10-Q: IIOT-OXYS Faces Going Concern, Extends Debt, Boosts Capital
Quarterly Report
IIOT-OXYS, Inc. reported continued operating losses and a significant working capital deficit, raising substantial doubt about its ability to continue as a going concern, while extending debt maturities and raising capital through dilutive preferred stock offerings.
Summary
- IIOT-OXYS, Inc. reported a net loss attributable to common stockholders of $(230,724) for the six months ended June 30, 2025, a significant improvement from $(647,381) in the prior year period.
- The company generated no revenues for the six months ended June 30, 2025, compared to $2,500 in the same period of 2024.
- A working capital deficit of $(2,763,666) and an accumulated deficit of $(11,438,976) were reported as of June 30, 2025.
- Cash and cash equivalents increased to $41,047 at June 30, 2025, from $23,593 at December 31, 2024, primarily due to financing activities.
- The maturity date for a $75,000 Convertible Promissory Note with GHS Investments LLC was extended from April 29, 2025, to October 29, 2025.
- The company raised $141,000 from the sale of Series D Convertible Preferred Stock during the six months ended June 30, 2025.
- Disclosure controls and procedures were deemed not effective as of June 30, 2025.
Sentiment
Score: 2
Explanation: The company faces severe financial distress, including a going concern warning, zero revenue, and increasing operational cash burn. While net loss decreased, it was largely due to non-cash derivative fair value changes. Reliance on dilutive financing and debt extensions, coupled with ineffective internal controls, points to a highly negative outlook despite management's efforts to find strategic alternatives.
Positives
- Net loss attributable to common stockholders significantly decreased to $(230,724) for the six months ended June 30, 2025, from $(647,381) in the prior year period.
- Cash and cash equivalents increased to $41,047 at June 30, 2025, from $23,593 at December 31, 2024.
- The company recorded a gain of $228,311 on the change in fair market value of derivative liability for the six months ended June 30, 2025, compared to a loss of $346,126 in the prior year.
- Management is actively pursuing strategic options, including potential mergers or acquisitions, to address funding challenges.
- The company received a $13,447 employee retention credit in May 2025, recorded as other income.
Negatives
- The company reported no revenues for the six months ended June 30, 2025, indicating a lack of operational income.
- A substantial doubt about the company's ability to continue as a going concern exists due to continuing operating losses, a working capital deficit of $(2,763,666), and an accumulated deficit of $(11,438,976).
- Cash used in operating activities increased significantly to $(112,726) for the six months ended June 30, 2025, from $(9,982) in the prior year period.
- Current notes payable increased substantially to $393,942 at June 30, 2025, from $138,942 at December 31, 2024.
- Salaries payable to related parties increased to $617,609 at June 30, 2025, from $538,981 at December 31, 2024, indicating deferred compensation.
- Interest expense increased to $(184,291) for the six months ended June 30, 2025, from $(117,746) in the prior year period.
- Disclosure controls and procedures were deemed not effective as of June 30, 2025.
Risks
- Substantial doubt exists about the company's ability to continue as a going concern due to continuing operating losses, a working capital deficit of $(2,763,666), a net loss of $(230,724) for the six months ended June 30, 2025, and an accumulated deficit of $(11,438,976).
- Inability to obtain adequate capital could force the company to cease operations.
- Revenue growth for the remainder of 2025 will be challenging due to difficulties in raising additional capital for sales and marketing efforts.
- The DOT Bridge Monitoring Contract ended in December 2023, and the monitoring program has been suspended with no foreseeable plans to restart, impacting a key revenue vertical.
- Management (CEO and COO) have received negligible compensation and accrued almost all compensation since mid-April 2023, potentially impacting morale and retention.
- The company's disclosure controls and procedures were not effective as of June 30, 2025, indicating potential weaknesses in financial reporting oversight.
- Significant dilution risk for common stockholders due to the issuance of convertible preferred stock and the increase in authorized common shares to 10,000,000,000.
Future Outlook
Management believes it can achieve satisfactory liquidity for the next twelve months through additional borrowings and/or equity sales, but provides no assurance. Revenue growth for the remainder of 2025 is expected to be challenging due to difficulties in raising capital for sales and marketing. The company is actively vetting suitable merger or acquisition targets. The Structural Health Monitoring (SHM) program with the DOT has been suspended, but the company will continue monitoring two sites for marketing purposes and is pursuing new contracts in other states and with local municipalities, with potential conversions in 2025 or later. The Smart Manufacturing vertical shows promise based on past successes and customer endorsements, with additional Proof of Concepts (POCs) being pursued.
Management Comments
- Management believes that the Company will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations for the next twelve months by generating cash through additional borrowings and/or sale of equity securities, as needed. However, there can be no assurance that the Company will be able to generate sufficient liquidity to maintain its operations.
- Revenue growth for the rest of 2025 will be challenging given the difficulty in raising additional capital to fuel sales and marketing efforts.
- Despite this setback (DOT contract suspension), our main contractor has confirmed we can continue to monitor our two sites (at our cost), which will allow us to effectively market our system and services to local municipalities and other state DOTs.
- Our CEO and COO have received negligible compensation and have accrued almost all compensation since mid-April 2023 and the lack of funds has severely limited sales and marketing efforts.
- Given the current challenges in raising adequate funds, management is pursuing options including vetting suitable companies to merge with or acquire us.
- We believe our strategic partnership continues to be our greatest asset. The strength of our Aingura IIoT, S.L. partnership provides supplemental expertise, equipment and software, which ensures our ability to bring value to our prospective customers.
Industry Context
The company operates in the Industrial Internet of Things (IIoT) space, specifically targeting Smart Manufacturing and Structural Health Monitoring (SHM) verticals. The global smart manufacturing market is projected to grow from $233.3 billion in 2024 to $479 billion by 2029 (CAGR 15.5%), while the worldwide SHM industry is expected to grow from $2.5 billion in 2024 to $4.1 billion by 2029 (CAGR 10.4%). Despite these attractive market sizes, the company faces significant challenges in capitalizing on these trends due to its inability to raise sufficient capital, as evidenced by the suspension of its DOT Bridge Monitoring Contract and the ending of a key SaaS contract.
Comparison to Industry Standards
- The global smart manufacturing market is projected to grow at a CAGR of 15.5% from $233.3 billion in 2024 to $479 billion by 2029.
- The worldwide Structural Health Monitoring (SHM) industry is projected to grow at a CAGR of 10.4% from $2.5 billion in 2024 to $4.1 billion by 2029.
- The company's current lack of revenue ($0 for six months ended June 30, 2025) stands in stark contrast to the significant growth and size of its target markets, indicating a severe underperformance relative to industry potential.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Deficiency | Disclosure controls and procedures were not effective as of June 30, 2025. | 2025-06-30 | Indicates potential weaknesses in the company's ability to record, process, summarize, and report financial information accurately and timely, posing a significant risk to financial integrity and investor confidence. |
| Authorized Share Increase | Authorized shares of common stock increased from 3,000,000,000 to 10,000,000,000. | 2025-09-03 | Facilitates future equity raises but significantly increases the potential for dilution of existing common stockholders. |
Related Party Transactions
- Convertible note payable (Note E) to a director for a principal amount of $125,000, with accrued interest of $86,170 as of June 30, 2025.
- Salaries payable to the CEO totaled $327,674 as of June 30, 2025, with compensation largely accrued since mid-April 2023.
- Salaries payable to the COO/Interim CFO totaled $289,935 as of June 30, 2025, with compensation largely accrued since mid-April 2023.
- Common stock issued to related parties for services amounted to 11,000,000 shares for $11,000 during the six months ended June 30, 2025.
- Rent payable to two stockholders for office facility lease totaled $4,750 as of June 30, 2025.
Stakeholder Impact
- Shareholders face significant dilution risk from ongoing convertible preferred stock issuances and the recent increase in authorized common stock, alongside the substantial doubt about the company's going concern.
- Employees, particularly the CEO and COO, are experiencing deferred compensation due to the company's financial constraints, which could impact morale and retention.
- Creditors (noteholders) are being asked to extend maturity dates on convertible notes, indicating the company's difficulty in meeting its debt obligations.
- Potential partners or acquirers may find the company's valuable assets attractive, but the financial distress and governance issues could complicate negotiations.
Next Steps
- Generate cash through additional borrowings and/or sale of equity securities to meet obligations for the next twelve months.
- Vetting suitable companies for potential merger or acquisition.
- Continue monitoring two Structural Health Monitoring (SHM) sites at company cost for marketing purposes.
- Pursue DOT contacts in two other northeast states for SHM contracts, with potential conversions in approximately one year.
- Prospect projects with local municipalities in the current northeast state for SHM, with potential conversions in 2025.
- Pursue additional Proof of Concepts (POCs) for other discrete manufacturing processes in the Smart Manufacturing vertical.
Key Dates
| Date | Description |
|---|---|
| 2017-07-06 | IIOT-OXYS, Inc. incorporated in Nevada. |
| 2017-07-28 | Effective date of the OXYS SEA, changing the company name to IIOT-OXYS, Inc. and acquiring OXYS Corporation. |
| 2017-10-26 | Company domicile changed from New Jersey to Nevada. |
| 2017-12-14 | Board of Directors approved the 2017 Stock Incentive Plan. |
| 2018-01-18 | Original issuance date of Convertible Note A. |
| 2019-03 | Original issuance date of Convertible Note D. |
| 2019-08 | Original issuance date of Convertible Note E. |
| 2020-07-29 | Issuance Date of the original Convertible Promissory Note to GHS Investments LLC (Note G). |
| 2020-11-16 | Date of Securities Purchase Agreement (SPA) with GHS Investments, LLC for Series B Convertible Preferred Stock. |
| 2020-11-19 | Initial closing under SPA, GHS purchased 45 shares of Series B Convertible Preferred Stock and received 25 shares as a commitment fee. |
| 2020-12-16 | GHS purchased an additional 85 shares of Series B Convertible Preferred Stock. |
| 2021-04-29 | Extension No. 1 to Convertible Promissory Note (Note G) extending maturity to October 29, 2021. |
| 2021-11-04 | Extension No. 2 to Convertible Promissory Note (Note G) extending maturity to April 29, 2022. |
| 2021-12-20 | GHS purchased an additional 51 shares of Series B Convertible Preferred Stock. |
| 2022-02-07 | GHS purchased an additional 51 shares of Series B Convertible Preferred Stock. |
| 2022-03-14 | Noteholders of Note A and Note D agreed to extend maturity dates to March 1, 2023, and waived prior defaults. |
| 2022-03-18 | Company adopted the 2022 Stock Incentive Plan, reserving 20,000,000 shares. |
| 2022-03-24 | GHS purchased an additional 136 shares of Series B Convertible Preferred Stock. |
| 2022-04-01 | Effective date of Employment Agreements for CEO and COO/Interim CFO. |
| 2022-04-29 | Extension No. 3 to Convertible Promissory Note (Note G) extending maturity to April 29, 2023. |
| 2022-06-02 | Board approved Employment Agreements with CEO and COO/Interim CFO. |
| 2022-10-03 | Company awarded 300,000 shares of common stock to an advisor under the 2022 Plan. |
| 2022-11-17 | GHS purchased an additional 61 shares of Series B Convertible Preferred Stock. |
| 2023-05-01 | Extension No. 4 to Convertible Promissory Note (Note G) extending maturity to April 29, 2025. |
| 2023-07-21 | Noteholders of Note A and Note D agreed to extend maturity dates to March 1, 2024, with automatic extension to March 1, 2026. |
| 2023-08-24 | GHS purchased 62 shares of Series B Convertible Preferred Stock. |
| 2023-12-31 | DOT Bridge Monitoring Contract ended. |
| 2024-01-08 | Board of Directors authorized issuance of up to 5,000 shares of Series C Convertible Preferred Stock. |
| 2024-03-01 | Convertible promissory noteholder and company converted $55,000 principal and $13,825 accrued interest into 57 shares of Series C Convertible Preferred Stock. |
| 2024-04-16 | GHS purchased 20 shares of Series B Convertible Preferred Stock. |
| 2024-05 | SaaS contract in Smart Manufacturing vertical ended. |
| 2024-10-03 | GHS purchased 43 shares of Series B Convertible Preferred Stock and committed 4 additional shares for services/fees. |
| 2025-03-05 | Company issued 5,000,000 shares to an officer and director and 100,000 shares to a consultant. |
| 2025-03-17 | Board of Directors authorized issuance of up to 210 shares of Series D Convertible Preferred Stock. |
| 2025-03-21 | GHS purchased 60 shares of Series D Convertible Preferred Stock. |
| 2025-04-10 | GHS purchased 45 shares of Series D Convertible Preferred Stock. |
| 2025-05-14 | Extension No. 5 to Convertible Promissory Note (Note G) extending maturity to October 29, 2025. |
| 2025-05-14 | GHS purchased 11 shares of Series D Convertible Preferred Stock. |
| 2025-05-14 | GHS purchased 25 shares of Series D Convertible Preferred Stock. |
| 2025-06-23 | Company issued 6,000,000 shares to an officer and director. |
| 2025-06-30 | End of the reported quarterly period. |
| 2025-08-06 | Noteholder of Note E agreed to extend maturity date to February 2, 2026. |
| 2025-09-03 | Certificate of Amendment to Articles of Incorporation became effective, increasing authorized common stock to 10,000,000,000 shares. |
| 2025-09-19 | Date of filing the 10-Q report. |
| 2025-10-29 | Extended maturity date for Convertible Promissory Note (Note G). |
| 2026-02-02 | Extended maturity date for Convertible Note E. |
| 2026-03-01 | Extended maturity date for Convertible Notes A and D. |
Recommendation
strong sellThe company is in severe financial distress, evidenced by a 'going concern' warning, zero revenue, a substantial working capital deficit, and increasing operational cash burn. While the net loss decreased, this was primarily due to non-cash derivative fair value adjustments rather than improved operations. The reliance on highly dilutive convertible preferred stock financing, repeated debt extensions, and ineffective internal controls highlight fundamental weaknesses. Despite management's pursuit of strategic alternatives and the potential in its target markets, the immediate financial outlook is extremely challenging, making the stock a high-risk, speculative investment with significant downside potential for current holders.
Keywords
IIOT-OXYS, 10-Q, SEC filing, financial results, going concern, convertible debt, preferred stock, Industrial Internet of Things, IIoT, Smart Manufacturing, Structural Health Monitoring, capital raise, dilution, GHS Investments
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