8-K: IIOT-OXYS Secures $210,000 Preferred Equity Financing and Finder's Fee Agreement

IIOT-OXYS, Inc. has entered into a Securities Purchase Agreement with GHS Investments, LLC for up to $210,000 in Series D Convertible Preferred Stock and a Finder's Fee Agreement with J.H. Darbie & Co., Inc.

Summary

• IIOT-OXYS, Inc. has approved a Finder's Fee Agreement with J.H. Darbie & Co., Inc. on March 17, 2025.
• The finder will receive 4% (2% for GHS Investments, LLC) of the gross proceeds from equity/convertible debt transactions and 3% (2% for GHS) of gross proceeds from non-convertible debt transactions.
• The finder will also receive warrants equal to 4% (0% for GHS) warrant coverage of the amount raised, exercisable at 120% of the introduced party's exercise price or the closing price of the company's common stock, whichever is lower.
• The agreement lasts for 120 days and can be terminated by the finder with written notice.
• IIOT-OXYS entered into a Securities Purchase Agreement (SPA) with GHS Investments, LLC on March 21, 2025, for up to $210,000.
• The SPA allows GHS to purchase up to 210 shares of Series D Convertible Preferred Stock.
• The initial closing involved 60 shares at $1,200 stated value per share, purchased by GHS for $1,000 per share, totaling $60,000.
• Additional closings of up to 150 shares may occur, subject to the SPA terms, for a total aggregate purchase price of up to $150,000.
• The company has designated a new class of Series D Convertible Preferred Stock consisting of 210 shares.
• The preferred stock is convertible to common stock at 80% of the lowest traded price for the company's common stock for the ten trading days immediately preceding the execution date of the Securities Purchase Agreement.
• The conversion price will automatically lower to the Adjustment Price if on the 90th and 180th calendar days following the first closing, the conversion price is greater than the lowest closing price of the Common Stock on the principal market on any trading day during the five trading day period.
• Conversions are limited to ensure GHS's beneficial ownership does not exceed 4.99% of the company's outstanding common stock.
• Each share of preferred stock receives cumulative dividends of 12% per annum, payable quarterly, in cash or preferred stock at the company's discretion.
• The preferred stock may be redeemed by the company with premiums ranging from 115% to 125% of the stated value, depending on the redemption timeframe, with full redemption one year from issuance.
• The preferred stock votes with common stock on an as-converted basis, limited to the 4.99% conversion limitation.
• Holders of the preferred stock have piggy-back registration rights.
• Failure to deliver required common stock upon conversion or breach of material covenants results in significant financial penalties, including liquidated damages and forced redemption at 135% of the stated value plus accrued dividends and other costs.
• Holders of the preferred stock have the right to participate in future rights offerings and financings.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. The company is securing funding, which is generally positive, but the terms of the agreement include potential risks and costs.

Positives

• The company secures up to $210,000 in funding through preferred equity financing.
• The financing agreement includes the potential for future closings, providing flexibility.
• The preferred stock offers a 12% cumulative dividend, attractive to investors.
• The company has the option to redeem the preferred stock, allowing for capital structure management.
• The agreement includes piggy-back registration rights for preferred stockholders, enhancing liquidity potential.
• The company has the option to pay dividends in cash or shares of Preferred Stock, at the Corporation's discretion.

Negatives

• The conversion price of the preferred stock can be adjusted downwards, potentially diluting existing shareholders.
• Failure to meet conversion obligations can result in significant financial penalties.
• The company faces negative covenants restricting certain financial activities without preferred stockholder consent.
• The agreement includes potential for liquidated damages and forced redemption under certain triggering events.
• The company is obligated to pay a finder's fee, which reduces the net proceeds from the financing.

Risks

• Failure to deliver conversion shares on time can trigger significant financial penalties.
• Breaching covenants in the Certificate of Designation can lead to a forced redemption of the preferred stock at a premium.
• The company's ability to raise future capital may be restricted by the negative covenants in the agreement.
• The conversion of preferred stock could dilute existing shareholders' equity.
• The company's financial performance may be impacted by the dividend obligations on the preferred stock.

Future Outlook

The company may conduct additional closings under the SPA for up to 150 shares of Preferred Stock, totaling up to $150,000. The company may also engage in future rights offerings and financings in which the holders of the Preferred Stock have the right to participate.

Industry Context

This announcement reflects a common strategy for small companies to raise capital through preferred stock offerings, often coupled with finder's fees to facilitate the process. The terms of the preferred stock, including the conversion price and dividend rate, are typical for this type of financing.

Comparison to Industry Standards

• The 12% dividend rate on the Series D Convertible Preferred Stock is relatively high, suggesting that the company may be considered a higher-risk investment.
• The conversion feature, tied to 80% of the lowest traded price, is a common mechanism to attract investors but can lead to dilution.
• The redemption premiums offered by the company are within the typical range for preferred stock agreements.
• The finder's fee of 4% is also within the typical range for similar transactions.

Stakeholder Impact

• Shareholders may experience dilution if the preferred stock is converted to common stock.
• The company's employees may benefit from the increased financial stability provided by the funding.
• Customers may benefit from the company's ability to invest in product development and service improvements.
• Suppliers may benefit from increased orders and more reliable payments.
• Creditors may be impacted by the negative covenants in the agreement, which restrict the company's ability to incur additional debt.

Next Steps

• GHS Investments, LLC may purchase additional shares of Series D Convertible Preferred Stock up to a total of 210 shares.
• The company will need to manage its obligations under the Finder's Fee Agreement.
• The company will need to monitor its stock price to manage the conversion price of the preferred stock.
• The company will need to ensure compliance with the covenants in the Certificate of Designation.

Key Dates

Keywords

Preferred Stock, Convertible Debt, Financing, Equity, Securities Purchase Agreement, Finder's Fee, IIOT-OXYS, GHS Investments, J.H. Darbie & Co.