10-Q: IIOT-OXYS Reports Q1 2024 Results: Revenue Declines, Net Loss Incurred Amidst Going Concern Uncertainty

IIOT-OXYS, Inc. reports a significant decrease in revenue and a net loss for Q1 2024, raising concerns about the company's ability to continue as a going concern.

Summary

• IIOT-OXYS, Inc. reported revenues of $2,500 for the three months ended March 31, 2024, a significant decrease from $43,283 in the same period of 2023.
• The company incurred a net loss of $220,618 for Q1 2024, compared to a net loss of $178,170 for Q1 2023.
• Operating expenses totaled $66,682, including payroll costs of $50,518 and amortization of intangible assets of $12,341.
• The company has a working capital deficit of $2,281,084 and an accumulated deficit of $10,664,215 as of March 31, 2024.
• Management expresses substantial doubt about the company's ability to continue as a going concern.
• The company is exploring options including additional borrowings, sale of equity securities, and potential merger or acquisition opportunities.
• The company converted $55,000 principal and $13,825 interest from a convertible note into 57 shares of Series C Convertible Preferred Stock.
• The company's disclosure controls and procedures were deemed not effective as of March 31, 2024.
• The company's cash balance increased slightly to $1,405 at the end of Q1 2024.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to declining revenue, increasing net loss, a significant working capital deficit, and concerns about the company's ability to continue as a going concern. While there are some positives, the overall tone is pessimistic.

Positives

• The company's strategic partnership with Aingura IIoT, S.L. provides supplemental expertise, equipment, and software.
• The company is exploring potential merger or acquisition opportunities.
• The company's cash balance increased slightly to $1,405 at the end of Q1 2024.
• The company has valuable real-world data, AI Machine Learning algorithms, and strong use cases developed from its data and algorithms.

Negatives

• The company experienced a significant decrease in revenue, with Q1 2024 revenues substantially less than the same period in 2023.
• The company incurred a net loss of $220,618 for Q1 2024.
• The company has a substantial working capital deficit of $2,281,084.
• There is substantial doubt about the company's ability to continue as a going concern.
• The CEO and COO have accrued all compensation since mid-April 2023.
• The company's disclosure controls and procedures were deemed not effective as of March 31, 2024.

Risks

• The company's ability to raise additional capital to fuel sales and marketing efforts is uncertain.
• The company faces significant headwinds in raising material funds for ongoing operations.
• The company's potential future revenue growth depends on its ability to raise capital.
• The company's DOT Bridge Monitoring Contract ended in December 2023.
• The company's SaaS contract ended in May 2024.
• The company's CEO and COO have not received any compensation since mid-April 2023, limiting sales and marketing efforts.
• The company's disclosure controls and procedures were deemed not effective as of March 31, 2024.

Future Outlook

The company's future revenue growth depends on its ability to raise capital and secure new contracts. Management is exploring strategic alternatives, including a potential merger or acquisition.

Management Comments

• Management expresses substantial doubt about the company's ability to continue as a going concern.
• Our management has secured limited funding from our lead investor to pay for ongoing expenses and our leadership team is considering our options for both the short and long term.
• Given the current challenges in raising adequate funds, management is pursuing options including vetting suitable companies to merge with or acquire us.

Industry Context

The company operates in the smart manufacturing (Industry 4.0) and structural health monitoring (SHM) industries, which are experiencing significant growth. The global smart manufacturing market is projected to reach $241 billion by 2028, and the worldwide SHM industry is expected to reach $4.1 billion by 2029.

Comparison to Industry Standards

• The document does not provide enough information to compare the company's results to specific industry standards or comparable companies.
• Without detailed financial ratios, growth rates, and market share data, a comprehensive comparison is not possible.
• The document mentions the growth rates of the smart manufacturing and SHM industries, but it does not provide specific benchmarks for company performance within those industries.

Related Party Transactions

• The company leases its current office facility from two stockholders on a month-to-month basis at a monthly rent of $250.
• The company executed three convertible promissory notes payable with a director for the principal amount of $125,000 and accrued interest payable of $67,430 as of March 31, 2024.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial difficulties and going concern uncertainty.
• Employees may be impacted by potential cost-cutting measures or restructuring.
• Customers may be concerned about the company's ability to fulfill contracts and provide ongoing support.
• Creditors face increased risk of non-payment due to the company's financial challenges.

Next Steps

• The company will continue to pursue discussions with the DOT for extension and expansion contracts.
• The company will continue to prospect additional POCs for other discrete manufacturing processes.
• The company will continue to use its endorsement and promotional videos to prospect future Smart Manufacturing CNC business.
• The company will continue to use commercially reasonable efforts to continue the listing and trading of its Common Stock on the OTC Pink, or on a national securities exchange.
• The company will vet suitable companies to merge with or acquire it.

Key Dates

Keywords

IIOT-OXYS, financial results, Q1 2024, going concern, revenue, net loss, convertible notes, preferred stock, working capital, accumulated deficit, merger, acquisition, capital raise, disclosure controls, internal controls