IIOT-OXYS, INC. This Management's Discussion and Analysis of Financial Condition and Results of
Operations contain certain forward-looking statements. Historical results may
not indicate future performance. Our forward-looking statements reflect our
current views about future events; are based on assumptions and are subject to
known and unknown risks and uncertainties that could cause actual results to
differ materially from those contemplated by these statements. Factors that may
cause differences between actual results and those contemplated by
forward-looking statements include, but are not limited to, those discussed in
the "Risk Factors" section of our Annual Report on Form 10-K for the year ended
Basis of Presentation
The financial information presented below and the following Management
Discussion and Analysis of the Consolidated Financial Condition, Results of
Operations, Stockholders' Equity and Cash Flow for the quarterly period ended
Forward-Looking Statements
Statements in this management's discussion and analysis of financial condition and results of operations contain certain forward-looking statements. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition involve risks and uncertainties. Where in any forward-looking statements, if we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.
Factors that may cause differences between actual results and those contemplated by forward-looking statements include those discussed in "Risk Factors" and are not limited to the following:
· the unprecedented impact of COVID-19 pandemic on our business, customers,
employees, subcontractors and supply chain, consultants, service providers,
stockholders, investors and other stakeholders;
· general market and economic conditions;
· our ability to maintain and grow our business with our current customers;
· our ability to meet the volume and service requirements of our customers;
· industry consolidation, including acquisitions by us or our competitors;
· capacity utilization and the efficiency of manufacturing operations;
· success in developing new products;
· timing of our new product introductions;
· new product introductions by competitors;
· the ability of competitors to more fully leverage low cost geographies for
manufacturing or distribution;
· product pricing, including the impact of currency exchange rates;
· effectiveness of sales and marketing resources and strategies;
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· adequate manufacturing capacity and supply of components and materials;
· strategic relationships with our suppliers;
· product quality and performance;
· protection of our products and brand by effective use of intellectual
property laws;
· the financial strength of our competitors;
· the outcome of any future litigation or commercial dispute;
· barriers to entry imposed by competitors with significant market power in
new markets;
· government actions throughout the world; and
· our ability to service secured debt, when due.
You should not rely on forward-looking statements in this document. This management's discussion contains forward looking statements that involve risks and uncertainties. We use words such as "anticipates," "believes," "plans," "expects," "future," "intends," and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these statements, which apply only as of the date of this document. Our actual results could differ materially from those anticipated in these forward-looking statements.
Critical Accounting Policies
The following discussions are based upon our financial statements, which have
been prepared in accordance with accounting principles generally accepted in
The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies. We continually evaluate the accounting policies and estimates used to prepare the financial statements. We base our estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.
Trends and Uncertainties
On
Historical Background
We were incorporated in the
On
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Under the terms of the OXYS SEA we acquired 100% of the issued voting shares of
OXYS in exchange for 34,687,244 shares of our Common Stock. We also cancelled
1,500,000 outstanding shares of our Common Stock and changed our management to
On
A new management team was put into place in 2018, which constitutes our current management team.
At the present time, we have two, wholly-owned subsidiaries which are
General Overview
We develop hardware, software and algorithms that monitor, measure and predict conditions for energy, structural, agricultural and medical applications. We use domain-specific Artificial Intelligence to solve industrial and environmental challenges. Our engineered solutions focus on common sense approaches to machine learning, algorithm development and hardware and software products.
Our customers have issues and they need improvements. We design a system of hardware and software, assemble, install, monitor data and apply our algorithms to help provide the customer insights.
We use off the shelf components, with reconfigurable hardware architecture that adapts to a wide range of customer needs and applications. We use open source software tools, while still creating proprietary content for customers, thereby reducing software development time and cost. The software works with the hardware to collect data from the equipment or structure that is being monitored.
We focus on developing insights. We develop algorithms that help our customers create insights from vast data streams. The data collected is analyzed and reports are created for the customer. From these insights, the customer can act to improve their process, product or structure.
OUR SOLUTIONS ACHIEVE TWO OBJECTIVES
ADD VALUE
· We show clear path to improved asset reliability, machine uptime, machine
utilization, energy consumption, and quality.
· We provide advanced algorithms and insights as a service.
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RISK MINIMIZATION
· We use simple measurements requiring almost zero integration - minimally
invasive.
· We do not interfere with command and control of critical equipment.
· We do not physically touch machine control networks - total isolation of
networks.
HOW WE DO IT
Our location in
Our goal is to help Biotech, Pharma, and Medical Device companies realize the next wave of performance, productivity, and quality gains for their organizations, and become Industry 4.0 compliant.
We have a unique value proposition in a fast-growing worldwide multi-billion USD market, and have positioned our business with strategic partners for accelerated growth. We are therefore well-poised for growth in 2020 and beyond, as we execute our plans and acquire additional customers.
WHAT MARKETS WE SERVE SMART MANUFACTURING
We help our customers maintain machine uptime and maximize operational efficiency. We also enable then to do energy monitoring, predictive maintenance that anticipates problems before they happen, and improve part and process quality.
BIOTECH, PHARMACEUTICAL, AND MEDICAL DEVICES
We are on the operations side, not the patient-facing side. In this market vertical, our customers must provide high-quality products that must also pass rigorous review by governing bodies such as the FDA. Here again, we focus on machine uptime, operational efficiency, and predictive maintenance to avoid unplanned downtime.
SMART INFRASTRUCTURE
For bridges and other civil infrastructure, local, state and federal agencies have limited resources. We help our clients prioritize how to spend limited funds by addressing those fixes which need to be made first.
OUR UNIQUE VALUE PROPOSITION
EDGE COMPUTING AS A COMPLIMENT TO CLOUD COMPUTING
Within the Internet of Things ("IoT") and Industrial Internet of Things ("IIoT"), most companies right now are adopting an approach which sends all sensor data to the cloud for processing. We specialize in edge computing, where the data processing is done locally right where the data is collected. We also have advanced cloud-based algorithms that implement various machine learning and artificial intelligence algorithms.
25 ADVANCED ALGORITHMS
We have sought to differentiate from our competitors by developing advanced algorithms on our own and in collaboration with strategic partners These algorithms are an essential part of the edge computing strategy that convert raw data into actionable knowledge right where the data is collected without having to send the data to the cloud first.
RECONFIGURABLE HARDWARE AND SOFTWARE
Instead of focusing on creating tools, we use open source tools to create proprietary content.
Results of Operations for the Three Months Ended
For the three months ended
Comparatively, for the three months ended
During the current and prior period, the Company did not record an income tax benefit due to the uncertainty associated with the Company's ability to utilize the deferred tax assets.
Results of Operations for the Six Months Ended
For the six months ended
Comparatively, for the six months ended
During the current and prior period, the Company did not record an income tax benefit due to the uncertainty associated with the Company's ability to utilize the deferred tax assets.
Year over Year (YoY) revenue for the first six months of 2020 was less than in
same period of 2019. This was due to several reasons, including: challenges
raising substantial capital and longer than anticipated customer acquisition
times. These two factors led to cash flow issues, which in turn led to
additional and aging AP. All this resulted in a challenging first half of 2020,
and, thus, the negative YoY revenue growth. Our Quarterly Report on Form 10-Q
for the period ended
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1https://www.ptc.com/-/media/Files/PDFs/IoT/State-of-IIoT-Whitepaper.pdf
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It is anticipated that YoY revenue growth in the second half of 2020 will meet or exceed that for same period of 2019. This is due to the hard work of the past year that has resulted in two successful pilots, in two of our key target industry verticals. We now have data and algorithms to build strong use cases and marketing collateral that can be leveraged to extend contracts with current customers and win additional contracts with new customers in all targeted industry segments. Also, the strength of the Aingura IIoT, S.G. collaboration agreement has bolstered financial stability, added talent breadth and depth, and complimentary industry segment experience. Furthermore, recent liquidity of our stock has attracted funding opportunities, and access to additional capital will enable funding of business development, staff augmentation, and inorganic growth opportunities. Combined with our underlying strengths: experienced leadership; savvy technological talent, and operational execution excellence; we believe these revenue goals are achievable.
Liquidity and Capital Resources
At
For the three months ended
For the three months ended
For the six months ended
For the six months ended
For the six months ended
For the six months ended
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company has incurred losses from operations of
Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company but cannot assure that such financing will be available on acceptable terms. At the Company's current rate of expenditure, the Company anticipates being able to maintain current operations for three months; however, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of equity securities. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations.
The Company's continuation as a going concern is dependent upon its ability to
ultimately attain profitable operations, generate sufficient cash flow to meet
its obligations, and obtain additional financing as may be required. Our
auditors have included a going concern qualification in their auditors' report
dated
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The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve the Company's operating results.
Recently Issued Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity capital expenditures or capital resources.
Emerging Growth Company
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Certain specified reduced reporting and other regulatory requirements that are available to public companies that are emerging growth companies. These provisions include:
1. an exemption from the auditor attestation requirement in the assessment of
our internal controls over financial reporting required by Section 404 of
the Sarbanes-Oxley Act of 2002;
2. an exemption from the adoption of new or revised financial accounting
standards until they would apply to private companies;
3. an exemption from compliance with any new requirements adopted by the
Public Company Accounting Oversight Board , or the PCAOB, requiring
mandatory audit firm rotation or a supplement to the auditor's report in
which the auditor would be required to provide additional information
about our audit and our financial statements; and
4. reduced disclosure about our executive compensation arrangements.
We have elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they would apply to private companies. As a result of this election, our financial statements may not be comparable to public companies required to adopt these new requirements.
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