10-Q: IIOT-OXYS, Inc. Reports Q1 2026 Financials Amidst Capital Challenges

IIOT-OXYS, Inc. filed its Q1 2026 10-Q, detailing continued operating losses, a significant working capital deficit, and ongoing efforts to secure capital.

Summary

• IIOT-OXYS, Inc. reported no revenues for the first quarter of 2026, similar to the prior year's first quarter.
• Operating expenses for Q1 2026 were $63,589, primarily consisting of professional fees ($56,224) and general and administrative expenses ($7,365).
• The company incurred net other expenses of $162,573, including a loss of $97,220 from the change in fair value of derivative liabilities and $49,084 in interest expense.
• A significant preferred stock dividend expense of $167,511 was recorded for convertible preferred stocks.
• The net loss attributable to common stockholders for Q1 2026 was $393,673, compared to $180,313 for Q1 2025.
• The company's cash balance decreased to $6,838 as of March 31, 2026, from $26,342 as of December 31, 2025, primarily due to net cash used in operating activities.
• Financing activities provided $40,120 in net cash, mainly from the sale of Series D Convertible Preferred Stock.
• The company has a working capital deficit of $2,653,885 and an accumulated deficit of $13,043,185 as of March 31, 2026, raising substantial doubt about its ability to continue as a going concern.
• Management is exploring options including mergers or acquisitions due to difficulties in raising capital.
• A Securities Purchase Agreement was executed on March 6, 2026, with GHS Investments, LLC, for the purchase of Series D Convertible Preferred Stock.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as highly negative due to the continued lack of revenue, increasing net loss, critically low cash balance, and substantial doubt about the company's going concern status, despite efforts to secure capital and partnerships.

Positives

• The company continues to pursue strategic partnerships, notably with Aingura IIoT, S.L., which provides supplemental expertise and equipment.
• Management believes its assets, including collected real-world data and developed AI Machine Learning algorithms, have potential future revenue growth attractive to potential acquirers or merger partners.
• GHS Investments, LLC, the lead investor, has provided ongoing limited funding to cover operational expenses.
• The company has secured waivers for cumulative penalties for non-payment of dividends from GHS Investments, LLC on several Series B and D Convertible Preferred Stock issuances.

Negatives

• No revenues were recorded in Q1 2026 or Q1 2025.
• The company has a significant working capital deficit of $2,653,885 as of March 31, 2026.
• The accumulated deficit has grown to $13,043,185 as of March 31, 2026.
• Net cash used in operating activities was $59,624 for Q1 2026.
• The company's cash balance is critically low at $6,838 as of March 31, 2026.
• There is substantial doubt about the company's ability to continue as a going concern due to its financial condition.
• The DOT Bridge Monitoring Contract ended in December 2023, and the related monitoring program has been suspended with no foreseeable restart.
• The SaaS contract for the Smart Manufacturing vertical ended in May 2024.

Risks

• The company's ability to continue as a going concern is in doubt due to continuing operating losses, working capital deficit, and negative cash flow from operations.
• Failure to obtain adequate capital could force the company to cease operations.
• The suspension of the DOT Bridge Monitoring Contract and the uncertainty of new DOT contracts pose a risk to future revenue.
• The company faces challenges in raising additional capital to fuel sales and marketing efforts.
• Geopolitical events, such as conflicts in Ukraine and Israel, and their impact on the economy, are identified as potential risks.
• The company's ability to meet the volume and service requirements of its customers is a risk.
• Industry consolidation and new product introductions by competitors pose risks.
• The effectiveness of sales and marketing resources and strategies is a risk factor.
• The company's reliance on strategic partnerships for expertise and equipment is a factor.
• The company is actively considering options including vetting suitable companies to merge with or acquire it due to current capital raising challenges.

Future Outlook

The company believes revenue growth for the rest of 2026 will be challenging due to difficulties in raising capital for sales and marketing. Future revenue growth is dependent on the ability to raise capital and the success of its Structural Health Monitoring (SHM) and Smart Manufacturing verticals. Management is exploring strategic options including mergers or acquisitions.

Management Comments

• Management believes that the Company will be able to achieve a satisfactory level of liquidity to meet the Companys 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.
• We believe revenue growth for the rest of 2026 will be challenging given the difficulty in raising additional capital to fuel 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 companys assets have potential future revenue growth, that will be attractive to prospective partners interested in an acquisition or merger.
• 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

StockSavvy.ai notes that the global smart manufacturing market was valued at $233.3 billion in 2024 and is projected to reach $479 billion by 2029, with a CAGR of 15.5%. The worldwide Structural Health Monitoring (SHM) industry was valued at $2.5 billion in 2024 and is expected to reach $4.1 billion by 2029, with a CAGR of 10.4%. IIOT-OXYS, Inc. operates within these growing sectors.

Comparison to Industry Standards

• The company's lack of revenue and significant operating losses contrasts with the growth projections for the smart manufacturing and SHM industries.
• While the company highlights its AI and machine learning capabilities, it has not yet translated these into revenue, unlike some competitors who may be further along in commercialization.
• The company's reliance on convertible debt and preferred stock financing is common for early-stage technology companies but indicates a higher cost of capital and potential dilution compared to companies with more stable revenue streams.

Management Changes

Related Party Transactions

• Consulting Agreement with Cliff Emmons (CEO) for a monthly fee of $4,167 payable in Series E Preferred Stock.
• Debt Exchange Agreement with Cliff Emmons for $387,242 of accrued compensation and unpaid fees exchanged for 269 shares of Series E Convertible Preferred Stock.
• Debt Exchange Agreement with Vidhyadhar Mitta (former Director) for $216,156 of principal and accrued interest exchanged for 180 shares of Series E Preferred Stock.
• Debt Exchange Agreement with Karen McNemar (former CFO) for $323,269 of accrued and unpaid fees exchanged for 269 shares of Series E Preferred Stock.
• Debt Exchange Agreement with Sergey Gogin and Yvsgramorah, LLC for $522,195 of principal and accrued interest exchanged for 489 shares of Series E Preferred Stock.

Stakeholder Impact

• Shareholders face continued dilution risk from preferred stock issuances and potential future capital raises, alongside the ongoing risk of significant value erosion due to the company's financial distress.
• Employees may face uncertainty regarding job security given the company's going concern issues and potential for merger or acquisition.
• Creditors and debtholders face risks related to the company's ability to meet its obligations, particularly given the low cash balance and ongoing losses.

Next Steps

• Continue to pursue DOT contacts in two other northeast states for potential contracts.
• Prospect projects with local municipalities for potential contracts in 2026.
• Pursue additional Proofs of Concept (POCs) for other discrete manufacturing processes.
• Continue to leverage the strategic partnership with Aingura IIoT, S.L. for U.S. collaborations.
• Management is actively vetting suitable companies for potential mergers or acquisitions.
• The company will continue to seek funding from its lead investor to cover ongoing expenses.

Key Dates

Recommendation

The company's Q1 2026 results show a worsening financial situation with no revenue, increasing losses, critically low cash, and substantial doubt about its ability to continue as a going concern. The significant increase in net loss attributable to common stockholders and the continued reliance on complex financing instruments with high dividend costs highlight severe financial distress. Without a clear path to revenue generation or significant capital infusion, the risk of further value destruction for shareholders is extremely high.

Keywords

IIOT-OXYS, 10-Q, Quarterly Report, Financial Statements, Convertible Preferred Stock, Derivative Liability, Going Concern, Capital Raise, Net Loss, Operating Expenses, Securities Purchase Agreement, GHS Investments