Sign in

You're signed outSign in or to get full access.

IH

Indoor Harvest Corp (INQD)·Q1 2018 Earnings Summary

Executive Summary

  • Q1 2018 delivered a sharp improvement in loss and opex: net loss fell 88% to $0.13M, and total operating expenses declined 62% to $0.27M, helped by lower G&A and a positive $0.24M change in embedded derivative fair value .
  • Revenue was $0 (company in transition), but balance sheet de-risked: derivative liability dropped from $0.55M to $0.03M; stockholders’ deficit improved to $(0.59)M from $(1.00)M .
  • Management advanced strategic repositioning: new CEO (Feb 2018), CMO (Jan 2018), and formation of a Scientific Advisory Board; pursuing HVAC-HPA integration and research partnerships in US/Canada/Europe .
  • No earnings call was held; company expects to resume quarterly calls and schedule an annual meeting in H2 2018. Wall Street consensus for Q1 2018 was unavailable via S&P Global for INQD, so estimate comparisons are not possible .

What Went Well and What Went Wrong

  • What Went Well

    • 88% reduction in net loss (from $1.06M to $0.13M) and 62% cut in operating expenses, with G&A down 68% YoY; CFO highlights cost discipline and one-time 2017 acquisition-related expenses impacting the comp base .
    • Strategic buildout: hired CEO Daniel Weadock and CMO Sandra Fowler to drive execution and rebranding .
    • Scientific Advisory Board formed; initial members bring deep expertise in molecular genetics, controlled-environment HVAC, and commercial greenhouse/cannabis cultivation .

  • What Went Wrong

    • No revenue in Q1 2018; business remains in transition from vertical farming EPCM to biopharma-grade cannabis technology and research .
    • Continued reliance on convertible notes; interest and amortization of debt discount weighed on results ($17,669 interest; $80,563 amortization) despite derivative liability revaluation benefit .
    • Texas license remains pending; prior JV loss ($0.25M) and uncertainty around regulatory timing add execution risk (though legislative efforts continue) .

Financial Results

MetricQ2 2017Q3 2017Q1 2018
Revenue ($USD)$0 $4,245 $0
Gross Profit ($USD)$(2,694) $3,080 $0
Total Operating Expenses ($USD)$420,459 $178,491 $272,603
Net Income (Loss) ($USD)$(724,385) $(219,561) $(127,216)
EPS, Basic & Diluted ($USD)$(0.04) $(0.01) $(0.01)
Weighted Avg Shares19,153,022 19,929,506 24,649,867
Operating Expense BreakdownQ1 2017Q3 2017Q1 2018
Depreciation & Amortization ($USD)$13,141 $12,792 $3,038
Research & Development ($USD)$737 $0 $0
Professional Fees ($USD)$90,547 $8,107 $71,375
General & Administrative ($USD)$622,403 $157,592 $198,190
Total Operating Expenses ($USD)$726,828 $178,491 $272,603
Balance Sheet SnapshotDec 31, 2017Mar 31, 2018
Cash & Equivalents ($USD)$35,453 $42,981
Total Assets ($USD)$133,020 $133,058
Convertible Notes Payable, net ($USD)$455,459 $565,272
Derivative Liability ($USD)$554,917 $25,006
Total Liabilities ($USD)$1,132,644 $727,780
Stockholders’ Deficit ($USD)$(999,624) $(594,722)
Cash Flow HighlightsQ1 2017Q1 2018
Net Cash Used in Operating Activities ($USD)$(352,103) $(185,663)
Net Cash Provided by Financing ($USD)$671,868 $193,191
Cash at End of Period ($USD)$147,434 $42,981

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Shareholder CommunicationsH2 2018NoneResume quarterly calls; schedule annual meetingNew
Technology Development2018NoneIntegrate HPA with HVAC (Harvest Air), pursue US/Canada/Europe partnerships; begin climate recipe and microbe integration testingNew
Revenue/Margins/OpEx/Tax2018N/ANo numeric guidance providedMaintained: no formal guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2017)Current Period (Q1 2018)Trend
Regulatory/Legal (Texas program)JV placed 16/43; JV loss recorded; license process restricted to 3; lobbying expected; uncertainty persists Application pending; working with Medical Cannabis Association of Texas; expects legislative efforts may expand permits, enable research licensing in 2019 (no guarantees) Continued focus; cautiously optimistic; execution risk remains
Product/TechnologyTweed pilot completed; ceased vertical farming EPCM; shift to licensing and cannabis tech HPA-HVAC integration with Harvest Air; research partnerships; climate recipes; microbe tech with aeroponics Pivot accelerating; R&D-oriented commercialization
Leadership/TalentBoard and officer restructuring in Aug 2017 New CEO (Feb 2018); CMO (Jan 2018); Scientific Advisory Board established Strengthening management and advisory depth
Supply Chain/OperationsCost cuts, reduced payroll and opex Opex down 62% YoY; G&A down 68%; professional fees down 21% YoY Sustained cost discipline
Macro/PolicyDOJ rescinds Cole Memo; company supportive, expects push for federal clarity (MEDS Act) Reiterates plan to align with CSA registration; federal compliance focus Federal path emphasized

Management Commentary

  • CFO Annette Knebel: “We have made great strides in reducing our overall operating expenses… substantial expenses in the first quarter of 2017 related to the acquisition of Alamo CBD… We will continue to evaluate ways to cut costs and reduce operations where we can” .
  • CEO Dan Weadock: “We’ve opened up discussions with several key groups… to partner… to begin testing climate recipes… and testing the effects of combining certain microbe technologies with aeroponics… well positioned in what I expect will be a surge of interest in innovation… pharmaceutical potential of cannabis” .
  • CEO appointment release: “Indoor Harvest is currently positioned to be a global leader in developing finely tuned, precise cannabis medicines… constructs and completes its technology integration trials in Tempe, Arizona and begins its development in Parachute, Colorado, and ultimately seeks registration under the Controlled Substance Act” .

Q&A Highlights

  • No earnings call or Q&A held for Q1 2018; management stated intent to resume quarterly conference calls and schedule the annual shareholder meeting in the second half of 2018 .

Estimates Context

  • Wall Street consensus for Q1 2018 (EPS and revenue) was unavailable via S&P Global for INQD due to missing mapping; therefore, comparisons to estimates and “beat/miss” determinations cannot be made at this time. Values would normally be retrieved from S&P Global.*

Key Takeaways for Investors

  • Cost-out traction and derivative liability collapse materially improved the P&L and balance sheet despite zero revenue; continued cost discipline is the near-term driver of loss reduction .
  • Strategy pivot to biopharma-grade cannabis tech is advancing under new leadership and an SAB; monitor HVAC-HPA integration milestones, research partnerships, and site developments (Tempe, AZ; Parachute, CO) for validation .
  • Regulatory path remains central: Texas application is pending; legislative/regulatory outcomes are a binary catalyst for licensing and monetization; federal CSA alignment is the stated objective .
  • Capital structure risk persists: convertible debt and potential default mechanics require vigilance; however, reduced derivative liability and improved stockholders’ deficit de-risk the balance sheet relative to year-end 2017 .
  • Near-term trading: potential catalysts include formal guidance, partnership announcements, trial starts, and resumption of investor communications; lack of revenue and estimate visibility can amplify volatility.
  • Medium-term thesis: execution on tech integration, regulatory approvals, and partner-led commercialization could transition INQD from R&D to revenue generation; absent that, continued opex control is key to preserving runway .
  • Watch for additional board/advisory additions and operating updates as indicators of scaling capabilities .
</final>