Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - IHO-AGRO INTERNATIONAL INC. | v457452_ex32-1.htm |
| EX-31.1 - EXHIBIT 31.1 - IHO-AGRO INTERNATIONAL INC. | v457452_ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended September 30, 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: 000-55653
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
Securities registered under Section 12(b) of the Exchange Act:
| Title of each class: | Name of each exchange on which registered: | |
| None | None |
Securities registered under Section 12(g) of the Exchange Act:
Common stock, $0.0001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes þ No ¨
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer. | ¨ | Accelerated filer. | ¨ |
Non-accelerated filer. (Do not check if a smaller reporting company) |
¨ | Smaller reporting company. | þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
There was no active public trading market as of the last business day of the Company’s second fiscal quarter, so there was no aggregate market value of common stock held by non-affiliates.
Number of the registrant’s common stock outstanding as of February 21, 2017: 35,259,002
Documents incorporated by reference: None.
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.
From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
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DESCRIPTION OF THE BUSINESS
Overview.
The Company was organized under the laws of the State of Nevada on July 29, 2014 and is a marketer and distributor of very unique all natural mineral based fertilizers. We do not produce the fertilizer. The Company strives to be environmentally friendly in the production of a fertilizer that we believe will reduce the worldwide dependence on chemical fertilizers and provide a safe and healthy alternative to help in the worldwide production of food.
In the fertilization process, there are more than 60 different minerals present in plant tissue. Farmers are well aware of the consequences of low levels of minerals in pastures, which is why animal feed is enriched with minerals. In most cases, the elements needed by a plant are also needed by animals. There are seven minerals needed in the diet of animals, and they are iron, copper, zinc, manganese, iodine, cobalt and selenium. If these elements are not present, the health of the animal is affected through slower development and depressed immune systems.
Products
There are two (2) fertilizer products.
“IHO – Agro Mineral,” a fertilizer consisting of mineral extracts from various salts, including sea salt, found naturally on the surface of the Earth; and
“IHO-Bio,” a fertilizer consisting of a mixture of mineral extracts from various salts, including sea salt, as well as various plant extracts, including seaweed. It contains all the micronutrients present in “IHO – Agro Mineral”, plus plant extracts rich in amino acids, vitamins and natural plant hormones.
The “IHO-Agro Mineral” fertilizer is a natural product that we believe will reduce the use of chemical fertilizers. It’s ecological, which creates healthier conditions while also increasing production and higher profits. We believe the product provides an increase in soil minerals by adding a micronutrient fertilizer. We believe the “IHO-Agro Mineral” fertilizer will help fruit trees increase their production and will be able to be used on crops that are growing in locked, saturated soil. We believe the “IHO-Agro Mineral” fertilizer will be able to be used in pastures to increase mineral content.
We believe the “IHO-Agro Bio” fertilizer will be able to be used for fruit trees that bear no fruit. We believe it will also be able to be used when solids are depleted; we believe it will increase mineralization and increase agricultural production, and also increase germination.
The Company did not itself develop the fertilizer. The Panamanian Entity developed the fertilizer and is owned by the Company’s sole officer and sole director, Mr. Ioan Hossu. The Company has obtained an exclusive license with the Panamanian entity to market and sell the fertilizer.
Benefits of HO-Agro Products vs. Agro-Chemical Fertilizers
Typically, fertilizers represent 30% to 40% of input costs for many key crops. These costs differ from country to country. Most agro-chemical fertilizer prices fluctuate in accordance with international energy costs. In contrast, IHO-Agro products are not oil dependent, and the energy used to manufacture these products is minimal. Even in case of natural disasters, should no electricity be available, the Panamanian entity could continue to manufacture the products, as they are not energy dependent. We do recommend (depending on the crops) two to four gallons of our product to be used for each hectare. While getting additional benefits from IHO-Agro products, we believe the costs of fertilizing will be much lower than using chemical fertilizers. These costs will depend on where the products are used, as different import tariffs and taxes will be applied. Even so, we believe the costs will be significantly lower. Farmers will get the assurance fertilizer costs will not increase due to an increase in the price of oil. We believe the benefits will include:
| • | Plants more resistant to insects and disease. Farmers may need to use less pesticides and fungicides, therefore the costs associated with dispersing them is diminished or eliminated. |
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| • | Farmers will not incur any additional costs associated with the usage of IHO-Agro products, as they can readily use their existing farm equipment. |
| • | Depending on the extraction method employed in the process, we believe that soils treated with these minerals will meet the standards required in the United States and the European Union for Organic Certification which will allow farmers to charge more for their crops. |
| • | We believe there will be no negative impact on the environment as a result of manufacturing, and there will be no environmental pollution associated with the process. We believe that, except for water (and perhaps table salt), the process will not generate any types of residue, or by-products. |
| • | Increase in mineral and vitamin content is possible. |
| • | We believe that seeds will germinate sooner and thus plants will reach maturity sooner. |
| • | We believe the use of our products will lead to longer producing plants, e.g. coffee plants that could start producing earlier, and yield more beans, extending the harvest longer. |
Sales and Marketing
The Company will continue to expand sales to all regions of the world through sales and marketing campaigns and programs using both internal and external resources via various media such as television, radio, printed, digital, website.
| · | All authorized distributors through legal distribution agreements will be responsible for various sales targets as defined by IHO-Agro in their respective regions and will be responsible for representing the IHO products in those markets in accordance with such distribution agreements. |
| · | IHO-Agro will maintain and further develop the IHO-Agro brand. |
| · | Authorized distributors will be responsible for the advertising and marketing costs associated with sales activities specific to their respective authorized territories. |
Employees
Apart from its sole officer, Ioan Hossu, the Company currently has no employees.
Where You Can Find More Information
We are subject to the reporting obligations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include filing an annual report under cover of Form 10-K, with audited financial statements, unaudited quarterly reports on Form 10-Q and the requisite proxy statements with regard to annual stockholder meetings. The public may read and copy any materials the Company files with the Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
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We are exempt from this reporting because we are a smaller reporting company.
Item 1B. Unresolved Staff Comments
Not applicable.
The Company rents suitable office space at the address indicated above at the rate of $100.00 per month, payable monthly with no set term or other obligations. The Company does not foresee any increases to the rental rate or the size of the office over the next 12 months.
We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities
| (a) | Market Information |
Our shares of common stock were approved for quotation on the OTC Pink on November 4, 2015 under the symbol “IHGO.”
The following table represents the closing high and low bid information for our common stock during the last two fiscal years as reported by the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The market for our common stock is sporadic and our stock is thinly traded.
| Quarter Ended | High | Low | ||||||
| September 30, 2016 | $ | .60 | $ | .60 | ||||
| June 30, 2016 | $ | .61 | $ | .60 | ||||
| March 31, 2016 | $ | .61 | $ | .60 | ||||
| December 31, 2015 | $ | .75 | $ | .10 | ||||
| September 30, 2015 | $ | n/a | $ | n/a | ||||
| June 30, 2015 | $ | n/a | $ | n/a | ||||
| March 31, 2015 | $ | n/a | $ | n/a | ||||
| December 31, 2014 | $ | n/a | $ | n/a | ||||
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| (b) | Holders |
As of September 30, 2016, there were 15 registered beneficial shareholders of record for our outstanding common stock. This figure does not take into account those shareholders whose certificates are held in the name of broker-dealers or other nominees.
| (c) | Dividends |
To date, we have paid no dividends on our shares of common stock and have no present intention of paying any dividends on our shares of common stock in the foreseeable future. The payment by us of dividends on the shares of common stock in the future, if any, rests solely within the discretion of our board of directors and will depend upon, among other things, our earnings, capital requirements and financial condition, as well as other factors deemed relevant by our board of directors. Although dividends are not limited currently by any agreements, it is anticipated that future agreements, if any, with institutional lenders or others may limit our ability to pay dividends on our shares of common stock.
| (d) | Securities Authorized for Issuance under Equity Compensation Plan |
In order to compensate our officers, directors, employees and/or consultants, on June 10, 2016, our Board of Directors approved and stockholders ratified by consent the 2016 Equity Incentive Plan (the “Plan”). The Plan has a total of 2,000,000 shares reserved for issuance.
As of September 30, 2016, no shares have been issued under the Plan.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
During the year ended September 30, 2016, the Company issued 422,500 shares of common stock for services valued in total at $126,750. The Company also issued 150,000 shares of common stock issued for cash of $45,000. The Company issued 300,000 common shares for services during the period subsequent to September 30, 2016.
These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.
Rule 10B-18 Transactions
During the years ended September 30, 2016 and 2015, there were no repurchases of the Company’s common stock by the Company.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The following is management’s discussion and analysis of the consolidated financial condition and results of operations of IHO-Agro International, Inc. for the fiscal years ended September 30, 2016 and 2015.The following should be read in conjunction with the audited consolidated financial statements for the period ending September 30, 2016 and notes thereto appearing elsewhere in the Form 10-K.
Plan of Operation
During the next 12 months, we plan to be profitable. Profitability will be accomplished by the following: increase in revenue as a result of increased sales and distribution partners, increased advertising and marketing across all media areas, increased product certification and registration in targeted countries, states and jurisdictions around the world. We also plan to tightly monitor all expenses, decrease expenses where applicable and review and adhere to business budgets on a monthly basis. Based on the above we anticipate operating margins will increase.
There can be no assurance that these assumptions will be correct. If these assumptions prove incorrect, it will affect our ability to generate revenue and to continue our operations.
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We have commenced limited operations and will require additional capital to recruit personnel to operate the business and to implement our business plan.
Over the next 12 months, our business will be generated through increased sales and distribution partners, increased advertising and marketing across all media areas, increased product certification and registration in targeted countries, states and jurisdictions around the world.
There can be no assurance that these assumptions will be correct. If these assumptions prove incorrect, it will affect our ability to generate revenue and to continue our operations.
Results of Operations
For the years ended September 30, 2016 and 2015
Our Company had the following comparative results from operations for the fiscal years ended September 30, 2016 and 2015:
| 1. | Gross revenue of $62,861 in 2016 as compared with gross revenue of $3,562 in 2015. This increase in revenue is due to an increase in sales to distributors. |
| 2. | Operating expenses of $323,828 in 2016 as compared with operating expenses of $432,256 in 2015. This decrease in operating expenses is due to a decrease in fees related to professional services, travel and expenses. |
| 3. | Net loss of $260,967 in 2016 as compared to a loss of $428,694 in 2015. This decrease in net loss is due to an increase in gross revenue and a decrease in operating expenses. |
Liquidity and Capital Resources
Our financial condition as of September 30, 2016 and 2015 is summarized as follows:
Working Capital Deficit:
| September 30, 2016 | September 30, 2015 | |||||||
| Current assets | $ | 85,241 | $ | 115,262 | ||||
| Current liabilities | (80,281 | ) | (21,935 | ) | ||||
| Working capital | $ | 4,960 | $ | 93,327 | ||||
Cash Flows:
| Year Ended September 30 | ||||||||
| 2016 | 2015 | |||||||
| Cash used in operating activities | $ | (92,195 | ) | $ | (309,176 | ) | ||
| Cash used in investing activities | - | (2,550 | ) | |||||
| Cash provided by financing activities | 59,483 | 69,495 | ||||||
| Net decrease in cash | $ | (32,712 | ) | $ | (242,231 | ) | ||
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We had working capital of $4,960 and an accumulated deficit of $719,186 at September 30, 2016. We have generated minimal revenue since inception and losses are anticipated in the development of our business. These factors indicate substantial doubt as to our ability to continue as a going concern.
Significant Accounting Policies and New Pronouncements
The following is the most significant accounting policies that has a substantive impact on the underlying discussions and analysis:
Revenue Recognition
The Company’s revenue is derived from sales of fertilizer product. The Company recognizes revenue when all of the following conditions are satisfied: (i) there is persuasive evidence of an arrangement; (ii) the service or product has been provided to the customer and no uncertainties exist surrounding product acceptance; (iii) the amount of fees to be paid by the customer is fixed or determinable; and (iv) the collection of fees is reasonably assured. Areas of judgment and subjectivity in the Company’s revenue recognition include principal versus agent considerations for the sale of fertilizer products.
Principal versus agent considerations: The Company evaluates customer contracts using the indicators of the principal versus agent revenue accounting guidance to determine whether the Company acts as a principal or as an agent in the fulfillment of fertilizer orders. Assessing each contract requires judgment, and the conclusions reached on each contract will greatly impact the amount of revenue recorded. While gross profit is not impacted by the conclusion reached, revenues and cost of revenues will vary significantly. The Company assesses each contract to determine if the Company is acting as a principal or an agent. Key factors that the Company considers when determining whether it acts as a principal or an agent includes: (i) whether the Company has separate contractual relationships with customers, (ii) is the Company responsible to fulfill orders, (iii) does the Company commit to set fertilizer prices, (iv) does the Company have inventory risk, (v) who has credit risk for the amount due from the customer, and (vi) does the Company have direct obligations to the supplier to pay for the fertilizer product. The Company weighs the criteria that are present in order to conclude whether the contract should be recorded gross as a principal, or net as an agent. The Company recognizes its revenues on a net basis.
Stock-based Compensation
The Company maintains a stock-based compensation plan under which incentive stock options to buy common stock may be granted to directors, officers and employees. Pursuant to ASC 718, the Company recognizes expense for its stock-based compensation based on the fair value of the awards that are granted. The fair values of stock options are estimated at the date of the grant using the Black-Scholes option pricing model, that require the input of highly subjective assumptions. Measured compensation cost is recognized ratably over the vesting period of the related stock-based compensation award. The amount recognized as expense is adjusted to reflect the number of stock options expected to vest. When exercised, stock options are settled through the issuance of common stock and are therefore treated as equity awards. The expected volatility of our commons stock is estimated based on the historical performance of the stock.
Off-Balance Sheet Arrangements
We do not have any off -balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We do not hold any derivative instruments and do not engage in any hedging activities.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Company appear at the end of this report beginning with the Index to Financial Statements on page F-1.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company’s principal executive officer and principal financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on their evaluation of the Company’s disclosure controls and procedures, the Company’s principal executive officer and principal financial officer, with the participation of the Company’s management, have concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2016, to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is(a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.
Specifically, our management identified certain matters involving internal control and our operations that it considered to be material weaknesses. As defined in the Exchange Act, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified by our management as of September 30, 2016, is described below:
| ● | We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements. This control deficiency is pervasive in nature. Further, there is a reasonable possibility that material misstatements of the financial statements including disclosures will not be prevented or detected on a timely basis as a result. | |
| ● | We did not maintain appropriate segregation of duties. |
As a result of the material weaknesses identified above, our internal control over financial reporting was not effective as of September 30, 2016.
Management’s Annual Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2016 based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 2016 based on the material weaknesses identified above. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm as we are a smaller reporting company and not required to provide the report.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting during our fourth quarter ended September 30, 2016, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
None.
Item 10. Directors, Executive Officers and Corporate Governance
Director and Executive Officer
The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers as of September 30, 2016. There is no familial relationship between or among the nominees, directors or executive officers of the Company.
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| Name | Age | Position |
| Ioan Hossu | 62 | President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Director |
The Company’s directors serve in such capacity until the first annual meeting of the Company’s shareholders and until their successors have been elected and qualified. The Company’s officers serve at the discretion of the Company’s board of directors, until their death, or until they resign or have been removed from office.
There are no agreements or understandings for any director or officer to resign at the request of another person and none of the directors or officers is acting on behalf of or will act at the direction of any other person. The activities of each director and officer are material to the operation of the Company. No other person’s activities are material to the operation of the Company.
The following summarizes the occupation and business experience of our executive officer and directors:
Mr. Hossu, MSc, has been President and Director of Industrias y Manufacturas Bionaturales S.A. a Panamanian company for the preceding 5 years. He has been responsible for the development and testing of the fertilizer products IHO-Bio and IHO-Mineral during this time and for the development and implementation of the manufacturing process in support of these products.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers hold their offices until they resign, are removed by the Board, or their successor is elected and qualified.
Family Relationships
None.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| i. | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| ii. | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; | |
| iii. | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; | |
| iv. | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| v. | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
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| vi. | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Promoters and Control Persons
None.
Code of Ethics
The Company has not adopted any formal Code of Ethics.
Committees of the Board of Directors
The Company does not presently have a separately designated standing audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. The functions of those committees are undertaken by our Board of Directors. We believe that the creation of these committees, at this time, would be cumbersome and constitute more form over substance.
Item 11. Executive Compensation
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended September 30, 2016 and 2015:
SUMMARY COMPENSATION TABLE
| Name and Principal Position |
Year | Salary
($) |
Bonus ($) |
Stock Awards ($) |
Option
Awards ($) |
Non- Equity Incentive Plan Compensation ($) |
Non- Qualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Totals
($) |
|||||||||||||||||||||||||||
| Ioan Hossu | 2016 | $ | 40,000 | 0 | 0 | 0 | 0 | 0 | $ | 0 | $ | 40,000 | ||||||||||||||||||||||||
| 2015 | 72,000 | 0 | 0 | 0 | 0 | 0 | 12,000 | 84,000 | ||||||||||||||||||||||||||||
Narrative Disclosure to Summary Compensation Table
The Company entered into a management consulting agreement with the Company’s sole officer and director which commenced on July 29, 2015 for consulting and other services in support of the business operations. The term of the agreement was for one year. Pursuant to the agreement the Company will pay $6,000 per month. In addition, the Company’s sole officer and director receives a $1,000 monthly car allowance. As of September 30, 2016 the Company’s sole officer and director was owed $45,779 based on this agreement.
The Company currently does not have a managing consulting agreement with its sole officer and director.
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Option Grants Table
There were no individual grants of stock options to purchase our common stock made to the executive officers named in the Summary Compensation Table for the period from July 29, 2014 (inception) through September 30, 2016.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
There were no stock options exercised during the fiscal year ended September 30, 2016 by the executive officers named in the Summary Compensation Table.
Long-Term Incentive Plan (“LTIP”) Awards Table
There were no awards made to any named executive officers in the last completed fiscal year under any LTIP.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information as of February 21, 2017 with respect to the holdings of: (1) each person known to us to be the beneficial owner of more than 5% of our Common Stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, at the address of: IHO-Agro International, Inc., 3101 Portofino Point, Unit O4, Coconut Creek, FL 33066.
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Common Stock (1) | ||||||
| % Stockholders: | ||||||||
| Brad Hebert | 4,000,000 | 11.34 | % | |||||
| Mircea Georgescu | 4,000,000 | 11.34 | % | |||||
| Directors and Executive Officers: | ||||||||
| Ioan Hossu, President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Director | 24,500,000 | 69.49 | % | |||||
| All directors and executive officers as a group (1 persons) | 69.49 | % | ||||||
| (1) | Based on 35,259,002 shares of common stock outstanding as of Feb 21, 2017. |
Description of Securities
General
We are authorized to issue an aggregate number of 40,000,000 shares of capital stock, of which all 40,000,000 shares are Common Stock, $0.0001 par value per share.
| 13 |
Common Stock
We are authorized to issue 40,000,000 shares of Common Stock, $0.0001 par value per share. Currently we have 35,259,002 shares of Common Stock issued and outstanding.
Each share of Common Stock shall have one (1) vote per share for all purpose. Our Common Stock does not provide a preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights. Our Common Stock holders are not entitled to cumulative voting for election of our Board.
Preferred Stock
We are not authorized to issue any shares of preferred stock.
Dividends
We have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our Board and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Warrants
Currently we have 29 warrants issued and outstanding with 692,525 shares of Common Stock underlying those 29 warrants.
Options
There are no outstanding options to purchase our securities.
Item 13. Certain Relationships and Related Transactions and Director Independence
The following are the related party transactions in which the Company has engaged since inception (July 29. 2014):
| (a) | Accounts payable includes $2,350 (2015 - $1,150) of rent owed to a shareholder for the offices of the Company. |
| (b) | As of September 30, 2016 the Company owed $10,956 to M. Hartsman for a loan to the Company for the use in paying operating expenses. The loan bears no interest and has no fixed repayment terms. |
| (c) | As of September 30, 2016 the Company owed $1,748 to B. Hebert for a loan to the Company for the use in paying operating expenses. The loan bears no interest and has no fixed repayment terms |
| (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. A total of $45,779 was owed as of September 30, 2016 and $6,185 as of September 30, 2015. |
| 14 |
| (e) | During the year ended September 30, 2016, the Company realized sales of fertilizer product. 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 $5,000 has been accounted for as due to shareholder at September 30, 2016. The Company makes advance payments to this entity to cover future sales orders. As of September 30, 2016 and 2015, the aggregate prepaid balance to this related party was $45,505 and $70,433; respectively. |
Director Independence
Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
| ● | the director is, or at any time during the past three years was, an employee of the company; |
| ● | the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service); |
| ● | a family member of the director is, or at any time during the past three years was, an executive officer of the company; |
| ● | the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions); or |
| ● | the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit. |
We currently have one director, our Chief Executive Officer, who is not an independent director.
We do not have an audit committee, compensation committee or nominating committee.
| 15 |
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-K or 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings were approximately $15,100 and $11,500 for the fiscal years ended September 30, 2016 and 2015, respectively.
Audit Related Fees
There were no fees for audit related services for the years ended September 30, 2016 and 2015.
Tax Fees
For the Company’s fiscal years ended September 30, 2016 and 2015, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
There were no other fees related to our principal accountant for the years ended September 30, 2016 and 2015.
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
| 16 |
| (1) | Financial Statements: |
The audited balance sheets of the Company as of September 30, 2016 and September 30, 2015, the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended, the footnotes thereto, the report of MaloneBailey, LLP , our independent auditor, are filed herewith.
| (2) | Financial Schedules: |
None.
Financial statement schedules have been omitted because they are either not applicable or the required information is included in the financial statements or notes hereto.
| (3) | Exhibits: |
The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report.
(b) The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.
Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
| ● | may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements; |
| ● | may apply standards of materiality that differ from those of a reasonable investor; and |
| ● | were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
| 17 |
The following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
| Exhibit No. | Description | |
| 3.1 | Certificate of Incorporation (1) | |
| 3.2 | First Amendment to Certificate of Incorporation (1) | |
| 3.3 | Bylaws (1) | |
| 10.1 | Form of Subscription Agreement (2) | |
| 10.2 | Form of Warrant (2) | |
| 10.3 | 2016 Equity Incentive Plan (3) | |
| 31.1 | 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 | 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 Document | |
| 101.SCH * | XBRL Taxonomy Schema | |
| 101.CAL * | XBRL Taxonomy Calculation Linkbase | |
| 101.DEF * | XBRL Taxonomy Definition Linkbase | |
| 101.LAB * | XBRL Taxonomy Label Linkbase | |
| 101.PRE * | XBRL Taxonomy Presentation Linkbase |
| (1) | Filed as an exhibit on Form S-1 filed with the Securities and Exchange Commission on March 27, 2015. |
| (2) | Filed as an exhibit on Form 10-K filed with the Securities and Exchange Commission on January 13, 2016. |
| (3) | Filed as an exhibit on Form S-8 filed with the Securities and Exchange Commission on July 28, 2016. |
+ In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
* Furnished herewith.
| 18 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| IHO-AGRO INTERNATIONAL INC. | ||
| By: | /s/ Ioan Hossu | |
| Ioan Hossu | ||
| President, Chief Executive Officer, Chief Financial Officer, and Treasurer | ||
Dated: February 21, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Ioan Hossu | February 21, 2017 | |||
| Ioan Hossu | President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Director (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer) |
| 19 |
IHO-Agro International Inc.
September 30, 2016 and 2015
(Expressed in U.S. dollars)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
IHO-Agro International, Inc.
Coconut Creek, Florida
We have audited the accompanying balance sheets of IHO-Agro International, Inc. (the “Company”) as of September 30, 2016 and 2015, and the related statements of operations, changes in stockholders’ equity , and cash flows for the years then ended. These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IHO-Agro International, Inc.as of September 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
February 17, 2017
| F-1 |
Balance Sheets
(Expressed in U.S. dollars)
| September 30, | September 30, | |||||||
| 2016 | 2015 | |||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | 1,041 | 33,753 | ||||||
| Accounts receivable | 37,667 | 10,048 | ||||||
| Other receivable | 1,028 | 1,028 | ||||||
| Prepaid expenses with related party | 45,505 | 70,433 | ||||||
| Total current assets | 85,241 | 115,262 | ||||||
| Equipment, net of accumulated depreciation | 1,063 | 1,913 | ||||||
| Total Assets | 86,304 | 117,175 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | 16,798 | 15,750 | ||||||
| Due to shareholders | 63,483 | 6,185 | ||||||
| Total Current Liabilities | 80,281 | 21,935 | ||||||
| Stockholders’ Equity | ||||||||
| Common stock, 40,000,000 shares authorized, $0.0001 par value 34,981,502 and 34,409,002 shares issued and outstanding as of September 30, 2016 and September 30, 2015, respectively | 3,499 | 3,441 | ||||||
| Additional paid-in capital | 721,710 | 550,018 | ||||||
| Accumulated deficit | (719,186 | ) | (458,219 | ) | ||||
| Total Stockholders’ Equity | 6,023 | 95,240 | ||||||
| Total Liabilities and Stockholders’ Equity | 86,304 | 117,175 | ||||||
(The accompanying notes are an integral part of these financial statements)
| F-2 |
Statements of Operations
(Expressed in U.S. dollars)
| For the Year Ended | For the Year Ended | |||||||
| September 30, | September 30, | |||||||
| 2016 | 2015 | |||||||
| $ | $ | |||||||
| Revenue, net of related party cost of sales | 62,861 | 3,562 | ||||||
| Operating Expenses: | ||||||||
| General and administrative | 323,828 | 432,256 | ||||||
| Total Operating Expenses | 323,828 | 432,256 | ||||||
| Net Loss | (260,967 | ) | (428,694 | ) | ||||
| Net Loss Per Common Share, Basic and Diluted | (0.01 | ) | (0.01 | ) | ||||
| Weighted Average Common Shares Outstanding, | ||||||||
| Basic and Diluted | 34,718,271 | 33,765,019 | ||||||
(The accompanying notes are an integral part of these financial statements)
| F-3 |
Statements of Changes in Stockholders’ Equity
For the years ended September 30, 2015 and September 30, 2016
(Expressed in U.S. dollars)
| Additional | ||||||||||||||||||||||||
| Common Stock | Paid-In | Subscriptions | Accumulated | |||||||||||||||||||||
| Shares | Par Value | Capital | Receivable | Deficit | Total | |||||||||||||||||||
| # | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance – September 30, 2014 | 33,601,750 | 3,360 | 307,922 | (22,005 | ) | (29,525 | ) | 259,752 | ||||||||||||||||
| Common stock issued for cash | 158,300 | 16 | 47,474 | - | - | 47,490. | ||||||||||||||||||
| Common stock premium issued | 54,752 | 5 | 16,421 | - | - | 16,426 | ||||||||||||||||||
| Common stock issued for services | 594,200 | 59 | 178,201 | - | - | 178,260 | ||||||||||||||||||
| Receipt of subscriptions receivable | - | - | - | 22,005 | - | 22,005 | ||||||||||||||||||
| Net loss | - | - | - | - | (428,694 | ) | (428,694 | ) | ||||||||||||||||
| Balance – September 30, 2015 | 34,409,002 | 3,441 | 550,018 | - | (458,219 | ) | 95,240 | |||||||||||||||||
| Common stock issued for cash | 150,000 | 15 | 44,985 | - | - | 45,000 | ||||||||||||||||||
| Common stock issued for services | 422,500 | 43 | 126,707 | - | - | 126,750 | ||||||||||||||||||
| Net loss | - | - | - | - | (260,967 | ) | (260,967 | ) | ||||||||||||||||
| Balance – September 30, 2016 | 34,981,502 | 3,499 | 721,710 | - | (719,186 | ) | 6,023 | |||||||||||||||||
(The accompanying notes are an integral part of these financial statements)
| F-4 |
Statements of Cash Flows
(Expressed in U.S. dollars)
| For the | For the | |||||||
| Year Ended | Year Ended | |||||||
| September 30, | September 30, | |||||||
| 2016 | 2015 | |||||||
| $ | $ | |||||||
| Operating Activities | ||||||||
| Net loss | (260,967 | ) | (428,694 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 850 | 637 | ||||||
| Stock-based compensation | 126,750 | 194,686 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses with related party | 24,928 | (70,433 | ) | |||||
| Accounts receivable | (27,619 | ) | (10,048 | ) | ||||
| Other receivable | - | (1,028 | ) | |||||
| Accounts payable and accrued expense | 1,048 | 15,300 | ||||||
| Due to shareholder | 42,815 | (9,596 | ) | |||||
| Net Cash Used In Operating Activities | (92,195 | ) | (309,176 | ) | ||||
| Investing Activities | ||||||||
| Purchase of equipment | - | (2,550 | ) | |||||
| Net Cash Used In Investing Activities | - | (2,550 | ) | |||||
| Financing Activities | ||||||||
| Proceeds from due to shareholders | 19,983 | - | ||||||
| Payments on due to shareholders | (5,500 | ) | - | |||||
| Proceeds from common stock issued or subscribed | 45,000 | 69,495 | ||||||
| Net Cash Provided By Financing Activities | 59,483 | 69,495 | ||||||
| Net Decrease in Cash | (32,712 | ) | (242,231 | ) | ||||
| Cash, Beginning of Period | 33,753 | 275,984 | ||||||
| Cash, End of Period | 1,041 | 33,753 | ||||||
| Supplemental Disclosures: | ||||||||
| Interest paid | – | – | ||||||
| Income taxes paid | – | – | ||||||
(The accompanying notes are an integral part of these financial statements)
| F-5 |
Notes to the Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
| 1. | Organization and Going Concern |
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. The Company has not generated any significant revenue to fund operations and has accumulated losses of $719,186.
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 for the year September 30, 2016, has recurring net losses, and the Company anticipates future net losses 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 receivable due, and public issuance 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. | Summary of Significant Accounting Policies |
| (a) | Basis of Presentation |
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year-end is September 30.
| (b) | Use of Estimates |
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
| F-6 |
| (c) | Cash and Cash Equivalents |
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
| (d) | Accounts Receivable |
The Company recognizes allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to make required payments. The allowance is based on historical bad debt expense, the age of receivable and the specific identification of receivables the Company considers at risk.
| (e) | Equipment |
Equipment is stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets acquired as follows: Computer equipment – 3 years. Major additions and improvements are capitalized as additions to the property and equipment accounts, while replacements, maintenance and repairs that do not improve or extend the life of the respective assets, are expensed as incurred.
| (f) | Long-lived Assets |
In accordance with ASC 360, “Property Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and exceeds the sum of the undiscounted cash flows.
| (g) | Income Taxes |
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
| (h) | Revenue Recognition |
The Company’s revenue is derived from sales of fertilizer product. The Company recognizes revenue when all of the following conditions are satisfied: (i) there is persuasive evidence of an arrangement; (ii) the service or product has been provided to the customer and no uncertainties exist surrounding product acceptance; (iii) the amount of fees to be paid by the customer is fixed or determinable; and (iv) the collection of fees is reasonably assured. Areas of judgment and subjectivity in the Company’s revenue recognition include principal versus agent considerations for the sale of fertilizer products.
| F-7 |
Principal versus agent considerations: The Company evaluates customer contracts using the indicators of the principal versus agent revenue accounting guidance to determine whether the Company acts as a principal or as an agent in the fulfillment of fertilizer orders. Assessing each contract requires judgment, and the conclusions reached on each contract will greatly impact the amount of revenue recorded. While gross profit is not impacted by the conclusion reached, revenues and cost of revenues will vary significantly. The Company assesses each contract to determine if the Company is acting as a principal or an agent. Key factors that the Company considers when determining whether it acts as a principal or an agent includes: (i) whether the Company has separate contractual relationships with customers, (ii) is the Company responsible to fulfill orders, (iii) does the Company commit to set fertilizer prices, (iv) does the Company have inventory risk, (v) who has credit risk for the amount due from the customer, and (vi) does the Company have direct obligations to the supplier to pay for the fertilizer product. The Company weighs the criteria that are present in order to conclude whether the contract should be recorded gross as a principal, or net as an agent. All revenue generated during the year ended September 30, 2016 was recognized on a net basis.
| (i) | Stock-based Compensation |
The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
| (j) | Advertising Costs |
The Company’s policy regarding advertising is to expense advertising to the period it relates to. The Company incurred advertising expense of $4,467 (2015 - $9,060) during the year ended September 30, 2016.
| (k) | Earnings (Loss) Per Share |
The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. During 2016, the Company excluded 692,525 (2015 – 617,525) common stock warrants from the calculation of diluted EPS as they would be anti-dilutive.
| (l) | Financial Instruments and Fair Value Measures |
ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
| F-8 |
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, accounts receivable, other receivable, accounts payable, and amounts due to a shareholder. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
| (m) | Comprehensive Income |
ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at September 30, 2016 and 2015 the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
| (n) | Recent Accounting Pronouncements |
We have reviewed all the recent accounting pronouncements issued to the date of the issuance of these financial statements, and we do not believe any pronouncements other than the pronouncement noted above will have a material impact on the Company.
| (o) | Concentrations |
During the year ended September 30, 2016, 85% of the Company’s revenue was generated from a single customer. 71% of the accounts receivable as of September 30, 2016 was from this 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.
| 3. | Equipment |
Equipment is stated at cost and is depreciated over their estimated useful lives on a three year straight-line basis.
| Cost | Accumulated Depreciation | September 30, 2016 Net Carrying Value | September 30, 2015 Net Carrying Value | |||||||||||||
| Computer Equipment | $ | 2,550 | $ | 1,487 | $ | 1,063 | $ | 1,913 | ||||||||
| F-9 |
| 4. | Related Party Transactions |
| (a) | Accounts payable includes $2,350 (2015 - $1,150) of rent owed to a shareholder for the offices of the Company. |
| (b) | During the year September 30, 2016 the Company borrowed $10,956 from M. Hartsman a stockholder of the Company. As of September 30, 2016 the Company owed $10,956 to M. Hartsman for a loan to the Company for the use in paying operating expenses. The loan bears no interest and is due on demand. M. Hartsman provides consulting services to the Company at no cost. |
| (c) | During the year September 30, 2016 the Company borrowed $1,748 from B. Herbert a stockholder of the Company. As of September 30, 2016 the Company owed $1,748 to B. Hebert for a loan to the Company for the use in paying operating expenses. The loan bears no interest and is due on demand. B. Herbert provides consulting services to the Company at no cost. |
| (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. A total of $45,779 was owed as of September 30, 2016. A balance of $6,185 was owed at September 30, 2015 for reimbursement of travel costs, legal fees and other start-up costs. |
| (e) | During the year ended September 30, 2016, the Company realized sales of fertilizer product. 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. As of September 30, 2016, the $5,000 has been accrued as due to shareholder. The Company makes advance payments to this entity to cover future sales orders. As of September 30, 2016 and 2015; respectively, the aggregate prepaid balance to this related party was $45,505 and $70,433; respectively. |
| (f) | In August 2015, the Company issued to Mircea Georgescu, a 5% beneficial owner of the Company, 425,000 shares of common stock in exchange for consulting services. |
| 5. | Common Stock |
The Company has 40,000,000 common shares authorized with a par value of $ 0.0001 per share.
During the year ended September 30, 2015, the Company had the following issuances:
| (a) | 68,300 units for total proceeds of $20,490. Each unit consisted of one common share and one-half of one share purchase warrant. 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. |
| (b) | 9 units for total proceeds of $27,000. Each unit consisted of 10,000 common shares and 5,000 share purchase warrants. Each 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. |
| (c) | 544,200 shares of common stock for services valued in total at $163,260. |
| (d) | 50,000 units for services valued in total at $15,000. Each unit consisted of one common share and one-half of one share purchase warrant. 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. |
| F-10 |
Effective January 30, 2015, the Company amended the subscription agreements pursuant to which the Company had issued 1,095,050 shares of common stock from inception to December 31, 2014 for gross proceeds of $328,515. Pursuant to the amended subscription agreements, the Company granted the investors an additional 5% of the total amount of common shares each shareholder purchased. The aggregate amount of additional shares issued was 54,752 shares with a total value of $16,426, which was recorded as stock-based compensation during the period.
During the year ended September 30, 2015, the Company received $22,005 of the subscriptions receivable at September 30, 2014.
During the year ended September 30, 2016, the Company had the following issuances:
| (a) | During September 30, 2016, the Company issued 422,500 shares of common stock for services valued at 0.30 per common share for a total expense of $126,750. Of the 422,500 shares issued 22,500 common shares have not yet been issued by the transfer agent; however, the Company has accounted for these as issued and outstanding as of September 30, 2016. |
| (b) | In November 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. |
| 6. | 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, 2014 | 513,375 | $ | 0.60 | |||||
| Issued in 2015 | 104,150 | 0.60 | ||||||
| Balance September 30, 2015 | 617,525 | $ | 0.60 | |||||
| Issued in 2016 | 75,000 | 0.60 | ||||||
| Balance September 30, 2016 | 692,525 | $ | 0.60 | |||||
As at September 30, 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 | |||||
| F-11 |
| 7. | Income Taxes |
The Company has net operating losses carried forward of $391,794 available to offset taxable income in future years which expire beginning in fiscal 2035. The Company is subject to United States federal and state income taxes at an approximate rate of 35%. The tax years open for Internal Revenue Service review are fiscal years ended September 30, 2015 and 2016. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:
| 2016 | 2015 | |||||||
| $ | $ | |||||||
| Income tax recovery at statutory rate | (46,502 | ) | (81,433 | ) | ||||
| Valuation allowance change | 46,502 | 81,433 | ||||||
| Provision for income taxes | - | - | ||||||
The significant components of deferred income tax assets and liabilities at September 20, 2016 and September 30, 2015:
| 2016 | 2015 | |||||||
| $ | $ | |||||||
| Net operating losses carried forward | 391,794 | 258,931 | ||||||
| Gross deferred income tax assets | 137,128 | 90,626 | ||||||
| Valuation allowance | (137,128 | ) | (90,626 | ) | ||||
| Net deferred income tax asset | - | - | ||||||
| 8. | Subsequent Event |
Subsequent to September 30, 2016, the Company issued 300,000 common shares for services.
| F-12 |