marihuana for Medical Purposes Regulations.

With the successful outcome of the initial technical pilot at Tweed, on September 28, 2015, Indoor Harvest and Canopy Growth mutually agreed to extend collaborative research and development for an additional two years. We are currently in the process of providing specifications and costs to build out 5,000 square feet of aeroponic production space at the Tweed facility in Smiths Falls. As part of the design-build process, the Company will be incorporating prototype testing of our advanced racking system with integrated proprietary HVAC and LED lighting systems that incorporate the Company's patent pending aeroponic process.

Community Located Agricultural Research Area (CLARA) Design-Build Project

Indoor Harvest, the City of Pasadena and the BUILD partnership participants are eager to get the agreement formalities behind us and move on to the IHC final environmental approval so that work may begin on refitting the facilities. All final legal approvals have been given and the mayor has scheduled it for a November 17, 2015, City Council vote. The agreement may require a second reading and Council vote at the next regularly scheduled session if legally necessary after passage on first reading but that has not been conclusively determined yet.

The CLARA platform has drastically increased its awareness to a National scale. Partly due to the reach of the BUILD partners and more importantly its true structure to attract educational investment in new technologies and community redevelopment that takes into account health impacts for its residents as well as job opportunities. This is a formula we believe to be demonstrably in harmony with long-term economic realities and social needs.

Indoor Harvest's President, John Choo, was invited to the annual Opportunity Finance Network Conference ( http://conference.ofn.org/index.html) in Detroit, Michigan by the highly respected Kresge Foundation to represent CLARA along with the BUILD representatives to an audience of community development financial institutions and partnering groups. This is a large stake for Indoor Harvest in the development of Corporate Governance and urban redevelopment.
 
In closing, our CEO and founder Chad Sykes stated, "After investing over $1,800,000 since our inception in R&D, tooling, developing our products and services as well as taking our Company public, I'm pleased to announce those investments are now generating revenue. We now have executed design-build agreements in place and a sales pipeline coming together. Since we launched our products and services in the third quarter of 2015, we've seen an increase of almost 200% in project deal flow. Based upon the foregoing, we believe that if everything we now expect to happen does come together as anticipated, we could possibly see positive cash flow by mid-2016 and even possibly reach profitability by the end of 2016."


Results of Operations
 
For the three month period ended September 30, 2015 vs. September 30, 2014
For the three months ended September 30, 2015 and 2014, we had a net loss of $381,587 and $111,075, respectively. The primary driver behind the increase in the loss was attributable to the increase in expenses as noted below.

For the three months ended September 30, 2015 and 2014, we incurred $380,932 and $111,081, respectively, in operating expenses. The increase in our operating expenses is due to increases in costs related to increased payroll costs, depreciation expense, travel expenses, marketing expenses, listing expenses to have our common stock traded on the OTCQB and professional expenses related to being a SEC reporting Company.

Our expenses related to research and development for the three months ended September 30, 2015 and 2014 were $5,459 and $20,956, respectively. The reduction in research and development expenses was due to collaborations in which research and development costs are shared.

For the nine month period ended September 30, 2015 vs. September 30, 2014.

For the nine months ended September 30, 2015 and 2014, we had a net loss of $971,453 and $314,937, respectively. The primary driver behind the increase in the loss was attributable to the increase in expenses as noted below.

For the nine months ended September 30, 2015 and 2014, we incurred $960,734 and $315,086, respectively, in operating expenses. The increase in our operating expenses is due to increases in costs related to increased payroll costs, depreciation expense, travel expenses, marketing expenses, listing expenses to have our common stock traded on the OTCQB and professional expenses related to being a SEC reporting Company.

Our expenses related to research and development for the nine months ended September 30, 2015 and 2014 were $17,987 and $21,966, respectively. The reduction in research and development expenses was due to collaborations in which research and development costs are shared.

Deferred rent payable at September 30, 2015 was $9,590. Deferred rent payable is the sum of the difference between the monthly rent payment and the straight-line monthly rent expense of an operating lease that contains escalated payments in future periods.

As of September 30, 2015 we had total liabilities of $67,995, while at December 31, 2014, we had total liabilities of $21,245. The increase in liabilities was due to accrued payroll, deferred rent and a $36,100 note payable to Wells Fargo Bank for tooling equipment. The tooling will be used to manufacture our aeroponic AGT fixtures.

Liquidity and Capital Resources
We anticipate taking the following steps to implement our business plan for the next 12 months. Our capital requirements for implementation of these steps are estimated at $5,000,000 as set forth in the table below. For the next 12 months, we anticipate engaging in the following operational activities, although we may vary our plans depending upon operational conditions and available funding: 

Event
 
Actions
  
Estimated Time
    
Estimated Cost
 
CLARA Phase I
Construct Demonstration Vertical Farm
 
 
Q4 2015- Q3 2016
 
 
$
3,500,000
 
CLARA Phase II
Develop Commercial Retail Campus at CLARA
 
 
Q1 2016- Q4 2016
 
 
$
500,000
 
Operational Expansion
Expand Team, Marketing and Tooling
 
 
Q4 2015- Q3 2016
 
 
$
1,000,000
 
 
In order to fund the CLARA activities and our expansion plans under our business plan described above, the Company plans to commence a private placement under Regulation D, Rule 506(c) for up to 5,000,000 shares of Series A Convertible Preferred Stock at a price of $1.00 per share for maximum gross proceeds of $5,000,000.  There is no assurance that we will commence this private placement or, if commenced, that we will raise any or all of the funds in this proposed offering.
Consistent with the SEC’s April 2013 guidance on using social media outlets like Facebook and Twitter to make corporate disclosures and announce key information in compliance with Regulation FD, Indoor Harvest is alerting investors and other members of the general public that Indoor Harvest will provide weekly updates on operations and progress through its social media on Facebook, Twitter and Youtube. Investors, potential investors and individuals interested in our company are encouraged to keep informed by following us on Twitter, YouTube or Facebook.
 
Facebook: http://www.facebook.com/indoorharvest
Twitter: http://www.twitter.com/indoorharvest
Youtube: http://www.youtube.com/indoorharvest

ABOUT INDOOR HARVEST CORP

Indoor Harvest Corp, through its brand name Indoor Harvest®, is a full service, state of the art design-build engineering firm for the indoor farming industry. Providing production platforms and complete custom designed build outs for both greenhouse and building integrated agriculture (BIA) grows, tailored to the specific needs of virtually any cultivar. Our patent pending aeroponic fixtures are based upon a modular concept in which primary components are interchangeable. Visit our website at http://www.indoorharvest.com for more information about our Company.
 
FORWARD LOOKING STATEMENTS

This release contains certain “forward-looking statements” relating to the business of Indoor Harvest and its subsidiary companies, which can be identified by the use of forward-looking terminology such as “estimates,” “believes,” “anticipates,” “intends,” expects” and similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. These forward-looking statements are based on Indoor Harvest’s current expectations and beliefs concerning future developments and their potential effects on Indoor Harvest. There can be no assurance that future developments affecting Indoor Harvest will be those anticipated by Indoor Harvest. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the Company) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. Indoor Harvest undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Contacts:

Indoor Harvest Corp
CEO, Mr. Chad Sykes
713-410-7903
ccsykes@indoorharvest.com



INDOOR HARVEST CORP
 
BALANCE SHEETS
AS OF SEPTEMBER 30, 2015 AND DECEMBER 31, 2014
(UNAUDITED)

 
 
  
September 30,
2015
    
December 31,
2014
  
 
        
ASSETS
        
Current assets:
        
Cash
  
$
122,098
    
$
411,669
  
       Prepaid expenses
    
9,315
      
-
  
Total current assets
    
131,413
      
411,669
  
 
                
Furniture and equipment, net
    
207,533
      
170,454
  
Security deposit
    
12,600
      
12,600
  
Intangible asset
    
2,000
      
2,000
  
Other assets
    
53,372
      
68,083
  
          Total assets
  
$
406,918
    
$
664,806
  
 
                
LIABILITIES
                
Current liabilities:
                
Accounts payable & accrued expenses
  
$
18,935
    
$
7,185
  
Accrued payroll
    
4,771
      
5,034
  
Deferred rent
    
9,590
      
9,026
  
Total current liabilities
    
33,296
      
21,245
  
 
                
Long term liabilities:
                
                Note payable
    
34,699
      
-
  
          Total Liabilities
    
67,995
      
21,245
  
 
                
Stockholders' equity:
                
Preferred stock: $0.01 par value, 5,000,000 shares authorized; none shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
    
-
      
-
  
Common stock: $0.001 par value, 50,000,000 shares authorized; 10,585,048 and 9,252,388  shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
    
10,584
      
9,251
  
Additional paid-in capital
    
1,954,871
      
1,299,389
  
Less: Stock subscription receivable
    
-
      
(10,000
)
Accumulated deficit
    
(1,626,532
)
    
(655,079
)
Total Stockholders' equity
    
338,923
      
643,561
  
 
                
Total liabilities and stockholders' equity
  
$
406,918
    
$
664,806
  



 
INDOOR HARVEST CORP
STATEMENTS OF OPERATIONS
(UNAUDITED)
 

 
        
 
  
For the three months ended
September 30,
    
For the nine months ended
September 30,
  
 
  
2015
    
2014
    
2015
    
2014
  
Operating Expenses
                
     Depreciation expense
  
$
12,484
    
$
4,616
    
$
33,928
    
$
10,230
  
     Research and development
    
5,459
      
20,956
      
17,987
      
21,966
  
     Professional fees
    
16,559
      
20,883
      
124,531
      
128,838
  
General and administrative expenses
    
346,430
      
64,626
      
784,288
      
154,052
  
Loss from operations
    
380,932
      
111,081
      
960,734
      
315,086
  
 
                                
Other Income (Expense)
    
(655
)
    
6
      
(10,719
)
    
149
  
 
                                
Net loss
  
$
(381,587
)
  
$
(11,075
)
  
$
(971,453
)
  
$
(314,937
)
 
                                
Net loss per common share:
                                
Net loss per share, basic and diluted
  
$
(0.04
)
  
$
(0.01
)
  
$
(0.10
)
  
$
(0.04
)
 
                                
Weighted average number of common shares outstanding:
Basic and diluted
    
10,024,410
      
8,410,300
      
9,946,256
      
8,060,465
  

 
 

INDOOR HARVEST CORP
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
 
                               
                   
Additional Paid-in Capital
            
Total Stockholders' Equity (Deficit)
  
   
Preferred Stock, $0.01 Par Value
    
Common Stock, $0.001 Par Value
          
   
Shares
    
Amount
    
Shares
    
Amount
    
Accumulated Deficit
    
Subscription Receivable
  
                                 
                                 
Balances, December 31, 2013
    
-
     -      
6,505,381
    
$
6,505
    
$
359,134
    
$
(211,797
)
  
$
-
    
$
153,842
  
                                                             
Issuance of common stock
    
-
      
-
                                                  
For cash
    
-
      
-
      
2,474,000
      
2,474
      
872,276
      
-
      
(10,000
)
    
864,750
  
For services
    
-
      
-
      
273,007
      
272
      
67,979
      
-
      
-
      
68,251
  
Net loss
    
-
      
-
      
-
      
-
      
-
      
(443,282
)
    
-
      
(443,282
)
                                                                 
Balances, December 31, 2014
    
-
      
-
      
9,252,388
      
9,251
      
1,299,389
      
(655,079
)
    
(10,000
)
    
643,561
  
                                                                 
Issuance of common stock
                                                                
For cash
    
-
      
-
      
536,000
      
536
      
267,464
      
-
      
-
      
268,000
  
For services
    
-
      
-
      
796,700
      
797
      
388,018
      
-
      
-
      
388,815
  
Collection of stock subscription receivable
    
-
      
-
      
-
      
-
      
-
      
-
      
10,000
      
10,000
  
Net loss
    
-
      
-
      
-
      
-
      
-
      
(971,453
)
    
-
      
(971,453
)
                                                                 
Balances, September 30, 2015
    
-
        -      
10,585,088
    
$
10,584
    
$
1,954,871
    
$
(1,626,532
)
  
$
-
    
$
338,923
  


INDOOR HARVEST CORP
  
STATEMENT OF CASHFLOWS
  
(UNAUDITED)
  
 
    
 
    
 
  
For the nine months ended September 30,
  
 
 
  
2015
    
2014
  
Cash flows from operating activities:
        
Net loss
  
$
(971,453
)
  
$
(314,937
)
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation expense
    
33,928
      
10,228
  
 Loss on the sale other asset
    
9,250
      
-
  
Stock issued for services - related party
    
273,344
      
68,252
  
Stock issued for services
    
115,471
      
-
  
Change in operating liability:
                
Deferred rent
    
564
      
8,838
  
Other assets
    
-(4,589
)
    
(80,326
)
Security deposit
    
-
      
(12,600
)
 Prepaid expense
    
(9,315
)
    
-
  
Accounts payable and accrued expenses
    
11,750
      
3,354
  
Accrued compensation - officers
    
-
      
(6,181
)
Accrued compensation
    
(263
)
    
3,885
  
Net cash used in operating activities
    
(541,313
)
    
(319,487
)
 
                
Cash flows from investing activities:
                
              Proceeds from sale of equipment
    
10,050
      
-
  
Purchase of equipment
    
(71,007
)
    
(64,936
)
Net cash used in investing activities
    
(60,957
)
    
(64,936
)
 
                
Cash flows from financing activities:
                
Proceeds from note payable
    
34,699
      
-
  
Collection of stock subscription receivable
    
10,000
      
-
  
Issuance of common stock for cash
    
268,000
      
504,750
  
Net cash provided by financing activities
    
312,699
      
504,750
  
 
                
Increase cash and cash equivalents
    
(289,571
)
    
120,327
  
Cash and cash equivalents at beginning of period
    
411,669
      
122,017
  
Cash and cash equivalents at end of period
  
$
122,098
    
$
242,344
  
 
                
Supplemental Disclosures
                
Interest paid
  
$
-
    
$
-
  
                Income taxes paid
  
$
-
    
$
-
  


Indoor Harvest Corp Reports