10-Q: IIOT-OXYS Faces Going Concern, Investor Takes Control

IIOT-OXYS, Inc. reports no revenue, widening losses, and a significant working capital deficit, leading to a change in control by its lead investor post-quarter.

Summary

• The company reported no revenues for the three and nine months ended September 30, 2025, compared to $2,500 in revenue for the nine months ended September 30, 2024.
• Net loss attributable to common stockholders for the nine months ended September 30, 2025, was $(669,613), an improvement from $(773,580) for the same period in 2024.
• Cash and cash equivalents plummeted to $278 as of September 30, 2025, from $23,593 at December 31, 2024.
• A substantial working capital deficit of $3,190,078 and an accumulated deficit of $11,877,865 were reported as of September 30, 2025.
• Net cash used in operating activities significantly increased to $(159,135) for the nine months ended September 30, 2025, from $(15,063) in the prior year period.
• Post-quarter-end, control of the company was transferred to GHS Investments, LLC, the lead investor, through the issuance of 100 shares of Series A Super-voting Preferred Stock.
• Several debt exchange agreements were executed post-quarter-end, converting over $1.5 million in accrued fees and notes payable to management and senior secured holders into Series E Convertible Preferred Stock.
• The company's disclosure controls and procedures were deemed not effective as of September 30, 2025.

Sentiment

Score: 1

Explanation: The company is in severe financial distress, evidenced by zero revenue, minimal cash, a substantial working capital deficit, and a 'going concern' warning. The post-quarter-end events show a distressed restructuring where the lead investor has taken control and converted significant debt into preferred stock, indicating a highly unfavorable situation for common shareholders.

Positives

• Net loss attributable to common stockholders decreased to $(669,613) for the nine months ended September 30, 2025, from $(773,580) in the prior year, indicating a reduction in the rate of loss.
• The strategic partnership with Aingura IIoT, S.L. is highlighted as a significant asset, providing supplemental expertise, equipment, and software, with Aingura's recent successes in heavy industrial equipment applications suggesting potential for future U.S. collaborations.
• The company possesses valuable assets including real-world data, Artificial Intelligence (AI) Machine Learning algorithms, strong use cases, and marketing collateral, which are believed to be attractive to prospective partners for acquisition or merger.
• The global smart manufacturing (Industry 4.0) market is projected to grow from $233.3 billion in 2024 to $479 billion by 2029 (CAGR 15.5%), and the worldwide Structural Health Monitoring (SHM) industry from $2.5 billion in 2024 to $4.1 billion by 2029 (CAGR 10.4%), providing large target markets for the company's offerings.

Negatives

• The company generated no revenues for the three and nine months ended September 30, 2025, a decline from $2,500 in revenue for the nine months ended September 30, 2024.
• Cash and cash equivalents decreased drastically to $278 at September 30, 2025, from $23,593 at December 31, 2024.
• A significant working capital deficit of $3,190,078 and an accumulated deficit of $11,877,865 as of September 30, 2025, indicate severe financial distress.
• Net cash used in operating activities increased substantially to $(159,135) for the nine months ended September 30, 2025, compared to $(15,063) for the same period in 2024.
• Derivative liabilities increased to $1,073,416 at September 30, 2025, from $758,787 at December 31, 2024, reflecting increased financial complexity and potential future dilution.
• Salaries payable to related parties increased to $650,343 at September 30, 2025, from $538,981 at December 31, 2024, indicating a reliance on related party financing for operational expenses.
• The DOT Bridge Monitoring Contract ended in December 2023, and the program has been suspended with no foreseeable plans to restart, impacting a key revenue vertical.
• The SaaS contract in the Smart Manufacturing vertical ended in May 2024, requiring new business development efforts.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to continuing operating losses, a significant working capital deficit, net loss, cash used in operating activities, and an accumulated deficit.
• Inability to obtain adequate capital could force the company to cease operations.
• Difficulty in raising material funds for ongoing operations through existing financing agreements due to market conditions.
• The impact of conflicts between the Russian Federation and Ukraine, and Israel, on operations.
• General market and economic conditions, including geo-political events, and their related impact on the economy.
• Challenges in maintaining and growing business with current customers and meeting volume and service requirements.
• Risks associated with industry consolidation, new product development, and competition from new product introductions or competitors leveraging low-cost geographies.
• Fluctuations in product pricing, currency exchange rates, and the effectiveness of sales and marketing strategies.
• Risks related to adequate manufacturing capacity, supply of components and materials, and strategic relationships with suppliers.
• Challenges in protecting products and brand through intellectual property laws.
• The financial strength of competitors and potential barriers to entry in new markets.
• Government actions throughout the world.
• The company's disclosure controls and procedures were not effective as of September 30, 2025, indicating potential weaknesses in financial reporting and compliance.

Future Outlook

The company believes revenue growth for the remainder of 2025 will be challenging due to difficulties in raising additional capital for sales and marketing. Future revenue growth is dependent on securing more capital. Management is actively pursuing options, including vetting suitable companies for merger or acquisition, given the valuable assets developed in the Smart Manufacturing and Structural Health Monitoring verticals. The transfer of control to GHS Investments, LLC, is expected to provide greater access to capital and potentially lead to synergistic mergers and increased shareholder value.

Management Comments

• "We believe 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 program 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."
• "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."
• "Given the current challenges in raising adequate funds, management is pursuing options including vetting suitable companies to merge with or acquire us."
• "We believe we’ve created valuable assets from our business development in these industries, which are strong in both their size and growth."
• "On November 5th, 2025, after the close of Q3 2025, but prior to the filing of this report, control of the Company was transferred to GHS, our lead investor."
• "We are optimistic that under this new leadership the Company will have greater access to capital to secure additional assets for the Company, including potential synergistic mergers. We expect the net result will be increased shareholder value."

Industry Context

The company operates in the Industrial Internet of Things (IIoT) space, specifically targeting Smart Manufacturing (Industry 4.0) and Structural Health Monitoring (SHM). These are high-growth markets, with Smart Manufacturing projected to reach $479 billion by 2029 (CAGR 15.5%) and SHM $4.1 billion by 2029 (CAGR 10.4%). Despite these favorable industry trends, IIOT-OXYS has failed to generate revenue and is struggling to secure capital, indicating an inability to capitalize on market opportunities or significant competitive pressures. The reliance on convertible debt and preferred stock, and the subsequent transfer of control to a lead investor, suggest a struggle to compete effectively or achieve commercialization in these capital-intensive sectors.

Comparison to Industry Standards

• The company's lack of revenue ($0 for nine months ended September 30, 2025) stands in stark contrast to the projected growth rates of 15.5% CAGR for the global smart manufacturing market and 10.4% CAGR for the worldwide SHM industry, indicating a significant underperformance relative to industry expansion.
• While the company mentions developing AI/Machine Learning algorithms and strong use cases, it does not provide specific comparable project successes or revenue figures from industry leaders like Siemens (MindSphere), GE Digital (Predix), or smaller, specialized IIoT firms, making a direct performance comparison difficult beyond the stark revenue disparity.
• The company's financial position, characterized by a working capital deficit of over $3 million and an accumulated deficit of nearly $12 million, is far below the financial health typically seen in established or rapidly growing companies within these high-growth technology sectors, which often demonstrate strong cash flows or significant capital backing to fuel expansion.

Management Changes

Corporate Governance

Related Party Transactions

• The company leases its office facility from two stockholders on a month-to-month basis at $250 monthly rent, with $5,500 recorded as rent payable to the stockholder as of September 30, 2025.
• An advance of $17,500 was received from an officer and director for working capital needs, included in accrued liabilities as of September 30, 2025.
• Convertible note payable (Note E) to a director for $125,000 principal, with accrued interest payable of $89,950 as of September 30, 2025.
• Salaries payable to the CEO amounted to $347,373 and to the COO/Interim CFO amounted to $302,970 as of September 30, 2025.
• Post-quarter-end, the CEO (Mr. Emmons) exchanged $387,242 of accrued and unpaid fees for 268.529 shares of Series E Convertible Preferred Stock and cancelled 7,800 Series A Preferred Stock.
• Post-quarter-end, a former Director (Mr. Mitta) exchanged $216,156 of principal and accrued interest for 180 shares of Series E Preferred Stock and cancelled 12,000 Series A Preferred Stock.
• Post-quarter-end, a former CFO (Ms. McNemar) exchanged $323,269 of accrued and unpaid fees for 269 shares of Series E Preferred Stock and cancelled 6,045 Series A Preferred Stock.
• Post-quarter-end, the CEO (Mr. Emmons) entered into a new consulting agreement for a monthly fee of $4,167 payable in Series E Preferred Stock.

Stakeholder Impact

• **Shareholders (Common Stockholders)**: Significant dilution from ongoing issuance of convertible preferred stock and common stock for services/debt conversion. Loss of control to GHS Investments, LLC. The 'going concern' warning indicates a high risk of total loss of investment.
• **Preferred Stockholders (GHS Investments, LLC)**: GHS has significantly increased its stake and taken voting control, converting debt and providing new capital, positioning itself to potentially benefit from any future turnaround or asset sales, while common shareholders bear the brunt of dilution and risk.
• **Employees/Management**: Accrued salaries payable to related parties indicate deferred compensation. Debt exchange agreements converted significant accrued fees for the CEO, former CFO, and former Director into Series E Preferred Stock, providing some resolution to their outstanding claims but also tying their compensation to the company's future equity performance. New consulting agreements for the CEO and former CFO provide continued compensation.
• **Creditors**: Some convertible noteholders (e.g., Mr. Mitta, Senior Secured Holders) have converted their debt into Series E Preferred Stock, resolving immediate liabilities but shifting their position to equity holders. Other notes payable remain, with maturity dates extended.
• **Customers**: The suspension of the DOT Bridge Monitoring program and the end of the SaaS contract indicate a lack of ongoing revenue-generating customer relationships, which could impact future product development and support.

Next Steps

• Generate cash through additional borrowings and/or sale of equity securities to meet obligations for the next twelve months.
• Continue monitoring two Structural Health Monitoring (SHM) sites at the company's cost to market the system and services to local municipalities and other state DOTs.
• Pursue DOT contacts in two other northeast states, with potential contracts converting in approximately one year.
• Prospect projects with local municipalities in the current northeast state, potentially converting to contracts in 2026 based on state grants.
• Leverage previous customer endorsement and promotional videos to prospect future Smart Manufacturing CNC business.
• Pursue additional Proof of Concepts (POCs) for other discrete manufacturing processes (metal stamping, plastic injection molding, plastic extrusion, automated assembly and test).
• Vetting suitable companies for merger or acquisition.
• Mr. Emmons will continue under a new consulting agreement, receiving a monthly fee of $4,167 payable in Series E Preferred Stock for three months, automatically renewable.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by zero revenue, minimal cash, a substantial working capital deficit, and an explicit 'going concern' warning. The post-quarter-end events, including the transfer of control to the lead investor (GHS) and the conversion of significant debt and accrued liabilities into preferred stock, indicate a distressed restructuring that heavily favors the new controlling shareholder. This action significantly dilutes common shareholders and prioritizes the lead investor's position. Given the lack of operational revenue, persistent losses, and the precarious financial state, the risk for common shareholders is extremely high, making a 'strong sell' recommendation appropriate.

Keywords

IIOT-OXYS, 10-Q, SEC filing, Industrial Internet of Things, IIoT, Edge Computing, Smart Manufacturing, Industry 4.0, Structural Health Monitoring, SHM, Artificial Intelligence, AI, Machine Learning, Going Concern, Convertible Preferred Stock, Derivative Liabilities, Capital Raise, Corporate Governance, GHS Investments