UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2016

 

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to___________ 

 

Commission File Number: 333-203056

 

IHO-Agro International, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		98-1191860
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

3101 Portofino Point, Unit 04  Coconut Creek, FL		33066
(Address of principal executive offices)		(Zip Code)

 

Registrant's telephone number, including area code: (416) 854-2433

 

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 at the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x   No ¨

 

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

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

Number of the Registrant’s common stock outstanding as of May 13, 2016: 34,559,002 common shares 

 

 

IHO-Agro International, Inc.

Form 10-Q

For the Quarterly Period Ended March 31, 2016

 

Table of Contents

 

PART I – FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	9
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	11
ITEM 4.	CONTROLS AND PROCEDURES	12
PART II – OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	13
ITEM 1A.	RISK FACTORS	13
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	13
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	13
ITEM 4.	MINE SAFETY DISCLOSURES	13
ITEM 5.	OTHER INFORMATION	13
ITEM 6.	EXHIBITS	13

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

The Company’s unaudited interim consolidated financial statements for the three and six month periods ended March 31, 2016 and for the comparable periods in the prior year form part of this quarterly report. They are prepared in accordance with United States generally accepted accounting principles.

 

 

IHO-Agro International Inc.

 

March 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

 

	Index
Balance Sheets (Unaudited)	4
Statements of Operations (Unaudited)	5
Statements of Cash Flows (Unaudited)	6
Notes to the Unaudited Financial Statements	7

 

 

IHO-Agro International Inc.

Balance Sheets

(Expressed in U.S. dollars)

(Unaudited)

 

		March 31,				September 30,
		2016				2015
		$				$
ASSETS
Current Assets
Cash			764				33,753
Accounts receivable			79,505				11,076
Prepaid expenses with related party			45,505				70,433
Total current assets			125,774				115,262
Equipment, net of accumulated depreciation			1,488				1,913
Total Assets			127,262				117,175
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable			8,764				15,750
Due to shareholders			29,990				6,185
Total Current Liabilities			38,754				21,935
Stockholders’ Equity
Common stock, 40,000,000 shares authorized, $0.0001 par value, 34,559,002 shares issued and outstanding (September 30, 2015 - 34,409,002 shares)			3,456				3,441
Additional paid-in capital			595,003				550,018
Accumulated deficit			(509,951	)			(458,219	)
Total Stockholders’ Equity			88,508				95,240
Total Liabilities and Stockholders’ Equity			127,262				117,175

  

 

See accompanying notes to unaudited financial statements.

 

 

IHO-Agro International Inc.

Statements of Operations

(Expressed in U.S. dollars)

(Unaudited)

 

		Three Months Ended March 31,								Six Months Ended March 31,
		2016				2015				2016				2015
		$				$				$				$
Revenue, net			-				-				58,556				-
Operating Expenses:
General and administrative			42,838				38,519				110,288				113,292
Total Operating Expenses			42,838				38,519				110,288				113,292
Net Loss			(42,838	)			(38,519	)			(51,732	)			(113,292	)
Net Loss Per Share, Basic and Diluted			(0.00	)			(0.00	)			(0.00	)			(0.00	)
Weighted Average Shares Outstanding, Basic and Diluted			34,559,002				33,706,551				34,515,559				33,680,409

 

See accompanying notes to unaudited financial statements.

 

 

IHO-Agro International Inc.

Statements of Cash Flows

(Expressed in U.S. dollars)

(Unaudited)

 

		Six Months Ended March 31,
		2016				2015
		$				$
Operating Activities
Net loss			(51,732	)			(113,292	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			425				212
Stock-based compensation			-				16,426
Changes in operating assets and liabilities
Prepaid expenses with related party			24,928				(56,000	)
Accounts receivable			(68,429	)			(1,028	)
Accounts payable			(6,986	)			1,750
Due to shareholder			12,815				(15,781	)
Net Cash Used In Operating Activities			(88,979	)			(167,713	)
Investing Activities
Purchase of equipment			-				(2,550	)
Net Cash Used In Investing Activities			-				(2,550	)
Financing Activities
Proceeds from note payable to related party			10,990				-
Proceeds from common stock issued or subscribed			45,000				42,495
Net Cash Provided By Financing Activities			55,990				42,495
Net Increase (Decrease) in Cash			(32,989	)			(127,768	)
Cash, Beginning of Period			33,753				275,984
Cash, End of Period			764				148,216
Supplemental Disclosures:
Interest paid			–				–
Income taxes paid			–				–

  

See accompanying notes to unaudited financial statements.

 

 

  

IHO-Agro International Inc.

Notes to the Financial Statements

March 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

 

1.

Basis of Presentation

 

IHO-Agro International Inc. (the “Company”) was incorporated under the laws of the State of Nevada, U.S. on July 29, 2014. The Company’s principal business is the marketing and distribution of all natural mineral based fertilizers. The Company has limited operations and to date has been primarily involved in organizing activities. Since inception through March 31, 2016 the Company has generated $62,118 in revenue and has accumulated losses of $509,951.

 

The interim unaudited financial statements as of March 31, 2016, and for the three and six months ended March 31, 2016 and 2015, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. They do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended September 30, 2015 filed in a Form 10-K.

Concentrations

 

During the six months ended March 31, 2016, 99.9% of the Company’s revenue was generated from a single customer. 99.9% of the accounts receivable as of March 31, 2016 was from this single customer. 100% of the accounts receivable as of September 30, 2015 was from a single customer.

All fertilizer to fulfill customer orders is manufactured and shipped by a single related party vendor, Industrias y Manufacturas Bionaturales S.A., which is owned by the Company’s sole officer and sole director.

 

Going Concern

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has generated minimal revenue since its inception and losses are anticipated in the development of its business. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, accounts receivables due, and private placement of common stock. Our success is dependent upon commercializing our product and our ability to obtain adequate future financing. There can be no assurance that we will be able to obtain future financing or, if obtained, what the terms of such future financing may be, or that any amount that we are able to obtain will be adequate to support our working capital requirements until we achieve profitable operations. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

  

2.

Equipment

 

Equipment is stated at cost and is depreciated over their estimated useful lives on a three-year straight-line basis.

 

		Cost				Accumulated Depreciation				March 31, 2016  Net Carrying  Value				September 30, 2015  Net Carrying Value
Computer Equipment			$2,550				$1,062				$1,488				$1,913

  

3.

Related Party Transactions

 

(a)

Accounts payable as of March 31, 2016 includes $1,750 (September 30, 2015 - $1,150) of rent owed to a shareholder for the offices of the Company.

 

(b)

As of March 31, 2016, the Company had a balance of $10,990 owing to a significant shareholder for a shareholder loan. The loan is unsecured, due on demand and bears no interest.

 

(c)

As of September 30, 2015, the Company had a balance of $6,185 owed to a significant shareholder for reimbursement of costs. This balance was repaid during the six months ended March 31, 2016.

 

(d)

The Company entered into a management consulting agreement with the Company’s sole officer and director which commenced on July 29, 2014 for consulting and other services in support of the business operations. Pursuant to the agreement the Company paid $2,500 per month for the first two months and $6,000 per month thereafter. In addition, the Company’s sole officer and director receives a $1,000 monthly car allowance. As of March 31, 2016 there is a balance of $19,000 (September 30, 2015 - $0) owed for these services.

 

(e)

All fertilizer shipped to customers was manufactured and shipped by a Panamanian entity called Industrias y Manufacturas Bionaturales S.A., which is owned by the Company's sole officer and sole director. The Company shall pay Industrias y Manufacturas Bionaturales S.A. a license fee of $5,000 per year and 5% of all sub-licensing revenue. The Company makes advance payments to this entity to cover future sales orders. As of March 31, 2016, the aggregate prepaid balance to this related party was $45,505 (September 30, 2015 - $70,433), after a $47,628 reduction for cost of goods sold on sales during the six months ended March 31, 2016.

 

4.

Common Stock

 

The Company has 40,000,000 common shares authorized with a par value of $ 0.0001 per share.

 

In November 2015 and December 2015, the Company issued an aggregate of 15 units for total proceeds of $45,000. Each unit consisted of 10,000 common shares and 5,000 share purchase warrants. Each whole share purchase warrant is exercisable at $0.60 per common share until the one-year anniversary of the first day that the common stock is traded on the OTCQB marketplace.

 

  

5.

Share Purchase Warrants

 

Each Selling Shareholder has a warrant to purchase up to 50% of the shares owned with an exercise price of $0.60 per shares with the warrant termination on the one-year anniversary of the first day that the Common Stock is traded on the OTCQB marketplace.

 

A summary of the changes in the Company’s common share purchase warrants is presented below:

 

		Number				Weighted Average Exercise Price
Balance September 30, 2015			617,525			$	0.6
Issued			75,000				0.6
Balance March 31, 2016			692,525			$	0.6

 

As at March 31, 2016, the following common share purchase warrants were outstanding and exercisable:

 

Number of Warrants	Exercise Price	Expiry Date
692,525	$ 0.60	One year from the first day that the Common Stock is traded on the OTCQB marketplace

  

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking information includes statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “continue” or the negative of these similar terms. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information.

 

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under “Liquidity and Capital Resources”. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws.

 

 

Results of Operations

 

For the three months ended March 31, 2016 versus March 31, 2015

 

The Company recognized no revenue from the sale of IHO Bio fertilizer product during the three months ended March 31, 2016, comparable with no prior sales from the same period last year. For the quarter ended March 31, 2016 we incurred total expenses of $42,838 and had a net loss of $42,838, versus the quarter ended March 31, 2015 with expenses incurred of $38,519, with a net loss of $38,519. All expenses incurred from inception have been general and administrative expenses. General and administrative expenses consist of sales and marketing, license and certification of product expenses, consulting and professional fees such as legal, accounting, travel and entertainment, office supplies, computer and software.

 

For the six months ended March 31, 2016 versus March 31, 2015

 

The Company recognized $58,556 in revenue from the sale of IHO Bio fertilizer product during the six months ended March 31, 2016, comparable with no sales from the same period last year. For the six months ended March 31, 2016 we incurred total expenses of $110,288 and had a net loss of $51,732, versus the quarter ended March 31, 2015 with expenses incurred of $113,292 with a net loss of $113,292. All expenses incurred from inception have been general and administrative expenses. General and administrative expenses consist of sales and marketing, license and certification of product expenses, consulting and professional fees such as legal, accounting, travel and entertainment, office supplies, computer and software.

 

From inception to March 31, 2016, the Company had been undertaking development stage activities including the ongoing registration and certification of the product in various jurisdictions and countries, testing and lab work, travel and advertising, procuring agreements with qualified distribution and sales partners, accounting and administration work and production and manufacturing design.

 

The Company’s results of operations are affected by the following factors and/or circumstances: the dependence on its sole officer and director to manage operation requirements in a timely and efficient manner. This is somewhat offset by the assistance on other consulting personnel.

 

The Company’s financial condition is affected by the following factors and/or circumstances: the delay and/or inability to obtain product registration and certification in certain jurisdictions and countries that could delay or negate potential revenue. The inability to procure adequate quantities of product from the manufacturer or in a timely manner. Market conditions that would erode the selling price of fertilizer in the open market due to competition, supply and demand and increased input/raw material costs.

 

The following events and uncertainties will have the following impact on future activities; Market conditions that would erode the selling price of fertilizer in the open market due to competition, supply and demand and increased input/raw material costs. The financial condition of the manufacturer could prevent its supply of product to the company.

 

 

Liquidity and Capital Resources

  

The Company has incurred losses and cumulative negative cash flows from operations through to September 30, 2015 and for the six months ended March 31, 2016. The Company anticipates profits for the fiscal year ended September 30, 2016. The Company expects that general and administrative expense will continue to increase and, as a result, will need additional capital to fund our operations. The Company intends to finance its operations with cash on hand combined with (i.) an unknown number of proceeds from sales from distribution partners in fiscal 2016; and (ii) proceeds of sale from the Company’s common stock at $0.60 per share on the OTCQB marketplace.

 

We have funded our operations principally from the sale of common stock. As of March 31, 2016, we had $764 of cash on hand and $79,505 in receivables. The cost of doing business at the current rate is approximately $14,000 per month. At the current rate, the Company has resources to last until September 2016.

 

The Company’s liquidity will be affected by the following trends; demands, commitments, events or uncertainties; the increase in rent, advertising, testing and certification/license costs, commissions to sales and distribution partners and increase in consulting and professional fees as the company grows. Demands from purchases for open terms or longer credit terms could impact cash flow.

 

Additional funding may not be available on favorable terms, if at all. The Company intends to continue to fund its business by way of equity or debt financing and advances from related parties. In the event we seek to raise additional capital through the issuance of debt or its equivalents, this will result in increased interest expense. If we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock. We cannot provide any assurance that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all.

 

If we are unable to raise capital as needed, we are required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results, or cease our operations entirely.

 

Going Concern

 

The Company has only begun to realize revenues and has incurred net losses since inception. In addition, at March 31, 2016, there is an accumulated deficit of $509,951. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

There can be no assurance that sufficient funds required during this year or thereafter will be generated from operations or available from external sources such as debt or equity financings, or other potential sources. The inability to generate cash flow from operations or to raise capital from external sources will force the Company to substantially curtail and cease operations, therefore, having a material adverse effect on its business. Furthermore, there can be no assurance that any funds, if available, will possess attractive terms or not have a significant dilutive effect on the Company’s existing stockholders. 

  

Off-balance sheet arrangements:

 

The Company has no off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable

  

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

 

At the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

 

Changes in Internal Control over Financial Reporting:

 

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

  

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims against the Company.

 

ITEM 1A. RISK FACTORS

 

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

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the quarter ended December 31, 2015, the Company issued an aggregate of 15 units for total proceeds of $45,000. Each unit consisted of 10,000 common shares and 5,000 share purchase warrants. Each whole share purchase warrant is exercisable at $0.60 per common share until the one-year anniversary of the first day that the common stock is traded on the OTCQB marketplace.

 

The shares and purchase warrant shares were issued in a transaction not involving a public offering in reliance upon an exemption from registration provided by Regulation S and Rule 506 of Regulation D of the Securities Act of 1933.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

Exhibit		Description
31.1		Section 302 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *		Section 906 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculations
101.DEF		XBRL Taxonomy Extension Definitions
101.LAB		XBRL Taxonomy Extension Labels
101.PRE		XBRL Taxonomy Extension Presentation

 

_______________  

* In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

 

 

 

 

SIGNATURES

 

In accordance with to requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	IHO-Agro International, Inc.
Dated: May 13, 2016	By	/s/ Ioan Hossu
		Ioan Hossu
		President, Chief Executive Officer, Chief Financial Officer, and Treasurer