8-K: IIOT-OXYS Secures $88K in Related-Party Preferred Stock Deal

IIOT-OXYS, Inc. entered into a Securities Purchase Agreement with GHS Investments, LLC, a related party, for up to $88,000 through the sale of Series D Convertible Preferred Stock.

Summary

• IIOT-OXYS, Inc. (the Company) entered into a Securities Purchase Agreement (SPA) with GHS Investments, LLC (GHS) on March 6, 2026.
• The agreement involves the purchase and sale of up to 97 shares of the Company's Series D Convertible Preferred Stock for an aggregate purchase price of up to $88,000.
• GHS Investments, LLC is owned by three of the Company's four directors, making this a related-party transaction.
• The SPA includes an Initial Closing of 47 shares (43 purchased for $43,000 and 4 as equity incentive) and an Additional Closing of up to 50 shares (45 purchased for $45,000 and 5 as equity incentive) at GHS's discretion upon the filing of the 2025 Form 10-K.
• Key provisions include events of default triggering a 135% redemption premium, GHS's right to convert into future financing securities at a 30% discount, participation rights in future financings, and most favored nations clauses.
• The Company reserved 150,000,000 shares of common stock for conversion and paid a finder's fee of $1,760 to J.H. Darbie & Co., Inc. for the Initial Closing.
• On March 12, 2026, 47 shares of Series D Convertible Preferred Stock were issued to GHS, exempt from registration under Section 4(a)(2) and Rule 506(b) of the Securities Act.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a necessary but highly unfavorable financing event. While it provides immediate capital, the small amount, onerous terms for common shareholders, and related-party nature suggest significant underlying financial weakness and governance concerns.

Positives

• Secured up to $88,000 in capital, providing immediate funding for operations.
• The capital raise is structured in two tranches, potentially aligning future funding with the filing of the 2025 Form 10-K.
• GHS Investments, as a related party, demonstrates continued insider confidence and investment in the company.

Negatives

• The financing amount of $88,000 is relatively small, suggesting limited access to larger capital markets or significant financial distress.
• The Series D Convertible Preferred Stock comes with significant investor protections and favorable terms for GHS, including a 135% redemption premium upon default, a 30% discount on future qualified offerings, and most favored nations clauses, which could be dilutive or costly for existing common shareholders.
• The involvement of directors as owners of GHS Investments raises corporate governance concerns regarding potential conflicts of interest and fairness of terms for non-insider shareholders.
• The issuance of preferred stock as an "equity incentive" to GHS, in addition to purchased shares, further dilutes common shareholders without direct cash inflow for those specific shares.

Risks

• Default Risk: The SPA defines numerous events of default, including suspension/delisting of common stock, failure to deliver conversion shares, breach of representations/warranties/covenants, bankruptcy, loss of DWAC eligibility, failure to make timely SEC filings (with a 30-day grace period for the 2025 Form 10-K), issuance of convertible securities without redeeming outstanding Preferred Stock, and failure to redeem outstanding Preferred Stock when due.
• High Redemption Premium: Upon an Event of Default, all outstanding Preferred Stock becomes immediately due for redemption at 135% of stated value plus accrued dividends and other amounts, which could severely strain the Company's finances.
• Dilution Risk: The conversion features, participation rights, and most favored nations clauses could lead to significant dilution for existing common shareholders in future financings or upon conversion.
• Financing Dependency: The Company's ability to secure the additional $45,000 tranche is contingent on GHS's discretion and the filing of the 2025 Form 10-K, indicating potential dependency on this related party for future funding.
• Corporate Governance Concerns: The transaction with GHS Investments, owned by three of the Company's four directors, presents potential conflicts of interest and may not be on arm's-length terms, potentially disadvantaging minority shareholders.

Future Outlook

The filing indicates a potential future bank underwritten financing of at least $1,000,000 within twelve months from the issuance of the Preferred Stock, which GHS may convert into at a 30% discount. The additional tranche of preferred stock is contingent on the filing of the Company's Annual Report on Form 10-K for the period ended December 31, 2025.

Management Comments

• Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. By: /s/ Clifford L. Emmons Clifford L. Emmons, Chief Executive Officer

Industry Context

StockSavvy.ai notes that small capital raises, especially those involving convertible preferred stock with significant investor protections and related-party involvement, are common for micro-cap companies or those facing challenges in accessing traditional capital markets. The terms, including high default premiums and conversion discounts, suggest the company may be perceived as high-risk by external investors, leading to reliance on insider funding. The focus on IoT and OXYS (likely oxygen systems or similar tech) suggests a company operating in a niche technology sector, where securing funding can be particularly challenging without significant revenue or established market presence.

Comparison to Industry Standards

• StockSavvy.ai observes that a capital raise of $88,000 is exceptionally small compared to typical financing rounds for publicly traded companies, which often range from millions to hundreds of millions of dollars. For instance, a Series A funding round for a tech startup typically averages $10-15 million, while even seed rounds often exceed $1 million.
• The 135% redemption premium upon default is significantly higher than standard debt or preferred stock default penalties, which usually range from 100-120% of the principal, indicating a high-risk profile perceived by the investor (GHS).
• The 30% discount on conversion into future qualified offerings is also a substantial concession, far exceeding typical warrant or option discounts in more robust financing environments, which might be 10-20% at most.
• The related-party nature of the transaction, where directors are also the investors, while not uncommon in distressed or micro-cap situations, raises red flags compared to best-in-class corporate governance standards seen in larger, more established companies like Apple or Microsoft, which prioritize arm's-length transactions to protect all shareholders.

Corporate Governance

Related Party Transactions

• IIOT-OXYS, Inc. entered into a Securities Purchase Agreement with GHS Investments, LLC, which is owned by Sarfaz Hajee, Mark Grober, and Matthew Schissler, who are three of the Company's four directors.
• The transaction involves the sale of up to 97 shares of Series D Convertible Preferred Stock for up to $88,000, with GHS also receiving additional shares as an equity incentive.

Stakeholder Impact

• Shareholders (Common): Potential for significant dilution from the conversion of preferred stock and future financings under the terms favorable to GHS. The high redemption premium upon default also poses a risk to the Company's financial stability, which could negatively impact common share value.
• Creditors: The terms of the preferred stock, particularly the 135% redemption premium upon default, could increase the Company's liabilities and potentially impact its ability to meet other financial obligations if a default occurs.
• Management/Directors: Three of the four directors are owners of GHS Investments, LLC, directly benefiting from the terms of this financing, which could create perceived or actual conflicts of interest.

Next Steps

• GHS Investments, LLC may, at its discretion, purchase up to an additional 50 shares of Preferred Stock upon the Company's filing of its Annual Report on Form 10-K for the period ended December 31, 2025.
• The Company will file the full text of the Securities Purchase Agreement as an exhibit to its next Quarterly Report on Form 10-Q.
• The Company may pursue a bank underwritten financing resulting in net proceeds of at least $1,000,000 within twelve months from the issuance of the Preferred Stock.

Key Dates

Recommendation

The filing reveals a very small capital raise with highly unfavorable terms for common shareholders, including significant dilution potential and a high default premium. The related-party nature of the transaction, involving company directors as investors, raises serious corporate governance concerns. These factors collectively point to significant financial distress and a high-risk investment profile, suggesting a "sell" recommendation for existing shareholders and caution for potential investors.

Keywords

IIOT-OXYS, Series D Convertible Preferred Stock, GHS Investments, Related Party Transaction, Capital Raise, SEC Filing, 8-K, Preferred Stock, Convertible Securities, Corporate Governance, Dilution, Financing, Equity Incentive