UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

x . ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2017

 

¨ . TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 000-50773

 

IIOT-OXYS, INC.
(Exact name of Registrant as specified in its charter)

 

Nevada   56-2415252
(State or other jurisdiction of incorporation
or organization)
  (I.R.S. Employer Identification No.)

 

705 Cambridge Street, Cambridge, Massachusetts   85029
(Address of principal executive offices)   (Zip Code)

 

Issuer’s telephone number, including area code: (617) 500-5101

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.001

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ . No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes ¨ . No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

(1) Yes x . No ¨ (2) Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x . No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer ¨ . Accelerated filer ¨ .
Non-accelerated filer ¨ . (Do not check if a smaller reporting company) Smaller reporting company x
    Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ¨ . No x

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of its most recently completed second fiscal quarter based upon the price at which the common equity was last sold was $0.

 

As of April 17, 2018, there were 40,633,328 shares of the registrant’s Common Stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None

     
 

 

TABLE OF CONTENTS

 

PART I 1
Item 1. Business 1
Item 1A. Risk Factors 9
Item 2. Properties 18
Item 3. Legal Proceedings 18
Item 4. Mine Safety Disclosures 18
PART II 19
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19
Item 6. Selected Financial Data 21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
Item 7A. Quantitative And Qualitative Disclosures About Market Risk 25
Item 8. Financial Statements 25
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 25
Item 9A. Controls and Procedures 25
Item 9B. Other Information 26
PART III 27
Item 10. Directors, Executive Officers and Corporate Governance 27
Item 11. Executive Compensation 29
Item 12. Security Ownership of Certain Beneficial Owners and Management 29
Item 13. Certain Relationships and Related Transactions, and Director Independence 30
Item 14. Principal Accountant Fees and Services 31
PART IV 32
Item 15. Exhibits, Financial Statement Schedules 32
Item 16. Form 10-K Summary 33

 

 

 

 

 

 

 

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Forward-Looking Statements

 

The statements contained in this report that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include the information concerning possible or assumed future operations, business strategies, need for financing, competitive position, potential growth opportunities, ability to retain and recruit personnel, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

 

Among the factors that could cause actual future results to differ materially are the following:

 

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:

 

· 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;
· adequate manufacturing capacity and supply of components and materials;
· strategic relationships with our suppliers;
· product quality and performance;
· protection of our products 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; and
· government actions throughout the world.

 

Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected. We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.

 

There may also be other risks and uncertainties that we are unable to identify and/or predict at this time or that we do not now expect to have a material adverse impact on our business.

 

Introductory Comment

 

Unless otherwise indicated, any reference to “the Company”, “our company”, “we”, “us”, or “our” refers to IIOT-OXYS, Inc., a Nevada corporation, and as applicable to its wholly owned subsidiaries, OXYS Corporation, a Nevada corporation and HereLab, Inc., a Delaware corporation.

 

 

 

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PART I

 

Item 1. Business

 

Historical Background

 

We were incorporated in the State of New Jersey on October 1, 2003 under the name of Creative Beauty Supply of New Jersey Corporation and subsequently changed our name to Gotham Capital Holdings, Inc. on May 18, 2015. We commenced operations in the beauty supply industry as of January 1, 2004. On November 30, 2007, our Board of Directors approved a plan to dispose of our wholesale and retail beauty supply business. From January 1, 2009 until July 28, 2017, we had no operations and were a shell company.

 

On March 16, 2017, our Board of Directors adopted resolutions, which were approved by shareholders holding a majority of our outstanding shares, to change our name to “IIOT-OXYS, Inc.”, to authorize a change of domicile from New Jersey to Nevada, to authorize a 2017 Stock Awards Plan, and to approve the Securities Exchange Agreement (the “ OXYS SEA ”) between the Company and OXYS Corporation (“ OXYS ”), a Nevada corporation incorporated on August 4, 2016.

 

Under the terms of the OXYS SEA we acquired 100% of our 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 Mr. DiBiase who also served in management of OXYS. Also, one of our principal shareholders entered into a consulting agreement with OXYS to provide consulting services during the transition. The OXYS SEA was effective on July 28, 2017, and our name was changed to “IIOT-OXYS, Inc.” at that time. Effective October 26, 2017, our domicile was changed from New Jersey to Nevada.

 

On December 14, 2017, we entered into a Share Exchange Agreement (the “ HereLab SEA ”) with HereLab, Inc., a Delaware corporation (“ HereLab ”), and HereLab’s two shareholders pursuant to which we would acquire all the issued and outstanding shares of HereLab in exchange for the issuance of 1,650,000 shares of our Common Stock, on a pro rata basis, to HereLab’s two shareholders. The closing of the transaction occurred on January 11, 2018 and HereLab became our wholly-owned subsidiary.

 

At the present time, we have two, wholly-owned subsidiaries which are OXYS Corporation and HereLab, Inc., through which our operations are conducted.

 

General Overview

 

IIOT-OXYS, Inc., a Nevada corporation (the “ Company ”), and OXYS, were originally established for the purposes of designing, building, testing, and selling Edge Computing systems for the Industrial Internet. Both companies were, and presently are, early stage technology startups that are largely pre-revenue in their development phase. HereLab is also an early-stage technology development company. The Company received its first revenues in the last quarter of 2017, and expects considerable revenue due to its business development pipeline for 2018 including first 2018 revenues to be realized in the first quarter of 2018.

 

Our unique value proposition is as follows:

 

Edge 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. OXYS specializes in edge computing, where the data processing is done locally right where the data is collected.

 

Advanced Algorithms

 

OXYS has sought to differentiate itself by licensing advanced algorithms from world-leading research institutions such as the Massachusetts Institute of Technology (“ MIT ”). 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, OXYS uses open source tools to create proprietary content. More specifically, OXYS uses hardware manufactured by companies such as HARTING (www.harting-usa.com) as well as others. This hardware is reconfigurable and flexible.

 

 

 

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OXYS History and Operations

 

In August 2016, OXYS was formed based on the value proposition above and, despite developing the business, including generating revenues, OXYS still remains an early-stage technology startup. The OXYS technology, which we have licensed, consists of three offerings:

 

· EdgeTelligence ® is our Edge computing platform currently based on the HARTING MICA hardware platform;
     
· EdgeRune ® is our analysis software; and
     
· EdgeMap® is our consulting service template.

 

Based on initial business development discussions and extensive discussions with various industry contacts and industry experts, several market areas were identified as potential early markets for the OXYS technology. These various areas are enumerated below:

 

Industrial Equipment

 

Starting with simple energy measurements and going all the way to online, real time determination of part and process quality, the monitoring of so-called “brownfield” industrial equipment represents a very significant market. There are millions of machine tools worldwide that could benefit from such monitoring. Any IIoT solution for industrial equipment must be at a price point that is lower than the cost of replacement of the programmable logic controller (“ PLC ”). OXYS management determined in August 2016 that the price point of such a device must be between $2,000 and $5,000 for the initial cost with an annual maintenance fee in addition.

 

Structural Health Monitoring

 

OXYS management determined that the monitoring of civil infrastructure represents a significant opportunity for the implementation of IIoT solutions based on the OXYS technology. There are tens of thousands of bridges across the U.S. that are deemed “structurally deficient.” Other structures include tunnels, pilings in rivers, dams, levees, etc. OXYS management set this as a strategic initiative in September 2016.

 

Agricultural and Environmental IoT

 

This was one of the early adopter industries that had demonstrated use cases and associated business cases. OXYS management started looking for potential partners in this area in October 2016 and had initial conversations with HereLab in December 2016.

 

Medical IoT

 

The emergency room is a bewildering place with dozens of unconnected devices. Data overload is common, and this is one contributing cause of the over 200,000 ER deaths occurring in the U.S. every year. 1 There are other applications involving patient care and monitoring both within the hospital as well as extended care facilities. OXYS management determined that this was a strategic area of focus in December 2016.

 

As a result of these initial decisions taken by OXYS management, during the first six months after OXYS was formed in 2016, the following activities, proposals, and technical efforts were undertaken during the calendar years 2016, 2017, and 2018. These activities are indicative of the status of OXYS as an early-stage technology startup company that is now realizing revenues and anticipates to realize both revenues and profits within calendar year 2018.

 

2016 OXYS Technical Development Activities, Customers, and Proposals

 

Smart Grid

 

The first business activity undertaken by OXYS management was the potential application of Edge Computing to the smart grid. The specific problem OXYS management attempted to solve was the measurement of current and voltage for a terminal block in a substation. Within such a substation, there could be hundreds of such terminal blocks each with dozens of interconnections. The IoT objective was to wirelessly transmit current and voltage measurements terminal by terminal so that potential problems could be identified before they cascade into a failure that could cause a blackout or loss of service.

 

 

 

 

 

1 https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2015.1394

 

  2  
 

 

During the final quarter of 2016, OXYS management developed a hardware and software solution that was capable of making the requisite measurements. Advanced Edge computing algorithms were developed on low level embedded systems (FPGAs) as well as general purpose code written in Python and Java. Development was a joint effort between OXYS management and a third party, who also engaged outside contractors. No funds were exchanged as this was a joint development where each party bore its own expenses with the expectation of revenue sharing upon product sale. A complete systems level design of the OXYS/Interactive Machines solution was presented on December 18, 2016 to the potential customer, a large utility company in the northeastern U.S. Although the utility company was favorably impressed, they ultimately decided not to adopt the proposal as they chose to develop their own in-house system instead. Therefore, this significant design and development activity did not lead to commercial orders. In addition, no written agreement was entered into by OXYS and the third party for the joint development.

 

Monitoring of 3D Printing of Metal

 

OXYS management has significant previous experience in the 3D printing of metal. The technical challenge of 3D printing of metal is that it is very difficult to determine the quality of each layer as it is deposited. Therefore, advanced quality control and monitoring strategies are always important for 3D printing. OXYS management believes that OXYS technology can offer an easy means of getting the data collected by the 3D printing machine itself onto a cloud-based platform so it can be further analyzed or compared to data from other machines and other plants. In October 2016, OXYS management approached a company specializing in 3D printing quality control, to conduct joint development activities. In October 2016, OXYS management presented a jointly-developed solution at the Smart Industry 2016 Conference held in Chicago, Illinois. The initially envisioned launch customer for this jointly-developed technology was a large German manufacturer of 3D printing equipment. After being presented the technology, the German company felt that it was a good solution, but decided not to immediately move forward at that time; however, our partner continues to speak with several other manufacturers of equipment in Germany and Belgium regarding the technology. We believe this project is still potentially viable and continues to be on our list of projects for business development by management. No written agreement was entered into by OXYS and the partner who assisted with the development of the technology.

 

Machine Monitoring

 

As mentioned previously, machine monitoring, and especially machine monitoring of older machine tools is a major market for IoT and continues to be one of our business development focus areas. After significant research activity, OXYS management decided to use an edge gateway and computing device made by a German company. Also in collaboration with the German company, OXYS management approached a large machine tool manufacturer in Ohio regarding the monitoring of a machine tool used to make critical drive train and steering components for automotive production. The machine tool company in question wanted a demo unit installed in their facility, which would then lead to orders that at that time were estimated to be up to 10 per month where each unit could be sold for $3,000-$5,000, depending on configuration. In December 2016, a demo unit was successfully deployed to the customer factory in Ohio. The customer was pleased and in January 2017 they requested a quotation, which management provided. The quote was a per unit price of what it would take to instrument up to 10 machines per month. The quote was submitted in February 2017. In May 2017, OXYS management learned after significant and regular follow up efforts that the engineer at the company in charge of this project had left. In addition, the company experienced financial hardship during the first half of 2017 and has now refocused its strategic efforts to focus on profitability. This project is therefore still of interest but is currently on hold and will be revisited by OXYS in 2018.

 

Funding Raising and Gotham Letter of Intent

 

As a result of successful initial validation of its value proposition, OXYS management sought means to expand the operations of OXYS as well as raise additional funds that would be needed to expand said activities. The initial funding of OXYS was conducted through a private placement for a total investment of $684,500. Over 95% of these funds were received from investors in 2016, and the balance of the funds were received by March 2017. This initial financing was expected to fund initial development activities as well as gain sufficient early adopter traction to justify a larger future raise. Evidenced by the successful market reception in 2016, OXYS management decided to proceed with a fund-raising strategy that would allow raising greater funds. OXYS management decided to seek possible entry into the OTC Markets which resulted in the completion of the reverse merger with the Company on July 28, 2017.

 

 

 

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2017 OXYS Technical Development Activities, Customers, and Proposals

 

HereLab Acquisition

 

OXYS management was able to validate several of the unique value propositions of OXYS during 2016, and these activities were significantly expanded during 2017. OXYS continued its operations as an early stage technology startup and expanded its activities considerably. Because of the success experienced in 2016, OXYS management sought to both expand the customer base as well as launch new initiatives, mainly structural health monitoring, in addition to those developed in 2016. Additionally, the entire area of Medical IoT was investigated by OXYS management in 2017 and key strategic partnerships were put into place. There was a significant acquisition by the Company which was initiated in 2017 and was completed in early 2018, namely that of HereLab, another early-stage technology startup. HereLab acquired several key early adopter customers in 2017 and these are now part of the customer base for the Company. As of the date of this filing, HereLab is now a wholly owned subsidiary of the Company and the President of HereLab, Patrick Phillips, serves as a Director and Vice President of Product Management for the Company.

 

Automotive Edge Device and User Interface

 

In April 2017, a large automotive manufacturer that is headquartered in Asia but that has extensive operations in the U.S. approached HARTING for a specific application involving edge devices and edge computing. HARTING then approached OXYS and the joint team met with this automotive manufacturer in May 2017. A final specification for the devices to be made was developed in June 2017. A purchase order was issued July of 2017. OXYS designed, built, tested and delivered 24 edge computing units with user interfaces to the experimental manufacturing technology center recently built by this large automotive company in Kentucky. The final installation was completed and accepted in September 2017. The resulting revenue was just under $40,000. This project provided valuable lessons learned which are guiding current product development. Management is presently developing a second-generation edge device internally and at the Company’s own cost which is of significant interest to this automotive company as well as to the entire automotive component manufacturing industry. It is expected to roll out during the second quarter of 2018. A technical services agreement was reached; however, management does not deem it material at this time. OXYS retains rights to market and sell the product to others, but the customer has rights to use the source code within their own facility.

 

Machine Monitor and Energy Monitor

 

Another large automotive manufacturer which was originally an American company and has a major presence in the Detroit area approached OXYS in 2017 for a demo for machine energy monitoring. The monitoring of energy provides multiple benefits and insights. Firstly, it reveals energy usage patterns right at the machine tool and not averaged over the entire plant. This immediately flags abnormal energy profiles that could be the result of poor machine maintenance or a sudden change in the manufacturing process. Secondly, the raw voltage and current data can be used as a machine health monitor as well as a process health monitor by implementing the advanced edge algorithms that the Company has licensed from MIT. The initial request for a demonstration of the OXYS technology came in August 2017. OXYS personnel visited the plant location in October 2017 to get the final specifications and requirements. The energy monitoring demo was designed, built, and tested by OXYS and was then installed in November 2017 at the factory site. The demo was very favorably received, and a small initial order for three units (consisting of hardware and software) was requested in December 2017. During the first quarter of 2018, OXYS personnel have been working with the automotive manufacturer’s information technology (IT) department to get permission for wireless data communications within the plant using OXYS devices and sensors. This request was approved, and work is now proceeding to fulfill the initial order. Management expects that this initial order could lead to dozens of additional units in 2018 with this one manufacturer, and hundreds of additional units within the automotive industry as a whole. The initial price of these units is approximately $3,000 plus an annual maintenance agreement for every installed unit.

 

Structural Health Monitoring

 

As identified by management, structural health monitoring is a major area of focus, opportunity, and sales and revenue potential. During June and July 2017, OXYS management had extensive discussions with a Department of Transportation of a state in New England regarding the monitoring of bridges. In particular, there is a strong interest and need for the monitoring of so-called box beam concrete bridges. There are hundreds of thousands of such bridges across the U.S. In August 2017, management submitted its first proposal for the monitoring of a bridge near a major New England city. The proposal was favorably received; however, the bridge replacement ended up being accelerated and the monitoring did not take place. Through the rest of 2017, management worked with this state government to identify a new project that could be suitable for monitoring. Such a project was found in December 2017 and consists of three separate concrete box beam bridges which are located all within a few miles of one another in the central part of this New England state. A proposal for the monitoring of these bridges was submitted in January 2018. We recently received a subcontract to begin work and work is in progress at the time of this filing. Several other projects have been identified by management and structural health monitoring is expected to be a major source of revenue for the Company during 2018 and beyond.

 

 

 

 

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HereLab Joint work and Acquisition

 

Beginning in 2017 and continuing in the future, OXYS had been working with HereLab, first on a consulting basis and eventually through acquisition as part of the Company itself. OXYS management originally engaged HereLab on a consulting basis for the development of a Structural Health Monitoring (“ SHM ”) node in April 2017. This led to the joint development of an intelligent edge device node that could be generalized. By June of 2017, the joint team was implementing accelerometers to existing HereLab hardware. The team also developed firmware in C++ for low power telemetry. Preliminary tests of the SHM node were successfully conducted in July 2017. Starting in September 2017, management directed OXYS to work on automotive IIoT in collaboration with OXYS student interns (three paid interns worked with OXYS from May 2017 to December 2017). HereLab closely supported the OXYS automotive IIoT deliveries in October 2017 and November 2017. Based on these early successes, the Company entered into a letter of intent to acquire HereLab in October 2017 and completed the acquisition in January 2018. Currently, HereLab has $157,000 in revenue potential in terms of projects in various states of delivery. This is expected to be realized by the end of the second quarter of 2018. We estimate that there is an additional $250,000+ in the business development pipeline for HereLab independent of other activities occurring in OXYS.

 

HereLab Business Description

 

HereLab was incorporated as a privately held Delaware corporation in February 2017. HereLab is based in and has operated only in the U.S. HereLab is also a startup and an early-stage technology company. HereLab had revenues in 2017 and, based on customer interest/feedback and existing contracts that could be expanded to encompass this additional business, is expecting a significant increase in activity and revenue in 2018 as it more fully monetizes its developments, now as a wholly owned subsidiary of the Company.

 

HereLab consists of two founders and 2-4 full time equivalent (FTE) contractors for engineering and design services. HereLab’s founder resides in the U.S. and its engineer resides in the United Kingdom.

 

HereLab is an environmental IoT hardware and software company, acting primarily as an original equipment manufacturer (“ OEM ”). HereLab designs radio-enabled/internet connected hardware for market, designs radio-enabled hardware for other customers, integrates sensors for soil, air, water and built environments, designs firmware and manages design for manufacture activities for customers.

 

During the prior year of activity, HereLab has designed multiple prototypes and products for major sensor manufacturers, global integrated circuit corporations, agricultural data aggregators and several independent startup companies.

 

HereLab focused 2017 design and design for manufacture OEM activity on agricultural sensing — row crop, specialty crop and pivot crops.

 

HereLab has worked with international suppliers and contract manufacturers. Distribution of HereLab’s products is typically done through a by-PO basis through the contract manufacturer.

 

Agricultural applications provide a typical business workflow example. HereLab typically works with a customer to design an application-specific hardware design — for corn, or hazelnuts or row crops — which requires an understanding of the environment and the data required. HereLab then designs a prototype for deployment and testing. From that prototype a product bill of materials is produced and sent to a manufacturer for quote. Once quoted, the customer supplies a purchase order to the company.

 

HereLab is now maturing beyond design for prototype services to design for manufacture. At this stage, HereLab’s revenues will expand from design consulting to a per unit wholesale markup for multiple customers.

 

We believe the acquisition of HereLab is one of mutual benefit. HereLab provides hardware and firmware development services not just for environmental IoT as described above but for industrial applications as well.

 

In total, HereLab has designed hardware/firmware platforms for long range radio enabled IoT nodes for over 35 sensors for hydrology, soil moisture, flood, irrigation, architectural applications, airborne gas detection, light, sound, temperature and humidity detection among others.

 

HereLab has spent a significant amount of its own time developing solutions. This activity could be called R&D. It is estimated that 20% of HereLab’s time in total is spent developing solutions and 80% is spent on customer-centered solutions. Of that 80%, 25% is design-development.

 

 

 

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Materials for production are supplied by global distributors (Digi-Key, Arrow) or are acquired by contract manufacture, direct from the manufacturer.

 

While HereLab’s agricultural applications largely cycle around spring/fall cycles, its other products and services have no such seasonality.

 

HereLab currently has no patents. HereLab does anticipate working directly with the Company on technology it has licensed for energy monitoring.

 

HereLab maintains no inventory of product and only acquires sufficient raw material to design and build prototypes, test hardware/enclosure requirements in the process of developing a final bill of materials for the product.

 

HereLab works directly with multiple customers in-channel to design and develop product. Thereby, the company-customer relationship is crucial. HereLab considers channel partners as potential value-chain partners as well. For example, HereLab will discount design services and “share” wholesale value in order to: 1) spread value among customers, 2) build customer loyalty, and 3) create private-label and HereLab label products.

 

HereLab has diversified to multiple customer types and will continue to be conduct business as a design-build OEM across multiple industry verticals.

 

Project and Revenue Outlook for 2018

 

On the books and in the plans for 2018, the Company presently has nearly a dozen projects for nine different customers in a wide range of industries including automotive, aerospace, state government, primary metal working, agriculture, and forest products. The Company, therefore, has a broad customer base and does not excessively rely on any one customer for revenue in 2018 and beyond.

 

Customers

 

Automotive Industry

 

· OXYS has an active project to deliver machine monitoring units to a large U.S. auto manufacturer by April 2018.

 

· OXYS has exploratory proposals with other automotive component manufacturers that could result in sales of several dozen units within the first six months of 2018.

 

Aerospace Industry

 

· OXYS has a proposal for machine monitoring under active consideration by a large aerospace engine manufacturer located in the U.S. The proposal would be for delivering five machine monitoring systems. Contract award, if selected, is expected in the second quarter of 2018.

 

· OXYS has several other exploratory proposals to other aerospace manufacturers in the U.S. and E.U. which could lead to the sale of dozens of additional units.

 

Casting – Primary Metal Working

 

Through a partner, namely Barrett Electric, OXYS has submitted proposals for machine monitoring to a casting facility located in New England. This casting facility runs melting furnaces which expend considerable energy and therefore energy management is a key consideration. OXYS equipment will allow this facility to actively monitor its energy usage and reduce usage by identifying process inefficiencies. Proposals are presently under review and contract award, if selected, is expected in the second quarter of 2018. An agreement is expected to be reached with Barrett Electric during the second quarter of 2018.

 

Lumber Industry – Saw Mills

 

In Northern New England and elsewhere in North America, the lumber industry is a major local economic driving force. The largest variable cost for the lumber industry is energy and electricity is the dominant mode of energy used. Management is again working with Barrett Electric to identify opportunities to sell machine monitoring systems to lumber mills to reduce energy consumption. Several lumber mills have been identified and exploratory proposals have been submitted. Contract award, if selected, is expected in the second quarter of 2018.

 

 

 

 

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Agricultural Customers

 

HereLab has six projects that are already under contract and are scheduled for delivery in 2018. These projects include rain buckets, soil moisture sensors, irrigation control systems, and several design projects where HereLab will design components for other customers and will receive a royalty stream for use of their designs. HereLab is serving four different customers with these six projects. Additionally, HereLab has several exploratory proposals out to customers and contract award, if selected, is expected in the second and third quarters of 2018. A license agreement is expected during the second quarter of 2018.

 

Structural Health Monitoring Customers

 

As previously mentioned, OXYS has received permission to proceed with a bridge monitoring project for a large New England state. The initial project will consist of monitoring three different bridges that are close together. Project technical work is expected to begin in March 2018. In addition, there are two other projects for which exploratory proposals have been submitted. The first is a tunnel monitoring project in a large city in New England. The second is a river flow and depth monitoring project for a river located in New England near the costal region. Both of these projects, if awarded, would begin in the second quarter of 2018.

 

Marketing

 

Our marketing and sales efforts are divided into several distinct categories:

 

1) Working with technical partners who have larger sales forces;

 

2) Direct business development and discussions with end use customers by company management;

 

3) Working with distribution channel partners who can leverage their existing sales channels for increased visibility; and

 

4) Trade shows and international technical, sales and marketing meetings.

 

Although the present expenditures on marketing and sales have been modest (less than 10% of expenditures) they are expected to increase in 2018, and we expect to hire a business development manager after the next funding to coordinate and focus our marketing and sales efforts.

 

Competition

 

There are two principal sources of competition to us. The first comes from large companies such as IBM, GE, Amazon, Google etc. who all have their efforts in IIoT. However, these large companies are cloud – computing centric and they are trying to move towards edge devices from their present position of being solely cloud computing based. We will be starting in edge computing from day one as opposed to force-fitting a cloud based solution into the limited computational capability and storage space of an edge device. We believe our systems will be more computationally efficient as compared to a cloud-based solution which requires more computational resources. We also believe our systems will embody the unique algorithms that we have licensed from MIT and seek to license from such research institutions as the National Labs.

 

Most of the IIoT implementations involve data going from sensor to cloud. This involves sending vast amounts of data to the cloud and then processing this data there. This takes a large computational footprint (many processors) and a large memory requirement to store the data. From our actual experience and according to many technical experts in the field (see for example the discussion on edge data in “Structural Health Monitoring” A Machine Learning Perspective,” by C.R. Farrar and K. Worden, John Wiley and Sons, New York, 2013) , a better approach is to use Edge Computing. Edge computing takes the raw data, which could be MB or GB per second, and extracts features. Features are attributes of the signal that preserve the essential physics of the signal but reduce the data density by a very large amount (up to a factor of one million). After the feature extraction step, the data has a data rate of approximately 10KB or 100KB per second. Next comes the classification step, which further reduces data by classifying data into at least two bins: nominal behavior or off-nominal or abnormal behavior. For example, in monitoring a machine tool in a factory, if the machine tool is behaving normally, there is nothing to report and therefore no data needs to be sent or transferred anywhere. Only the abnormal condition data needs to be sent along with a description of the problem. This is what Edge Computing accomplishes and it accomplishes this right where the data is being collected using relatively small computational and memory resources (For example our systems have a 1GHz processor and 1 few GB of RAM plus up to 32 GB of storage – which is less computational power than the average smart phone.). so considering all of these technical aspects, we are able to assert that our Edge Computing process is more efficient in terms of computational power and memory as compared to a cloud-based solution, that it only sends along the information (not just data) that is really needed, and it can still interact with cloud based services to provide data sharing across different platforms.

 

 

 

 

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The second source of competition is from startups who are in the edge computing space. The most prominent example is Foghorn Systems Inc. There will be additional startups that will specifically target the edge computing space as the investor awareness and the technical focus shifts from cloud computing to edge computing. Whereas other startups focus on development of proprietary tools for edge computing, our solutions will use open source tools but will still create proprietary algorithms and software content for clients and customers. We feel this methodology of creating proprietary solutions using open source tools will allow us to rapidly address current and future customer needs.

 

Government Regulation

 

At present, we do not require any governmental approvals of any our products or services.

 

Environmental Laws

 

At present, we are not regulated by any environmental laws.

 

Research and Development

 

Other than expenses for legal, accounting, audit, tax preparation, intellectual property (IP), and other overhead expenses such rent, the vast majority of our funds are spent on technology development, product development, and research and development. We are an emerging growth, early-stage, technology company and, as such, most of our expenditures are aimed at innovation and product development.

 

We have a technology maturation model so that we avoid doing work on technologies that are too early and too new and belong in a pure search environment. We rely heavily on our research partners such as universities and National Labs for such early stage work. When the technology is ready to leave the lab, we take over the further development. Along the way we expect to file additional IP and otherwise protect technology by using trademarks, for example.

 

The efforts in research and development have already resulted in significant customer interest in various market verticals including industrial, automotive, aerospace, agricultural, infrastructure, and power generation. In 2017, one successful product sale occurred from this development and, as discussed elsewhere in this filing, product revenue as a direct result of our research and development activities is expected to grow in 2018 and onwards.

 

All the present projects that we are working on internally as research and development projects will go forward, so we do not have any projects in the category of projects that have incurred significant expense but that will not result in present or future product.

 

Intellectual Property

 

As mentioned before, a critical business strategy for edge computing is advanced algorithms. One such family of advanced algorithms comes from MIT from the Research Lab for Electronics. These algorithms are called non-intrusive load monitoring (NILM). Just by monitoring current, voltage and power, inferences about the behavior of the system to which the power is being supplied could be made. For example, in a factory, every major piece of equipment has its own characteristic startup, running, and shutdown signature. By closely examining these, not only can activity in the factory be actively tracked, but potential machine anomalies could also be detected.

 

On February 5, 2018, we entered into a Non-Exclusive Patent License Agreement with the Massachusetts Institute of Technology (“ MIT ”). The agreement, which is effective February 1, 2018, grants to us a royalty-bearing non-exclusive license under U.S. Patent Nos. 8344724 (“Non-Intrusive Monitoring of Power and Other Parameters” issued January 1, 2013), 14/263407 (“Non-Intrusive Monitoring” filed April 28, 2014), and Patent Cooperation Treaty Serial No. PCT/US2016/057165 (“Noncontact Power Sensing” filed October 14, 2016) during the term of the agreement. The term of the agreement is from the effective date until the expiration or abandonment of all issued patents and filed patent applications licensed pursuant to the agreement, unless terminated earlier in accordance with the agreement.

 

Under the agreement, we are required to make a first commercial sale of a “LICENSED PRODUCT” and/or a first commercial performance of a “LICENSED PROCESS,” as defined in the agreement, on or before September 30, 2018. We have negotiated revenue targets with MIT which will determine annual royalty payments. The 2018 minimum revenue target for the sale of products and services incorporating the MIT technology is $100,000. This minimum revenue amount will increase in subsequent years.

 

 

 

 

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Within 30 days of invoicing, a non-refundable license issue fee of $10,000 is to be paid by us to MIT. Pursuant to the agreement, we are required to pay to MIT additional patent maintenance fees in years beyond 2018.

 

Pursuant to the agreement, we are required to pay to MIT a running royalty of 2% of “NET SALES,” as defined in the agreement made in the calendar years 2018, 2019, and 2020. For “NET SALES” made in the calendar year 2021 and every calendar year thereafter through the term of the agreement, we are required to pay to MIT a running royalty of 4%.

 

Management is also currently pursuing several additional licensing deals with National Laboratories, but the terms of these agreements are not able to be disclosed at this time. Lastly, management applied for and was granted several trademarks including EdgeTelligence®, EdgeMap®, EdgeRune®, and MakerSafe® to represent the range of products and services that the Company has developed or is the process of currently developing.

 

Employees

 

We have no full or part-time employees; however, we do have contractor employees (1099 basis) who are working daily on the core business activities of the business and have been doing so since the beginning of the business formation. During the second quarter of 2018, we plan on transitioning contractors such as Patrick Phillips, Nevan Hanumara, and Giro DiBiase to a W-2 basis. Nevan Hanumara, our CEO and sole executive officer, currently devotes approximately 30 hours a week to our business. Mr. Hanumara’s involvement in other efforts such as with CambridgeMedSpace LLC is not taking a significant portion of his time and is on an advisory basis. At the present time, there are no conflicts of interest between the Company and any of our contract employees. This was determined as follows: i) none of their outside activities are soliciting business from our customers or business contacts; ii) they are not soliciting our investors to invest in other ventures; and iii) they are not soliciting our contract employees to leave us and join other efforts. In 2018 we anticipate hiring 3-5 full time employees. At present, all our business services are provided by outside contractors.

 

Item 1A. Risk Factors

 

Because of our continued losses, there is substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

 

Our financial statements as of and for the year ended December 31, 2017 and for the period from inception (August 4, 2016) to December 31, 2016 were prepared assuming that we would continue as a going concern. Our significant cumulative losses from operations as of December 31, 2017, raised substantial doubt about our ability to continue as a going concern. If the going-concern assumption were not appropriate for our financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. Since December 31, 2017, we have continued to experience losses from operations. We have continued to fund operations primarily through the sale of equity securities. Nevertheless, we will require additional funding to complete much of our planned operations. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary additional funding from outside sources, including obtaining additional funding from the sale of our securities. Except for potential proceeds from the sale of equity in offerings by us and minimal revenues, we have no other source for additional funding. Our continued net operating losses and stockholders’ deficiency increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

 

The majority of our sales come from a small number of customers and a reduction in demand or loss of one or more of our significant customers may adversely affect our business.

 

At the present time, we are dependent on a small number of direct customers for a majority of our business, revenue and results of operations. We at present have customers in the automotive sector as well as the civil infrastructure sector. Two of our customers are large automotive companies, and the third major customer is a state government. To date, these customers have generated all our revenue. We expect to continue to experience significant customer concentration in future periods.

 

This customer concentration increases the risk of quarterly fluctuations in our operating results and sensitivity to any material, adverse developments experienced by our significant customers. In addition, our top customers’ purchasing power has, in some cases, given them the ability to make greater demands on us with regard to pricing and contractual terms in general. We expect this trend to continue, which may adversely affect our gross margins on certain products. Although we believe that our relationships with our major customers are good, we generally do not have long-term contracts with any of them, which is typical of our industry. Our customers often provide us with medium- to long-term product roadmaps and related indications of their product needs and purchases on a periodic basis, but they generally purchase our products on a periodic basis pursuant to purchase orders, and the relationship, as well as particular orders, can be terminated at any time without significant penalty. In addition, orders can be, and often are, rescheduled, canceled and modified with little or no notice. To ensure availability of our products for some of our largest customers, we start manufacturing our relevant products in advance of receiving purchase orders, based on our customers’ forecasts. These forecasts are not binding purchase commitments and, as a result, we incur inventory and manufacturing costs in advance of anticipated sales. Since actual demand for our products may not match these forecasts, we may be subject to increased risks of high inventory carrying costs, product obsolescence and increased operating costs. In addition, the loss of, or any substantial reduction in sales to, any of our major direct or end customers could have a material adverse effect on our business, financial condition and results of operations.

 

 

 

 

 

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Our operating subsidiaries have limited operating history and have generated very limited revenues thus far.

 

The limited operating history of OXYS and HereLab in the IIoT field, makes evaluating our business and future prospects difficult. OXYS was incorporated on August 4, 2016 and HereLab was incorporated on February 27, 2017. We do not anticipate generating substantial income from OXYS or HereLab’s operations until at the earliest 2018, and only then if we are able to successfully implement our business plan. To date we have generated only $39,800 from business operations. We intend in the longer term to derive further revenues from consulting services, product sales, and software licensing. Development of our services, products, and software will require significant investment prior to commercial introduction, and we may never be able to successfully develop or commercialize the services, products, or software in a material way.

 

We will require additional funding to develop and commercialize our services, products, and software. If we are unable to secure additional financing on acceptable terms, or at all, we may be forced to modify our current business plan or to curtail or cease our planned operations.

 

We anticipate incurring significant operating losses and using significant funds for product development and operating activities. Our existing cash resources are insufficient to finance even our immediate operations. Accordingly, we will need to secure additional sources of capital to develop our business and product candidates, as planned. We intend to seek substantial additional financing through public and/or private financing, which may include equity and/or debt financings, and through other arrangements, including collaborative arrangements. As part of such efforts, we may seek loans from certain of our executive officers, directors and/or current shareholders.

 

If we are unable to secure additional financing in the near term, we may be forced to:

 

  · curtail or abandon our existing business plans;
  · default on any debt obligations;
  · file for bankruptcy;
  · seek to sell some or all of our assets; and/or
  · cease our operations.

 

If we are forced to take any of these steps our common stock may be worthless.

 

Any future financing may result in ownership dilution to our existing shareholders and may grant rights to investors more favorable than the rights currently held by our existing shareholders.

 

If we raise additional capital by issuing equity, equity-related or convertible securities, the economic, voting and other rights of our existing shareholders may be diluted, and those newly-issued securities may be issued at prices that are at a significant discount to current and/or then prevailing market prices. In addition, any such newly issued securities may have rights superior to those of our common stock. If we obtain additional capital through collaborative arrangements, we may be required to relinquish greater rights to our technologies or product candidates than we might otherwise have or become subject to restrictive covenants that may affect our business.

 

Our CEO, who is our sole executive officer, devotes limited time to our business. If we are unable to find other executives and employees to assist us with our business, our business could fail.

 

Nevan Hanumara, who is our sole executive officer, is currently devoting approximately 30 hours a week of his time to our business. We do not have not entered into any employment arrangement with Mr. Hanumara and, currently, our services are being provided by Mr. Hanumara and other consultants. If we are unable to hire employees and contractors to assist us with our business, or if Mr. Hanumara is unwilling or unable to continue to provide services, our business could fail.

 

 

 

 

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Uncertain global economic conditions could materially adversely affect our business and results of operations.

 

Our operations and performance are sensitive to fluctuations in general economic conditions, both in the U.S. and globally. The ongoing uncertainty created by volatile currency markets, the continued weakness in the personal computer (“ PC ”) and energy sectors, alone or in combination, may continue to have a material adverse effect on our net sales and the financial results of our operations. In addition, we remain concerned about the geopolitical and fiscal instability in the Middle East and some emerging markets as well as the continued volatility of the equity markets. The impending Brexit and results of the recent U.S. election may also create additional global economic uncertainty. These factors could have a material adverse effect on the spending patterns of businesses including our current and potential customers which could have a material adverse effect on our net sales and our results of operations. Other factors that could adversely influence demand for our products include unemployment, labor and healthcare costs, access to credit, consumer and business confidence, and other macroeconomic factors that could have a negative impact on capital investment and spending behavior.

 

We are subject to various risks associated with international operations and foreign economies.

 

Our international sales are subject to inherent risks, including:

 

  · fluctuations in foreign currencies relative to the U.S. dollar;
  · unexpected changes to currency policy or currency restrictions in foreign jurisdictions;
  · delays in collecting trade receivable balances from customers in developing economies;
  · unexpected changes in regulatory requirements;
  · difficulties and the high tax costs associated with the repatriation of earnings;
  · fluctuations in local economies;
  · disparate and changing employment laws in foreign jurisdictions;
  · difficulties in staffing and managing foreign operations;
  · costs and risks of localizing products for foreign countries;
  · unexpected changes in regulatory requirements;
  · government actions throughout the world;
  · tariffs and other trade barriers; and,
  · the burdens of complying with a wide variety of foreign laws.

 

Moreover, there can be no assurance that our international sales will continue at existing levels or grow in accordance with our efforts to increase foreign market penetration.

 

In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by U.S. regulations applicable to us such as the Foreign Corrupt Practices Act. Although we have policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors and agents, including those based in or from countries where practices which violate such U.S. laws may be customary, will not take actions in violation of our policies. Any violation of foreign or U.S. laws by our employees, contractors or agents, even if such violation is prohibited by our policies, could have a material adverse effect on our business. We must also comply with various import and export regulations. The application of these various regulations depends on the classification of our products which can change over time as such regulations are modified or interpreted. As a result, even if we are currently in compliance with applicable regulations, there can be no assurance that we will not have to incur additional costs or take additional compliance actions in the future. Failure to comply with these regulations could result in fines or termination of import and export privileges, which could have a material adverse effect on our operating results. Additionally, the regulatory environment in some countries is very restrictive as their governments try to protect their local economy and value of their local currency against the U.S. dollar.

 

Revenue derived from large orders could adversely affect our gross margin and could lead to greater variability in our quarterly results.

 

Large orders may be more sensitive to changes in the global industrial economy, may be subject to greater discount variability, lower gross margins, and may contract at a faster pace during an economic downturn compared to smaller orders. To the extent that the amount of our net sales derived from large orders increases in future periods, either in absolute dollars or as a percentage of our overall business, our gross margins could decline, and we could experience greater volatility and see a greater negative impact from future downturns in the global industrial economy. This dynamic may also have an impact on the historical seasonal pattern of our net sales and our results of operations. These types of orders also make managing inventory levels more difficult as we have in the past and may have to in the future build large quantities of inventory in anticipation of future demand that may not materialize.

 

 

 

 

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Any future product revenues are dependent on certain industries, and contractions in these industries could have a material adverse effect on our results of operations.

 

Sales of our products are dependent on customers in certain industries, particularly the telecommunications, semiconductor, consumer electronics, automotive, energy, automated test equipment, power generation, federal government, state governments, defense and aerospace industries. As we have experienced in the past, and as we may continue to experience in the future, downturns characterized by diminished product demand in any one or more of these industries may result in decreased sales and a material adverse effect on our operating results. We cannot predict when and to what degree contractions in these industries may occur; however, any sharp or prolonged contraction in one or more of these industries could have a material adverse effect on our business and results of operations.

  

We intend to make significant investments in new products that may not be successful or achieve expected returns.

 

We plan to continue to make significant investments in research, development, and marketing for new and existing products and technologies. These investments involve a number of risks as the commercial success of such efforts depend on many factors, including our ability to anticipate and respond to innovation, achieve the desired technological fit, and be effective with our marketing and distribution efforts. If our existing or potential customers do not perceive our latest product offerings as providing significant new functionality or value, or if we are late to market with a new product or technology, we may not achieve our expected return on our investments or be able recover the costs expended to develop new product offerings, which could have a material adverse effect on our operating results. Even if our new products are profitable, our operating margins for new products may not be as high as the margins we have experienced historically.

 

Our success depends on new product introductions and market acceptance of our products.

 

The market for our products is characterized by rapid technological change, evolving industry standards, changes in customer needs and frequent new product introductions, and is therefore highly dependent upon timely product innovation. Our success is dependent on our ability to successfully develop and introduce new and enhanced products on a timely basis to replace declining revenues from older products, and on increasing penetration in domestic and international markets. As has occurred in the past and as may be expected to occur in the future, we have experienced significant delays between the announcement and the commercial availability of new products. Any significant delay in releasing new products could have a material adverse effect on the ultimate success of a product and other related products and could impede continued sales of predecessor products, any of which could have a material adverse effect on our operating results. There can be no assurance that we will be able to introduce new products in accordance with announced release dates, that our new products will achieve market acceptance or that any such acceptance will be sustained for any significant period. Failure of our new products to achieve or sustain market acceptance could have a material adverse effect on our operating results.

 

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.

 

We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation by the Financial Accounting Standards Board (“ FASB ”) and the Securities and Exchange Commission. A change in these policies or interpretations could have a significant effect on our reported financial results, may retroactively affect previously reported results, could cause unexpected financial reporting fluctuations, and may require us to make costly changes to our operational processes and accounting systems.

 

We operate in intensely competitive markets.

 

The markets in which we operate are characterized by intense competition from numerous competitors, some of which are divisions of large corporations having far greater resources than we have, and we may face further competition from new market entrants in the future. Some examples of large and small competitors include, but are not limited to:

 

  · General Electric with its GE Predix product for IoT;
  · IBM with its IBM BlueMix and IBM IoT Watson products;
  · Siemens with its MindSphere IoT product;
  · Microsoft with its Microsoft Azure IoT Suite;
  · FogHorn Systems;
  · Tulip.io; and
  · Uptake.

 

 

 

 

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Our financial results are subject to fluctuations due to various factors that may adversely affect our business and result of operations.

 

Our operating results have fluctuated in the past and may fluctuate significantly in the future due to a number of factors, including:

 

  · fluctuations in foreign currency exchange rates;
  · changes in global economic conditions;
  · changes in the mix of products sold;
  · the availability and pricing of components from third parties (especially limited sources);
  · the difficulty in maintaining margins, including the higher margins traditionally achieved in international sales;
  · changes in pricing policies by us, our competitors or suppliers;
  · the timing, cost or outcome of any future intellectual property litigation or commercial disputes;
  · delays in product shipments caused by human error or other factors; or
  · disruptions in transportation channels.

  

Any future acquisitions made by us will be subject to a number of related costs and challenges that could have a material adverse effect on our business and results of operations.

 

We have recently completed an acquisition and we plan to make more in the future. Achieving the anticipated benefits of an acquisition depends upon whether the integration of the acquired business, products or technology is accomplished efficiently and effectively. In addition, successful acquisitions generally require, among other things, integration of product offerings, manufacturing operations and coordination of sales and marketing and R&D efforts. These difficulties can become more challenging due to the need to coordinate geographically separated organizations, the complexities of the technologies being integrated, and the necessities of integrating personnel with disparate business backgrounds and combining different corporate cultures. The integration of operations following an acquisition also requires the dedication of management resources, which may distract attention from our day-to-day business and may disrupt key R&D, marketing or sales efforts. Our inability to successfully integrate any of our acquisitions could harm our business. The existing products previously sold by entities we have acquired may be of a lesser quality than our products or could contain errors that produce incorrect results on which users rely or cause failure or interruption of systems or processes that could subject us to liability claims that could have a material adverse effect on our operating results or financial position. Furthermore, products acquired in connection with acquisitions may not gain acceptance in our markets, and we may not achieve the anticipated or desired benefits of such transactions.

 

We may experience component shortages that may adversely affect our business and result of operations.

 

We have experienced difficulty in securing certain types of high power connectors for one of our projects and anticipate that supply shortages of components used in our products, including limited source components, can result in significant additional costs and inefficiencies in manufacturing. If we are unsuccessful in resolving any such component shortages in a timely manner, we will experience a significant impact on the timing of revenue, a possible loss of revenue, or an increase in manufacturing costs, any of which would have a material adverse impact on our operating results.

 

We rely on management information systems. interruptions in our information technology systems or cyber-attacks on our systems could adversely affect our business.

 

We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business. We rely on a primary global center for our management information systems and on multiple systems in branches not covered by our global center. As with any information system, unforeseen issues may arise that could affect our ability to receive adequate, accurate and timely financial information, which in turn could inhibit effective and timely decisions. Furthermore, it is possible that our global center for information systems or our branch operations could experience a complete or partial shutdown. A significant system or network disruption could be the result of new system implementations, computer viruses, cyber-attacks, security breaches, facility issues or energy blackouts. Threats to our information technology security can take a variety of forms and individuals or groups of hackers or sophisticated organizations including state-sponsored organizations, may take steps that pose threats to our customers and our infrastructure. If we were to experience a shutdown, disruption or attack, it would adversely impact our product shipments and net sales, as order processing and product distribution are heavily dependent on our management information systems. Such an interruption could also result in a loss of our intellectual property or the release of sensitive competitive information or partner, customer or employee personal data. Any loss of such information could harm our competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by the disruptions or security breaches. In addition, changing laws and regulations governing our responsibility to safeguard private data could result in a significant increase in operating or capital expenditures needed to comply with these new laws or regulations. Accordingly, our operating results in such periods would be adversely impacted.

 

 

 

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We are continually working to maintain reliable systems to control costs and improve our ability to deliver our products in our markets worldwide. Our efforts include, but are not limited to the following: firewalls, antivirus protection, patches, log monitors, routine backups with offsite retention of storage media, system audits, data partitioning and routine password modifications. Our internal information technology systems environment continues to evolve and our business policies and internal security controls may not keep pace as new threats emerge. No assurance can be given that our efforts to continue to enhance our systems will be successful.

 

We are subject to risks associated with our website.

 

We devote significant resources to maintaining our website, www.oxyscorp.com, as a key marketing, sales and support tool and expect to continue to do so in the future. Failure to properly maintain our Website may interrupt normal operations, including our ability to provide quotes, process orders, ship products, provide services and support to our customers, bill and track our customers, fulfill contractual obligations and otherwise run our business which would have a material adverse effect on our results of operations. We host our Website internally. Any failure to successfully maintain our Website or any significant downtime or outages affecting our Website could have a material adverse impact on our operating results.

 

Our products are complex and may contain bugs or errors.

 

As has occurred in the past and as may be expected to occur in the future, our new software products or new operating systems of third parties on which our products are based often contain bugs or errors that can result in reduced sales or cause our support costs to increase, either of which could have a material adverse impact on our operating results. 

  

Compliance with sections 302 and 404 of the Sarbanes-Oxley act of 2002 is costly and challenging.

 

As required by Section 302 of the Sarbanes-Oxley Act of 2002, our periodic reports contain our management’s certification of adequate disclosure controls and procedures, a report by our management on our internal control over financial reporting including an assessment of the effectiveness of our internal control over financial reporting, and an attestation and report by our external auditors with respect to the effectiveness of our internal control over financial reporting under Section 404. While these assessments and reports have not revealed any material weaknesses in our internal control over financial reporting, compliance with Sections 302 and 404 is required for each future fiscal year end. We expect that the ongoing compliance with Sections 302 and 404 will continue to be both very costly and very challenging and there can be no assurance that material weaknesses will not be identified in future periods. Any adverse results from such ongoing compliance efforts could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

 

Our business depends on our proprietary rights and we have been subject to intellectual property litigation.

 

Our success depends on our ability to obtain and maintain patents and other proprietary rights relative to the technologies used in our principal products. Despite our efforts to protect our proprietary rights, unauthorized parties may have in the past infringed or violated certain of our intellectual property rights. We from time to time engage in litigation to protect our intellectual property rights. In monitoring and policing our intellectual property rights, we have been and may be required to spend significant resources. We from time to time may be notified that we are infringing certain patent or intellectual property rights of others. There can be no assurance that any future intellectual property dispute or litigation will not result in significant expense, liability, injunction against the sale of some of our products, and a diversion of management’s attention, any of which may have a material adverse effect on our operating results.

 

We are subject to the risk of product liability claims.

 

Our products are designed to provide information upon which users may rely. Our products are also used in “real time” applications requiring extremely rapid and continuous processing and constant feedback. Such applications give rise to the risk that a failure or interruption of the system or application could result in economic damage, bodily harm or property damage. We attempt to assure the quality and accuracy of the processes contained in our products, and to limit our product liability exposure through contractual limitations on liability, limited warranties, express disclaimers and warnings as well as disclaimers contained in our “shrink wrap” and electronically displayed license agreements with end-users. If our products contain errors that produce incorrect results on which users rely or cause failure or interruption of systems or processes, customer acceptance of our products could be adversely affected. Further, we could be subject to liability claims that could have a material adverse effect on our operating results or financial position. Although we maintain liability insurance for product liability matters, there can be no assurance that such insurance or the contractual limitations used by us to limit our liability will be sufficient to cover or limit any claims which may occur.

 

 

 

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Each of our current product candidates and services is in an early stage of development and we may never succeed in developing and/or commercializing them. If we are unable to commercialize our services, products, or software, or if we experience significant delays in doing so, our business may fail.

 

We intend to invest a significant portion of our efforts and financial resources in our software and we will depend heavily on its success. This software is currently in the beta stage of development. We need to devote significant additional research and development, financial resources and personnel to develop additional commercially viable products, establish intellectual property rights, if necessary, and establish a sales and marketing infrastructure. We are likely to encounter hurdles and unexpected issues as we proceed in the development of our software and our other product candidates. There are many reasons that we may not succeed in our efforts to develop our product candidates, including the possibility that our product candidates will be deemed undesirable; our product candidates will be too expensive to develop or market or will not achieve broad market acceptance; others will hold proprietary rights that will prevent us from marketing our product candidates; or our competitors will market products that are perceived as equivalent or superior.

 

We depend on third parties to assist us in the development of our software and other product candidates, and any failure of those parties to fulfill their obligations could result in costs and delays and prevent us from successfully commercializing our software and product candidates on a timely basis, if at all.

 

We may engage consultants and other third parties to help our software and product candidates. We may face delays in our commercialization efforts if these parties do not perform their obligations in a timely or competent fashion or if we are forced to change service providers. Any third parties that we hire may also provide services to our competitors, which could compromise the performance of their obligations to us. If these third parties do not successfully carry out their duties or meet expected deadlines, the commercialization of our software and product candidates may be extended, delayed or terminated or may otherwise prove to be unsuccessful. Any delays or failures as a result of the failure to perform by third parties would cause our development costs to increase, and we may not be able to commercialize our product candidates. In addition, we may not be able to establish or maintain relationships with these third parties on favorable terms, if at all. If we need to enter into replacement arrangements because a third party is not performing in accordance with our expectations, we may not be able to do so without undue delays or considerable expenditures or at all.

 

The loss of or inability to retain key personnel could materially adversely affect our operations.

 

Our management includes a select group of experienced technology professionals, particularly Giro DiBiase, Nevan Hanumara, and Patrick Phillips, who will be instrumental in the development our software and product candidates. The success of our operations will, in part, depend on the successful continued involvement of these individuals. If these individuals leave the employment of or engagement with us, OXYS, HereLab, then our ability to operate will be negatively impacted. We do not have any employment agreements with these parties and do not maintain any “key-man” insurance for them.

  

Risks Related to Our Intellectual Property

 

Patents acquired by us may not be valid or enforceable, and may be challenged by third parties.

 

We do not intend to seek a legal opinion or other independent verification that any patents issued or licensed to us would be held valid by a court or administrative body or that we would be able to successfully enforce our patents against infringers, including our competitors. The issuance of a patent is not conclusive as to its validity or enforceability, and the validity and enforceability of a patent is susceptible to challenge on numerous legal grounds. Challenges raised in patent infringement litigation brought by or against us may result in determinations that patents that have been issued or licensed to us or any patents that may be issued to us or our licensors in the future are invalid, unenforceable or otherwise subject to limitations. In the event of any such determinations, third parties may be able to use the discoveries or technologies claimed in these patents without paying licensing fees or royalties to us, which could significantly diminish the value of our intellectual property and our competitive advantage. Even if our patents are held to be enforceable, others may be able to design around our patents or develop products similar to our products that are not within the scope of any of our patents.

 

In addition, enforcing the patents that have been licensed to us and any patents that may be issued to us in the future against third parties may require significant expenditures regardless of the outcome of such efforts. Our inability to enforce our patents against infringers and competitors may impair our ability to be competitive and could have a material adverse effect on our business.

 

 

 

 

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If we are not able to protect and control our unpatented trade secrets, know-how and other technological innovation, we may suffer competitive harm.

 

We rely on unpatented technology, trade secrets, confidential information and proprietary know-how to protect our technology and maintain any future competitive position, especially when we do not believe that patent protection is appropriate or can be obtained. Trade secrets are difficult to protect. In order to protect proprietary technology and processes, we rely in part on confidentiality and intellectual property assignment agreements with our employees, consultants and others. These agreements generally provide that the individual must keep confidential and not disclose to other parties any confidential information developed or learned by the individual during the course of the individual’s relationship with us except in limited circumstances. These agreements generally also provide that we shall own all inventions conceived by the individual in the course of rendering services to us. These agreements may not effectively prevent disclosure of confidential information or result in the effective assignment to us of intellectual property, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information or other breaches of the agreements. In addition, others may independently discover trade secrets and proprietary information that have been licensed to us or that we own, and in such case we could not assert any trade secret rights against such party.

 

Enforcing a claim that a party illegally obtained and is using trade secrets that have been licensed to us or that we own is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could have a material adverse effect on our business. Moreover, some of our academic institution licensors, collaborators and scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality of our technologies and other confidential information in connection with our collaborations, our ability to protect our proprietary information or obtain patent protection in the future may be impaired, which could have a material adverse effect on our business.

 

Risks Related to Our Common Stock

 

The public trading market for our common stock is volatile and will likely result in higher spreads in stock prices.

 

Our common stock is trading in the over-the-counter market and is quoted on the OTC Pink. The over-the-counter market for securities has historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations and other factors, such as our ability to implement our business plan, as well as economic conditions and quarterly variations in our results of operations, may adversely affect the market price of our common stock. In addition, the spreads on stock traded through the over-the-counter market are generally unregulated and higher than on stock exchanges, which means that the difference between the price at which shares could be purchased by investors on the over-the-counter market compared to the price at which they could be subsequently sold would be greater than on these exchanges. Significant spreads between the bid and asked prices of the stock could continue during any period in which a sufficient volume of trading is unavailable or if the stock is quoted by an insignificant number of market makers. We cannot insure that our trading volume will be sufficient to significantly reduce this spread, or that we will have sufficient market makers to affect this spread. These higher spreads could adversely affect investors who purchase the shares at the higher price at which the shares are sold, but subsequently sell the shares at the lower bid prices quoted by the brokers. Unless the bid price for the stock increases and exceeds the price paid for the shares by the investor, plus brokerage commissions or charges, shareholders could lose money on the sale. For higher spreads such as those on over-the-counter stocks, this is likely a much greater percentage of the price of the stock than for exchange listed stocks. There is no assurance that at the time the shareholder wishes to sell the shares, the bid price will have sufficiently increased to create a profit on the sale.

  

Because our shares are designated as “penny stock”, broker-dealers will be less likely to trade in our stock due to, among other items, the requirements for broker-dealers to disclose to investors the risks inherent in penny stocks and to make a determination that the investment is suitable for the purchaser.

 

Our shares are designated as “penny stock” as defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and thus may be more illiquid than shares not designated as penny stock. The SEC has adopted rules which regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks are defined generally as: non-Nasdaq equity securities with a price of less than $5.00 per share; not traded on a “recognized” national exchange; or in issuers with net tangible assets less than $2,000,000, if the issuer has been in continuous operation for at least three years, or $10,000,000, if in continuous operation for less than three years, or with average revenues of less than $6,000,000 for the last three years. The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer’s account, to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a stock that is subject to the penny stock rules. Since our securities are subject to the penny stock rules, investors in the shares may find it more difficult to sell their shares. Many brokers have decided not to trade in penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. The reduction in the number of available market makers and other broker-dealers willing to trade in penny stocks may limit the ability of purchasers in this offering to sell their stock in any secondary market. These penny stock regulations, and the restrictions imposed on the resale of penny stocks by these regulations, could adversely affect our stock price.

 

 

 

 

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Our Board of Directors can, without shareholder approval, cause preferred stock to be issued on terms that adversely affect common shareholders.

 

Under our Articles of Incorporation, our board of directors is authorized to issue up to 10,000,000 shares of preferred stock, none of which are issued and outstanding as of the date of this report. Also, our board of directors, without shareholder approval, may determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares. If our board of directors causes any shares of preferred stock to be issued, the rights of the holders of our common stock could be adversely affected. Our board of directors’ ability to determine the terms of preferred stock and to cause its issuance, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock. Preferred shares issued by our board of directors could include voting rights, or even super voting rights, which could shift the ability to control our company to the holders of our preferred stock. Preferred shares could also have conversion rights into shares of our common stock at a discount to the market price of the common stock which could negatively affect the market for our common stock. In addition, preferred shares would have preference in the event of our liquidation, which means that the holders of preferred shares would be entitled to receive the net assets of our company distributed in liquidation before the common stock holders receive any distribution of the liquidated assets.

 

We have not paid, and do not intend to pay in the near future, dividends on our common shares and therefore, unless our common stock appreciates in value, our shareholders may not benefit from holding our common stock.

 

We have not paid any cash dividends since inception. Therefore, any return on the investment made in our shares of common stock will likely be dependent initially upon the shareholder’s ability to sell our common shares in the open market, at prices in excess of the amount paid for our common shares and broker commissions on the sales.

 

Because we became public by means of a reverse merger, we may not be able to attract the attention of brokerage firms.

 

Additional risks may exist because we became public through a “reverse merger.” Securities analysts of brokerage firms may not provide coverage of our company since there is little incentive for brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct secondary offerings on our behalf in the future.

 

Shares of our common stock that have not been registered under federal securities laws are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which apply to a former “shell company.”

 

Prior to the closing of the SEA, we were deemed a “shell company” under applicable SEC rules and regulations because we had no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. Pursuant to Rule 144 promulgated under the Securities Act sales of the securities of a former shell company, such as us, under that rule are not permitted (i) until at least 12 months have elapsed from the date on which Form 10-type information reflecting our status as a non-shell company, is filed with the SEC and (ii) unless at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports. Without registration under the Securities Act, our shareholders will be forced to hold their shares of our common stock for at least that 12-month period after the filing of the report on Form 8-K following the closing of the reverse merger before they are eligible to sell those shares pursuant to Rule 144, and even after that 12-month period, sales may not be made under Rule 144 unless we are in compliance with other requirements of Rule 144. Further, it will be more difficult for us to raise funding to support our operations through the sale of debt or equity securities unless we agree to register such securities under the Securities Act, which could cause us to expend significant time and cash resources. The lack of liquidity of our securities as a result of the inability to sell under Rule 144 for a longer period of time than a non-former shell company could negatively affect the market price of our securities.

 

 

 

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We are an “emerging growth company,” and will be able take advantage of reduced disclosure requirements applicable to “emerging growth companies,” which could make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and, for as long as we continue to be an “emerging growth company,” we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

Item 2. Properties

 

We currently do not own any properties. Management believes that this space is adequate to meet the Company’s current and foreseeable needs. We entered into a lease agreement on August 1, 2017 which began on January 1, 2018 and will terminate on December 31, 2018. Pursuant to the lease, we are obligated to pay the landlord monthly installments of $2,000 for a total lease payment of $24,000 in 2018.

 

Item 3. Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

 

 

 

 

 

 

 

 

 

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PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock is quoted on the OTC Pink under the symbol “ITOX.” The table below sets forth for the periods indicated the quarterly high and low bid prices as reported by OTC Markets. Limited trading volume has occurred during these periods. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

 

    Quarter     High     Low  
FISCAL YEAR ENDED DECEMBER 31, 2017     First     $ 0.80     $ 0.40  
      Second     $ 0.65     $ 0.40  
      Third     $ 1.15     $ 0.56  
      Fourth     $ 2.50     $ 1.42  

 

    Quarter     High     Low  
FISCAL YEAR ENDED DECEMBER 31, 2016     First     $ 1.50     $ 0.60  
      Second     $ 0.60     $ 0.30  
      Third     $ 0.30     $ 0.30  
      Fourth     $ 1.50     $ 0.30  

 

Our common stock is considered to be penny stock under rules promulgated by the Securities and Exchange Commission (the “ SEC ”). Under these rules, broker-dealers participating in transactions in these securities must first deliver a risk disclosure document which describes risks associated with these stocks, broker-dealers’ duties, customers’ rights and remedies, market and other information, and make suitability determinations approving the customers for these stock transactions based on financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing, provide monthly account statements to customers, and obtain specific written consent of each customer. With these restrictions, the likely effect of designation as a penny stock is to decrease the willingness of broker-dealers to make a market for the stock, to decrease the liquidity of the stock and increase the transaction cost of sales and purchases of these stocks compared to other securities.

 

Availability of Rule 144

 

We were a shell company prior to the filing of our report on Form 8-K on August 3, 2017. Rule 144 is not available for the resale of securities issued by companies that are, or previously were, shell companies, such as our company, unless certain conditions are met. Paragraph (i) of Rule 144 prohibits the use of the rule for resale of securities issued by any shell companies (other than business combination related shell companies) or any issuer that has been at any time previously a shell company, except where the following conditions are met:

 

· the issuer of the securities that was formerly a shell company has ceased to be a shell company;
· the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
· the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
· at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company.

 

 

 

 

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As a result, our shareholders will not be able to sell their shares of our common stock under Rule 144 at least prior to the one year anniversary of the filing of our Current Report on Form 8-K on August 3, 2017.

 

Holders

 

As of the close of business on April 17, 2018, we had approximately 136 holders of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. We have appointed Issuer Direct, 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, to act as transfer agent for the common stock.

 

Dividends

 

We have not declared or paid any cash dividends on our common stock during the fiscal years ended December 31, 2017 and December 31, 2016, or in any subsequent period. We do not anticipate or contemplate paying dividends on our common stock at the present time. The only restrictions that limit the ability to pay dividends on common equity, or that are likely to do so in the future, are those restrictions imposed by law.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Equity Compensation Plan Information

 

Plan category   Number of securities to be issued upon exercise of outstanding options, warrants and rights     Weighted-average exercise price of outstanding options, warrants and rights     Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))  
    (a)     (b)     (c)  
Equity compensation plans approved by security holders              
Equity compensation plans not approved by security holders             4,500,000  
Total             4,500,000  

 

2017 Stock Incentive Plan

 

On March 16, 2017, our board of directors assumed the 2017 Stock Awards Plan adopted by the Company while domiciled in New Jersey. No awards were made under this plan. On December 14, 2017, the Board of Directors terminated this plan and adopted a new 2017 Stock Incentive Plan (the “ Plan ”). The purposes of the Plan are (a) to enhance our ability to attract and retain the services of qualified employees, officers, directors, consultants, and other service providers upon whose judgment, initiative and efforts the successful conduct and development of our business largely depends, and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of our company, by providing them an opportunity to participate in the ownership of our Company and thereby have an interest in the success and increased value of our Company.

 

There are 4,500,000 shares of common stock authorized for non-qualified and incentive stock options, restricted stock units, restricted stock grants, and stock appreciation rights under the Plan, which are subject to adjustment in the event of stock splits, stock dividends, and other situations.

 

 

 

 

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The Plan is administered by our board of directors; however, the board of directors may designation administration of the Plan to a committee consisting of at least two independent directors. Only employees of our Company or of an “Affiliated Company”, as defined in the Plan, (including members of the board of directors if they are employees of our Company or of an Affiliated Company) are eligible to receive incentive stock options under the Plan. Employees of our Company or of an Affiliated Company, members of the board of directors (whether or not employed by our company or an Affiliated Company), and “Service Providers”, as defined in the Plan, are eligible to receive non-qualified options, restricted stock units, and stock appreciation rights under the Plan. All awards are subject to Section 162(m) of the Internal Revenue Code.

 

No option awards may be exercisable more than ten years after the date it is granted. In the event of termination of employment for cause, the options terminate on the date of employment is terminated. In the event of termination of employment for disability or death, the optionee or administrator of optionee’s estate or transferee has six months following the date of termination to exercise options received at the time of disability or death. In the event of termination for any other reason other than for cause, disability or death, the optionee has 30 days to exercise his or her options.

 

The Plan will continue in effect until all the stock available for grant or issuance has been acquired through exercise of options or grants of shares, or until ten years after its adoption, whichever is earlier. Awards under the Plan may also be accelerated in the event of certain corporate transactions such as a merger or consolidation or the sale, transfer or other disposition of all or substantially all our assets.

 

The Board has not granted any awards under the Plan.

 

Recent Sales of Unregistered Securities

 

On October 1, November 1, and December 1, 2017, we issued 10,000 shares of our common stock to DATHNA Partners LLC pursuant to a Consulting Agreement dated October 1, 2017 for a total of 30,000 shares of our common stock issued to DATHNA Partners LLC for the year ended December 31, 2017.

 

On January 15 and February 15, 2018, we issued 350,000 and 150,000 shares of our common stock to Draco Financial LLC pursuant to a Consulting Agreement dated effective December 1, 2017.

 

Each of the above consultants delivered appropriate investment representations with respect to the shares and consented to the imposition of restrictive legends upon the stock certificates representing the shares. No consultant entered into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. Each consultant was also afforded the opportunity to ask questions of management and to receive answers concerning the terms and conditions of the transaction. These securities were issued without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Section 4(a)(2) thereof, and Rule 506(b) promulgated thereunder, as a transaction by an issuer not involving any public offering. No selling commissions were paid in connection with the issuance of these securities.

 

Item 6. Selected Financial Data

 

As a Smaller Reporting Company, we are not required to furnish information under this Item 6.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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 above and in “Risk Factors.” We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements

 

 

 

 

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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 periods ended December 31, 2016 and 2017 gives effect to our acquisition of OXYS Corporation (“ OXYS ”) on July 28, 2017. In accordance with the accounting reporting requirements for the recapitalization related to the “reverse merger” of OXYS, the financial statements for OXYS have been adjusted to reflect the change in the shares outstanding and the par value of the common stock of OXYS. Additionally, all intercompany transactions between the Company and OXYS have been eliminated.

 

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 United States. These financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States.

 

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 July 28, 2017, we closed the reverse acquisition transaction under the Securities Exchange Agreement dated March 16, 2017, as reported in the Company’s report on Form 8-K filed with the Commission on August 3, 2017. Following the closing, the business of the Company has been that of OXYS, Inc. and HereLab, Inc., our wholly owned subsidiaries. The operations of the Company have varied significantly following the closing since prior to that time, the Company was an inactive shell company.

 

Historical Background

 

We were incorporated in the State of New Jersey on October 1, 2003 under the name of Creative Beauty Supply of New Jersey Corporation and subsequently changed our name to Gotham Capital Holdings, Inc. on May 18, 2015. We commenced operations in the beauty supply industry as of January 1, 2004. On November 30, 2007, our Board of Directors approved a plan to dispose of our wholesale and retail beauty supply business. From January 1, 2009 until July 28, 2017, we had no operations and were a shell company.

 

On March 16, 2017, our Board of Directors adopted resolutions, which were approved by shareholders holding a majority of our outstanding shares, to change our name to “IIOT-OXYS, Inc.”, to authorize a change of domicile from New Jersey to Nevada, to authorize a 2017 Stock Awards Plan, and to approve the Securities Exchange Agreement (the “ OXYS SEA ”) between the Company and OXYS Corporation (“ OXYS ”), a Nevada corporation incorporated on August 4, 2016.

 

Under the terms of the OXYS SEA we acquired 100% of our 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 Mr. DiBiase who also served in management of OXYS. Also, one of our principal shareholders entered into a consulting agreement with OXYS to provide consulting services during the transition. The OXYS SEA was effective on July 28, 2017, and our name was changed to “IIOT-OXYS, Inc.” at that time. Effective October 26, 2017, our domicile was changed from New Jersey to Nevada.

 

On December 14, 2017, we entered into a Share Exchange Agreement (the “ HereLab SEA ”) with HereLab, Inc., a Delaware corporation (“ HereLab ”), and HereLab’s two shareholders pursuant to which we would acquire all the issued and outstanding shares of HereLab in exchange for the issuance of 1,650,000 shares of our Common Stock, on a pro rata basis, to HereLab’s two shareholders. The closing of the transaction occurred on January 11, 2018 and HereLab became our wholly-owned subsidiary.

 

At the present time, we have two, wholly-owned subsidiaries which are OXYS Corporation and HereLab, Inc., through which our operations are conducted.

 

 

 

 

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General Overview

 

IIOT-OXYS, Inc., a Nevada corporation (the “ Company ”), and OXYS, were originally established for the purposes of designing, building, testing, and selling Edge Computing systems for the Industrial Internet. Both companies were, and presently are, early stage technology startups that are largely pre-revenue in their development phase. HereLab is also an early-stage technology development company. The Company received its first revenues in the last quarter of 2017, and expects considerable revenue due to its business development pipeline for 2018 including first 2018 revenues to be realized in the first quarter of 2018.

 

Our unique value proposition is as follows:

 

Edge 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. OXYS specializes in edge computing, where the data processing is done locally right where the data is collected.

 

Advanced Algorithms

 

OXYS has sought to differentiate itself by licensing advanced algorithms from world-leading research institutions such as the Massachusetts Institute of Technology (“ MIT ”). 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, OXYS uses open source tools to create proprietary content. More specifically, OXYS uses hardware manufactured by companies such as HARTING (www.harting-usa.com) as well as others. This hardware is reconfigurable and flexible.

 

Liquidity and Capital Resources

 

At December 31, 2017, the Company had a cash balance of $60,863, which represents a $420,978 decrease from the $481,841 balance at December 31, 2016. This decrease was primarily the result of cash used to satisfy the requirements of a reporting company and due to acceleration in product development activities. The Company’s working capital at December 31, 2017 was $77,663, as compared to a December 31, 2016 working capital of $543,535.

 

For the year ended December 31, 2017, we incurred a net loss of $1,531,095. Net cash used in operating activities was $490,701 for the year ended December 31, 2017.

 

For the period from inception (August 4, 2016) to December 31, 2016, we incurred a net loss of $8,626. Net cash used by operating activities was $70,320 for the period from inception (August 4, 2016) to December 31, 2016.

 

For the year ended December 31, 2017, investing activities consisted of $1,000 of cash paid in conjunction with a licensing agreement. During the same period, financing activities consisted of cash received totaling $141,499 from issuance of common stock net of costs of $70,776.

 

For the period from inception (August 4, 2016) to December 31, 2016, there were no investing activities. During the same period, financing activities consisted of cash received totaling $552,161 from issuance of common stock

 

The Company presently owns no real property and at this time has no intention of acquiring any such property. The Company’s expenses are associated with professional fees as well as product development expenses and activities.

 

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 $1,531,095 for the year ended December 31, 2017, and $8,626 for the period from inception (August 4, 2016) to December 31, 2016, and has an accumulated deficiency which raises substantial doubt about the Company’s ability to continue as a going concern.

 

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 our current rate of expenditure, we anticipate being able to maintain current operations for six months; however, we expect additional funding within three months.

 

 

 

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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 April 17, 2018. Such a going concern qualification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot be assured.

 

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.

 

Results of Operations for the Year Ended December 31, 2017 compared to the period from inception (August 4, 2016) to December 31, 2016

 

For the year ended December 31, 2017, we earned revenues of $39,800 and incurred related cost of sales of $47,887. We incurred professional fees of $1,416,527 and other general and administrative expenses of $106,469. As a result we incurred a net loss of $1,531,095 for the year ended December 31, 2017.

 

Comparatively, for the period from inception (August 4, 2016) to December 31, 2016, we did not earn any revenues. We incurred professional fees of $7,162 other general and administrative expenses of $1,464. As a result, we incurred a net loss of $8,626 for the period from inception (August 4, 2016) to December 31, 2016.

 

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.

 

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.

 

 

 

  24  
 

 

Item 7A. Quantitative And Qualitative Disclosures About Market Risk

 

As a Smaller Reporting Company, we are not required to furnish information under this Item 7A.

 

Item 8. Financial Statements

 

The financial statements and supplementary data required by this item are included following the signature page of this report.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

 

None.

 

Item 9A. Controls and Procedures

 

Disclosure Controls and Procedures

 

We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and, as such, is accumulated and communicated to our Chief Executive Officer, Nevan Hanumara, who serves as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Mr. Hanumara, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of December 31, 2017. Based on his evaluation, Mr. Hanumara concluded that, due to a material weakness in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2017. In light of the material weakness in internal control over financial reporting, we completed substantive procedures, including validating the completeness and accuracy of the underlying data used for accounting prior to filing this Annual Report on Form 10-K.

 

These additional procedures have allowed us to conclude that, notwithstanding the material weakness in our internal control over financial reporting, the consolidated financial statements included in this report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 based upon Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“ COSO ”).

 

During its evaluation, management noted certain matters involving internal control and its operation that we consider to be significant deficiencies or material weaknesses under standards of the Public Company Accounting Oversight Board (“ PCAOB ”). A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

 

 

 

  25  
 

 

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

 

We noted the deficiencies involving the segregation of duties, lack of governance/oversight, lack of internal control documentation, and the timeliness of preparing final balances that we believe to be material weaknesses.

 

Because of this material weaknesses, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2017, based on criteria described in Internal Control – Integrated Framework (2013) issued by COSO.

 

Remediation of the Material Weakness

 

We are evaluating the material weaknesses and developing a plan of remediation to strengthen our overall internal control over financial reporting. The remediation plan will include the following actions:

 

· Separation of corporate responsibilities, e.g. CEO, CFO, Secretary, etc. to different key management individuals;
· Creation and adoption of a formal policy manual specifically dealing with financial controls; and
· Establishment of an Audit Committee through an Audit Committee Charter with a Chair and the CFO will provide regular updates to this Audit Committee.

 

We are committed to maintaining a strong internal control environment and we believe that these remediation efforts will represent significant improvements in our controls. We have started to implement these steps, however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until the remediation steps set forth above are fully implemented and tested, the material weakness described above will continue to exist.

 

Changes in Internal Control over Financial Reporting

 

On July 28, 2017, we closed the OXYS SEA and, as a result, new management was put in place which resulted in changes to our internal control over financial reporting which were not fully realized until the Fourth Quarter of 2017. Those changes to the processes designed by, or under the supervision of, management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles have resulted in the material weaknesses stated above.

 

Item 9B. Other Information

 

Not applicable.

 

 

 

 

 

  26  
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

Current Management

 

The following table sets forth information concerning our directors and executive officers:

 

Name   Position   Age
Executive Officers :        
Nevan Hanumara   Chief Executive Officer, Interim Chief Financial Officer, and Secretary   35
         
Directors :        
Nevan Hanumara   Director   35
Vidhydhar Mitta   Director   45
Patrick Phillips   Director   59

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

 

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

 

Business Experience of Executive Officers and Directors

 

The principal occupation and business experience during the past five years for our executive officers and directors is as follows:

 

Nevan Hanumara: Mr. Hanumara has served as our Chief Executive Officer and Interim Chief Financial Officer since February 28, 2018. Mr. Hanumara has also served as our Secretary and director since the closing of the reverse acquisition on July 28, 2017. In addition, Mr. Hanumara has also served as a director of OXYS since its inception on August 4, 2016. Since 2016, he has operated as the co-founder and operating member of Cambridge Medspace LLC, a company that provides consulting and advisory services to early stage technology companies as well as providing access to rental office space to those companies. In his position as co-founder, Mr. Hanumara is responsible for attracting tenants to the space, assisting tenants with infrastructural support, providing tenants with business development and professional networking opportunities, and seeking other sources of revenue for Cambridge Medspace. Since 2012, Mr. Hanumara has worked as a research scientist with the Massachusetts Institute of Technology. In his position as a research scientist, Mr. Hanumara manages various programmatic activities within the mechanical engineering department and is responsible for teaching courses on medical device design, as well as serving as a program mentor for graduate students. In addition, he engages in various technical and programmatic business and proposal development efforts on behalf of MIT. Mr. Hanumara received a PhD in Mechanical Engineering from MIT in 2012, an MS in Mechanical Engineering from MIT in 2006, and a BS in Mechanical Engineering and a BA in French from the University of Rhode Island in 2004.

 

Vidhydhar Mitta: Mr. Mitta has served as a director of the Company since the closing of the reverse acquisition on July 28, 2017.Mr. Mitta has also served as a director of OXYS since its inception on August 4, 2016. Since 2000, he has been the founder and President of Synergic Solutions Inc., a software development company that designs custom software for a variety of industries including radio-medicine and associate allied health fields. In his position as President, Mr. Mitta has responsibility for all aspects of Synergic Solutions including technical program guidance, employee supervision, business development, and profit and loss responsibility. Mr. Mitta received a BS in Information Science & Technology from BMS College of Engineering in 1995.

 

Patrick Phillips: Mr. Phillips has served as a director of the Company since the closing of the HereLab SEA which occurred on January 11, 2018. Mr. Phillips has also served as a director and CEO of HereLab since its inception on February 27, 2017. In September 2015, Mr. Phillips founded HereLab’s predecessor entity. Mr. Phillips continued work for that entity until HereLab was incorporated in February 2017. From January 2011 until July 2015, Mr. Phillips was Executive Director of Arts & Ideas, Inc. was a nationally focused, nonprofit publishing organization.

 

 

 

 

  27  
 

 

Legal Proceedings

 

During the past ten years there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors or executive officers, and none of these persons has been involved in any judicial or administrative proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business entity, any judicial or administrative proceedings based on violations of federal or state securities, commodities, banking or insurance laws or regulations, or any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization.

 

Family Relationships

 

There are no family relationships between any of our directors and executive officers.

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.”

 

We currently have not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission (“ SEC ”) require our directors, executive officers and persons who own more than 10% of our common stock to file reports of their ownership and changes in ownership of our common stock with the SEC. Based solely on our review of the reports filed during 2017 and questionnaires from our directors and executive officers, we determined that no director, executive officer, or beneficial owner of more than 10% of our common stock failed to file a report on a timely basis during 2017.

 

Code of Ethics

 

On March 9, 2018, the Board of Directors adopted a Code of Ethics (the “ Code ”). The purpose of the Code of Ethics is to deter wrongdoing and to promote:

 

· honest and ethical conduct;
· full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by the Company;
· avoidance and ethical handling of actual or apparent conflicts of interest, including disclosure to an appropriate person of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
· confidentiality of corporate information;
· protection and proper use of corporate assets and opportunities;
· compliance with applicable governmental laws, rules, and regulations;
· prompt internal reporting of any violations of this Code to an appropriate person; and
· accountability for adherence to the Code.

 

The Code of Ethics applies to all directors, officers, and employees of the Company and its subsidiaries, including, but not limited to, the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is available at www.oxyscorp.com and is included as an exhibit to this Annual Report on Form 10-K. The Company will provide any person, without charge and upon request through our website, a copy of the Code of Ethics.

 

 

 

  28  
 

 

Item 11. Executive Compensation

 

The following table sets forth information concerning the annual compensation awarded to, earned by, or paid to the following named executive officers for all services rendered in all capacities to our company and its subsidiaries for the years ended December 31, 2017 and 2016.

 

Except as described below, we have not entered into any employment or compensation agreements or arrangements with Mr. DiBiase for his previous services as an officer or director of our company.

 

Summary Compensation Table

Name and principal position   Year   All other
compensation
($)
  Total
($)
Carmine Catizone (1)   2017   0   0  
  2016   0   0  
Giro DiBiase (2)   2017   25,000   25,000 (3)
    2016   0   0  

 

(1) Carmine Catizone served as our President until July 28, 2017.
(2) Giro DiBiase served as our Chief Executive Officer from July 28, 2017 until February 28, 2018.
(3) Consisted of fees paid for misc. management, business development, administrative, accounting, and operational services rendered on a consulting basis.

 

Equity Awards

 

No equity awards were granted to our named executive officers during the years ended December 31, 2017 or 2016.

 

Compensation of Directors

 

The following table sets forth information concerning the compensation awarded to, earned by, or paid to the following directors for all services rendered in all capacities to our company and its subsidiaries for the year ended December 31, 2017. This table includes any person who served as a director at any time during fiscal 2017.

 

Except as described below, we have not entered into any employment or compensation agreements or arrangements with Messrs. Hanumara and Mitta for their services as directors of our company.

 

Director Compensation

 

Name   Fees earned or paid in cash
($)
  Total
($)
Nevan Hanumara   12,500   12,500 (1)
Vidhydhar Mitta   0   0  

 

(1) Consists of fees paid for misc. technical, program management, administrative, and general operational services rendered on a consulting basis.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management

 

The following table and footnotes thereto sets forth information regarding the number of shares of common stock beneficially owned by (i) each director and named executive officer of our company, (ii) each person known by us to be the beneficial owner of 5% or more of its issued and outstanding shares of common stock, and (iii) all executive officers and directors of the Company as a group. In calculating any percentage in the following table of common stock beneficially owned by one or more persons named therein, the following table assumes 40,633,328 shares of common stock issued and outstanding. Unless otherwise further indicated in the following table, the footnotes thereto and/or elsewhere in this report, the persons and entities named in the following table have sole voting and sole investment power with respect to the shares set forth opposite the shareholder’s name, subject to community property laws, where applicable. Unless as otherwise indicated in the following table and/or the footnotes thereto, the address of each person beneficially owning in excess of 5% of the outstanding common stock named in the following table is: 705 Cambridge Street, Cambridge, MA 02141.

 

 

 

  29  
 

 

Name and Address of Beneficial Owner   Amount and
Nature of
Beneficial
Ownership (1)
    Percent
of Class (1)
 
Named Executive Officers and Directors                
Nevan Hanumara     3,000,000       7.38 %
Vidhydhar Mitta     1,736,843       4.27 %
Patrick Phillips     1,500,000       3.69 %
Carmine Catizone     1,072,550       2.64 %
Giro DiBiase     3,000,000       7.38 %
Named Executive Officers and Directors as a Group (5 Persons)     10,309,393       25.37 %
5% Beneficial Holders (Not Named Above)                

Nutan Dave

705 Cambridge Street

Cambridge, MA 02141

    3,000,000       7.48 %

 

(1) Under Rule 13d-3 of the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the above table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on the date of this report.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Certain Relationships and Related Transactions

 

Under the terms of the OXYS SEA we acquired 100% of the issued and outstanding voting shares of OXYS in exchange for 34,687,244 shares of our Common Stock. In addition, 1,500,000 outstanding shares of our Common Stock were cancelled and our management was changed to Mr. DiBiase who also served in management of OXYS. The OXYS SEA was effective on July 28, 2017.

 

Also, OXYS entered into a Consulting Agreement dated June 15, 2017 with Pasquale Catizone, one of our principal shareholders, to provide consulting services during the transition. The agreement terminated 120 days from the closing of the OXYS SEA. OXYS paid to Mr. Catizone $25,000 upon the execution of the agreement and an additional $50,000 upon the closing of the OXYS SEA.

 

On July 28, 2017, our Board of Directors approved the payment of $2,500 in consulting fees per month to Mr. Hanumara.

 

Effective February 28, 2018, our Board of Directors approved the payment of $5,000 in consulting fees per month to Mr. Hanumara.

 

Upon the Closing of the HereLab SEA, we issued to Mr. Phillips 1,500,000 shares of our Common Stock and appointed Mr. Phillips as a director of the Company.

 

We have entered into a Consulting Agreement dated August 22, 2017 with Mr. Phillips pursuant to which we have agreed to pay him $7,000 per month in consulting fees. The term of the agreement is month-to-month for one year.

 

We entered into a lease agreement on August 1, 2017 with the DiBiase family, which began on January 1, 2018 and will terminate on December 31, 2018. Pursuant to the lease, we are obligated to pay the DiBiase family monthly installments of $2,000 for a total lease payment of $24,000 in 2018. Giro DiBiase was our CEO and Interim CFO and is still a shareholder and involved in management of OXYS on a consulting basis.

 

 

 

 

 

 

  30  
 

 

Item 14. Principal Accountant Fees and Services

 

Fees Paid

 

Audit Fees

 

The aggregate fees billed for professional services rendered by our principal accountants for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the year ended December 31, 2017 were $21,500 and $15,000 for the period ended December 31, 2016.

 

Audit-Related Fees

 

There were no fees billed for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of the financial statements, other than those previously reported above, for the year ended December 31, 2017 were $0 and $0 for year ended December 31, 2016.

 

Tax Fees

 

There were no fees billed for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning in the years ended December 31, 2017 and 2016.

 

All Other Fees

 

There were no other fees billed for products or services provided by the principal accountants, other than those previously reported above, for the years ended December 31, 2017 and 2016.

 

Audit Committee

 

We do not have an Audit Committee, therefore the Board of Directors has considered whether the non-audit services provided by our auditors to us are compatible with maintaining the independence of our auditors and concluded that the independence of our auditors is not compromised by the provision of such services. Our Board of Directors pre-approves all auditing services and permitted non-audit services, including the fees and terms of those services, to be performed for us by our independent auditor prior to engagement.

 

 

 

 

 

  31  
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

Financial Statements

 

The following financial statements are filed with this report:

 

Reports of Independent Registered Public Accounting Firms

 

Balance Sheets at December 31, 2017 and 2016

 

Statements of Operations for the year ended December 31, 2017 and for the Period from August 4, 2016 (Date of Inception) to December 31, 2016

 

Statements of Changes in Stockholders’ Deficit for the year ended December 31, 2017 and for the Period from August 4, 2016 (Date of Inception) to December 31, 2016

 

Statements of Cash Flows for the year ended December 31, 2017 and for the Period from August 4, 2016 (Date of Inception) to December 31, 2016

 

Notes to Financial Statements

 

Exhibits

 

The following exhibits are included with this report:

 

Incorporated by Reference      
Exhibit
Number
  Exhibit Description   Form   File No.   Exhibit   Filing 
Date
  Filed 
Here-
with
2.1 & 10.1   Securities Exchange Agreement dated March 16, 2017, by and among Gotham Capital Holdings, Inc., OXYS Corp. and the Shareholders of OXYS Corp.   8-K   000-50773   2.1   8/3/17    
2.2 & 10.2   Agreement and Plan of Merger dated July 10, 2017   8-K   000-50773   2.1   11/1/17    
2.3 & 10.3   Securities Exchange Agreement dated December 14, 2017, with HereLab, Inc.   8-K   000-50773   2.1   12/19/17    
3.1   Nevada Articles of Incorporation for IIOT-OXYS, Inc.   8-K   000-50773   3.1   11/1/17    
3.2   Bylaws for IIOT-OXYS, Inc.   8-K   000-50773   3.2   11/1/17    
3.3   Nevada Articles of Merger dated July 14, 2017   8-K   000-50773   3.3   11/1/17    
3.4   New Jersey Certificate of Merger dated October 26, 2017   8-K   000-50773   3.4   11/1/17    
3.5   Articles of Exchange   8-K   000-50773   2.1   1/12/18    
4.1 & 10.4   2017 Stock Incentive Plan   8-K   000-50773   4.1   12/19/17    
10.5   Consulting agreement with Pasquale Catizone dated June 15, 2017   8-K   000-50773   99.1   6/16/17    
10.6   Indemnification Agreement dated July 28, 2017   8-K   000-50773   99.1   8/3/17    
10.7   Non-Exclusive Patent License Agreement with MIT dated February 5, 2018                   X
10.8   Technology Cooperation Agreement with Sigma Labs, Inc. dated effective June 13, 2017                   X
10.9   Form of 12% Senior Secured Convertible Note   8-K   000-50773   99.1   2/13/18    
10.10   Form of Securities Purchase Agreement   8-K   000-50773   99.2   2/13/18    
10.11   Form of Security and Pledge Agreement   8-K   000-50773   99.3   2/13/18    
10.12   Form of Warrant   8-K   000-50773   99.4   2/13/18    
10.13   Consulting Agreement with Patrick Phillips dated August 22, 2017                   X

 

 

 

 

  32  
 

 

Incorporated by Reference      
Exhibit
Number
  Exhibit Description   Form   File No.   Exhibit   Filing 
Date
  Filed 
Here-
with
14.1   Code of Ethics                   X
21.1   List of Subsidiaries                   X
31.1   Rule 13a-14(a) Certification by Principal Executive Officer and Principal Financial Officer                   X
32.1   Rule 13a-14(a) Certification by Principal Financial Officer and Principal Financial Officer                   X
101.INS   XBRL Instance Document                   X
101.SCH   XBRL Taxonomy Extension Schema Document                   X
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document                   X
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document                   X
101.LAB   XBRL Taxonomy Extension Label Linkbase Document                   X
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document                   X

 

 

Item 16. Form 10-K Summary

 

None.

 

 

 

 

 

 

 

SIGNATURE PAGE FOLLOWS

 

 

  33  
 


SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  IIOT-OXYS, INC.
     
Date: April 17, 2018 By: /s/ Nevan Hanumara
    Nevan Hanumara, Chief Executive Officer and Interim Chief Financial Officer
    (Principal Executive Officer and Principal Financial Officer)

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

 

NAME   TITLE   DATE
         
/s/ Nevan Hanumara   Director   April 17, 2018
Nevan Hanumara        
         
/s/ Patrick Phillips   Director   April 17, 2018
Patrick Phillips        
         
/s/ Vidhyadhar Mitta   Director   April 17, 2018
Vidhyadhar Mitta        

 

 

  34  
 

 

INDEX TO FINANCIAL STATEMENTS

 

    Page
Reports of Independent Registered Public Accounting Firms   F-2
     
Balance Sheets at December 31, 2017 and 2016   F-4
     
Statements of Operations for the year ended December 31, 2017 and for the Period from August 4, 2016 (Date of Inception) to December 31, 2016   F-5
     
Statements of Changes in Stockholders’ Deficit for the year ended December 31, 2017 and for the Period from August 4, 2016 (Date of Inception) to December 31, 2016   F-6
     
Statements of Cash Flows for the year ended December 31, 2017 and for the Period from August 4, 2016 (Date of Inception) to December 31, 2016   F-7
     
Notes to Financial Statements   F-8

 

 

 

 

 

 

 

 

 

  F- 1  
 

 

 

 

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Oxys Corporation

705 Cambridge Street

Cambridge, MA 02142

 

We have audited the accompanying balance sheet of Oxys Corporation as of December 31, 2016, and the related statements of operations, stockholders' equity, and cash flows for the period from inception (August 4, 2016) to December 31, 2016. Oxys Corporation's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Oxys Corporation as of December 31, 2016, and the results of their operations and their cash flows for the period from inception (August 4, 2016) to December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Connolly, Grady & Cha, P. C.            

Certified Public Accountants

 

Philadelphia, Pennsylvania

 

April 27, 2017

 

 

Member of the American Institute of Certified Public Accountants,

Public Company Accounting Oversight Board, and Pennsylvania Institute of Certified Public Accountants

 

 

1608 Walnut Street, Suite 1703, Philadelphia, PA 19103 (215) 735-4580 Fax (215) 735-4584 www.cgcpc.corn

 

  2  
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of IIOT-OXYS, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of IIOT-OXYS, Inc. (the Company) as of December 31, 2017, and the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

 

Consideration of the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2 to the financial statements, the Company has incurred net losses since inception and has negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Haynie & Company

 

We have served as the Company’s auditor since 2018.

 

Salt Lake City, Utah

April 17, 2018

 

 

  F- 3  
 

 

IIOT-OXYS, Inc. and Subsidiary

Consolidated Balance Sheets

As of December 31, 2017 and December 31, 2016

 

    December 31, 2017     December 31, 2016  
             
Assets                
Current Assets                
Cash and Cash Equivalents   $ 60,863     $ 481,841  
Cash - Escrow     1,782       52,659  
Accounts Receivable     39,800        
Prepaid Insurance     14,778        
Inventory           10,035  
Total Current Assets     117,223       544,535  
                 
Other Assets                
Other Asset - Licensing Agreement     1,000        
Total Other Assets     1,000        
                 
Total Assets   $ 118,223     $ 544,535  
                 
Liabilities and Stockholders' Equity                
Current Liabilities                
Accounts Payable   $ 38,357     $  
Credit Card Payable     203        
Due to Stockholder     1,000       1,000  
Total Current Liabilities     39,560       1,000  
                 
Total Liabilities     39,560       1,000  
                 
Commitments and Contingencies                
Stockholders' Equity                
Preferred stock $0.001 par value, 10,000,000 shares authorized; 0 issued and outstanding at December 31, 2017 and 2016            
Common stock $0.001 par value, 190,000,000 shares authorized; 38,983,327 issued and outstanding at December 31, 2017; 33,197,769 shares issued and outstanding at December 31, 2016     38,983       9,957  
Additional Paid in Capital     1,579,401       542,204  
Accumulated Deficit     (1,539,721 )     (8,626 )
                 
Total Stockholders' Equity     78,663       543,535  
Total Liabilities and Stockholders' Equity   $ 118,223     $ 544,535  

 

See accompanying notes to audited financial statements.

 

 

 

  F- 4  
 

 

IIOT-OXYS, Inc. and Subsidiary

Consolidated Statements of Operations

For the Year Ended December 31, 2017 and the

Period from Inception (August 4, 2016) to December 31, 2016

 

    For the Year Ended December 31, 2017    

For the Period

from Inception (August 4, 2016) to December 31, 2016

 
Revenues                
Sales   $ 39,800     $  
Cost of Sales     47,887        
Gross Profit     (8,087 )      
                 
Expenses                
Demo Parts     34,393        
Bank Service Charges     648       82  
Office Expenses     17,090       100  
Organization costs     23,808       1,000  
Insurance     8,372        
Professional     1,416,527       7,162  
Travel     22,158       282  
Total Expenses     1,522,996       8,626  
                 
Other Income (Expenses)                
Interest Expense     (12 )      
Total Other Income (Expense)     (12 )      
                 
Net (Loss) Before Income Taxes     (1,531,095 )     (8,626 )
                 
Income Tax Benefit (Expense)            
                 
Net (Loss)   $ (1,531,095 )   $ (8,626 )
                 
Loss per Common Share     (0.0422 )     (0.0003 )
                 
Weighted Average Number of Shares Outstanding - Basic and Diluted     36,241,821       31,768,822  

 

See accompanying notes to audited financial statements.

 

 

 

  F- 5  
 

 

IIOT-OXYS, Inc. and Subsidiary

Statements of Changes in Stockholders' Equity

For the Year Ended December 31, 2017 and the

Period from Inception (August 4, 2016) to December 31, 2016

 

      Common Stock       Additional Paid-In       Accumulated       Total Stockholders'  
      Shares       Amount       Capital       (Deficit)       Equity  
                                         
Balances, August 4, 2016         $     $     $     $  
                                         
Issuance of common stock at $1.00 per share     9,161       9       9,152             9,161  
                                         
Stock split 3,000 shares for 1 share of October 8, 2016 par $0.001     27,472,819       8,233       (8,233 )            
                                         
Issuance of common stock at $0.095 per share     5,715,789       1,715       541,285             543,000  
                                         
Net (loss)                       (8,626 )     (8,626 )
                                         
Balance December 31, 2016     33,197,769     $ 9,957     $ 542,204     $ (8,626 )   $ 543,535  
                                         
Issuance of common stock at $0.095 per share     1,489,474     $ 447     $ 141,052     $     $ 141,499  
                                         
Issuance of common stock at $1.15 to $1.90 per share     530,000       530       994,970             995,500  
                                         
To reflect effect of acquisition (reverse merger/ recapitalization)     3,766,084       28,049       (98,825 )           (70,776 )
                                         
Net (loss)                       (1,531,095 )     (1,531,095 )
                                         
Balance December 31, 2017     38,983,327     $ 38,983     $ 1,579,401     $ (1,539,721 )   $ 78,663  

 

See accompanying notes to audited financial statements.

 

 

 

 

  F- 6  
 

 

IIOT-OXYS, Inc. and Subsidiary

Consolidated Statement of Cash Flows

For the Year Ended December 31, 2017

and the Period from Inception (August 4, 2016) to December 31, 2016

 

    For the Year Ended December 31, 2017    

For the Period

from Inception (August 4, 2016) to December 31, 2016

 
             
Cash Flows from Operating Activities:                
Net (Loss)   $ (1,531,095 )   $ (8,626 )
                 
Adjustments to reconcile net loss to net cash (used) by operating activities:                
                 
Non-Cash Stock Compensation     995,500        
                 
Changes in operating assets and liabilities:                
(Increase) Decrease in:                
Accounts Receivable     (39,800 )      
Inventory     10,035       (10,035 )
Prepaid Insurance     (14,778 )      
Escrow     50,877       (52,659 )
Increase (Decrease) in:                
Accounts Payable     38,357        
Credit Card Payable     203        
Due to Stockholder           1,000  
Net Cash (Used) by Operating Activities     (490,701 )     (70,320 )
                 
Cash Flows from Investing Activities:                
Cash Paid in Conjunction with Licensing Agreement     (1,000 )      
Net Cash (Used) by Investing Activities     (1,000 )      
                 
Cash Flows from Financing Activities:                
Issuance of Common Stock, Net of Costs     70,723       552,161  
Net Cash Provided by Financing Activities     70,723       552,161  
                 
Net (Decrease) Increase in Cash and Cash Equivalents     (420,978 )     481,841  
                 
Cash and Cash Equivalents at Beginning of Period     481,841        
                 
Cash and Cash Equivalents at End of Period   $ 60,863     $ 481,841  
                 
Supplemental Information:                
                 
Interest paid during the period   $ 12     $  
Taxes paid during the period   $     $  

 

See accompanying notes to audited financial statements.

 

 

 

  F- 7  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

1. NATURE OF OPERATIONS

 

On July 28, 2017, IIOT-OXYS, Inc., a Nevada corporation (the “ Company ”) (previously known as Gotham Capital Holdings, Inc.), executed and closed the Securities Exchange Agreement dated effective March 16, 2017, between the Company, OXYS Corporation, a Nevada corporation (“ OXYS ”), and the shareholders of OXYS and changed its name to “IIOT-OXYS, Inc.” As a result of the Closing, the Company issued 34,687,244 shares on a pro rata basis to the shareholders of OXYS, and OXYS became a wholly owned subsidiary of the Company. In addition, the Company cancelled 1,500,000 outstanding shares held by principal shareholders of the Company, which resulted in a total of 38,453,328 shares issued and outstanding upon completion of the Closing.

 

OXYS Corporation was incorporated on August 4, 2016 in Nevada. It maintains its principal office in Massachusetts at 705 Cambridge St., Cambridge, MA 02142.

 

The Company was only recently formed and is currently devoting substantially all its efforts in identifying, developing and marketing engineered products, software and services for applications in the Industrial Internet which involves collecting and processing data collected from a wide variety of industrial systems and machines.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company's financial statements are prepared on the accrual method of accounting. The accounting and reporting policies of the Company conform with generally accepted accounting principles (GAAP).

 

As a result of the change in control resulting from the closing of the Securities Exchange Agreement transaction, OXYS has assumed the public reporting obligations of the public company. Accordingly, the 2016 comparative financial statements are those of OXYS.

 

Principles of Consolidation

 

The consolidated financial statements for December 31, 2017 include the accounts of IIOT-OXYS, Inc., and OXYS Corporation. All significant intercompany balances and transactions have been eliminated.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. The Company determines the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. The allowance for doubtful accounts at December 31, 2017 and 2016 was $0.

 

Revenue Recognition

 

The Company’s revenue is derived primarily from providing services under contractual agreements. The Company recognizes revenue in accordance with ASC Topic No. 605 based on the following criteria: Persuasive evidence of an arrangement exists, services have been rendered, the price is fixed or determinable, and collectability is reasonably assured.

 

 

 

  F- 8  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Reclassification

 

Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation in the current-period financial statements.

 

Use of Estimates

 

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.

 

Fair Value of Financial Instruments

 

Fair Value of Financial Instruments - The Company accounts for fair value measurements in accordance with accounting standard ASC 820-10-50, “Fair Value Measurements.” This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

 

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

 

The fair value of certain of our financial instruments including cash and cash equivalents, cash escrow and due to stockholder approximate their carrying amounts because of the short-term maturity of these instruments.

 

Income Taxes

 

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred taxes are recognized for operating losses that are available to offset future taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized.

 

The Company adopted the provisions of FASB ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns. FASB ASC 740-10-25 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. The Company's tax returns are subject to tax examinations by U.S. federal and state authorities until respective statute of limitation. Currently, the 2016 tax year is open and subject to examination by taxing authorities. However, the Company is not currently under audit nor has the Company been contacted by any of the taxing authorities. The Company does not have any accruals for uncertain tax positions at December 31, 2017 and 2016. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.

 

 

 

  F- 9  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all unrestricted highly liquid investments with an original maturity of three months or less to be cash equivalents.

 

Concentration of Risk

 

Financial instruments that potentially expose the Company to concentrations of risk consist primarily of cash and cash equivalents and cash-escrow, which are generally not collateralized. The Company’s policy is to place its cash and cash equivalents with high quality financial institutions, in order to limit the amount of credit exposure. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC), up to $250,000. At December 31, 2017 and 2016, the Company had $0 and $231,841 in excess of the FDIC insurance limit, respectively.

 

Inventory

 

Inventory consists primarily of demo equipment and is recorded at the lower of cost (first-in, first out method) or market.

 

Earnings (Loss) Per Share

 

The Company computes net earnings (loss) per share under Accounting Standards Codification subtopic 260-10, "Earnings Per Share" ("ASC 260-1 O"). Basic earnings or loss per share ("EPS") is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company was only recently formed, has incurred continuing operating losses and has an accumulated deficit of $1,539,721 and $8,626 at December 31, 2017 and 2016, respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

 

Management believes that it will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations through December 31, 2018 by generating revenues and through additional borrowings as needed. However, there can be no assurance that the Company will be able to generate sufficient liquidity to maintain its operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

3. RECENT ACCOUNTING PRONOUNCEMENTS

 

In May 2016, accounting guidance was issued to clarify the not yet effective revenue recognition guidance issued in May 2014. This additional guidance does not change the core principle of the revenue recognition guidance issued in May 2014, rather, it provides clarification of accounting for collections of sales taxes as well as recognition of revenue (i) associated with contract modifications, (ii) for noncash consideration, and (iii) based on the collectability of the consideration from the customer. The guidance also specifies when a contract should be considered "completed" for purposes of applying the transition guidance. The effective date and transition requirements for this guidance are the same as the effective date and transition requirements for the guidance previously issued in 2014, which is effective for interim and annual periods beginning on or after December 15, 2017. The Company will adopt the new standard on January 1, 2018 and believes adoption will not have any material impact on its financial statements.

 

 

 

  F- 10  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

3. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (" ROU ") model that requires a lessee to record a ROU asset and a lease liability on the consolidated balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the potential impact of the adoption of this standard.

 

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update revise the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The amendments are effective for annual reporting periods after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard.

 

Other Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

4. INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC Topic No. 740. This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. Income tax returns open for examination by the Internal Revenue Service consist of tax years ended December 31, 2016 and 2017.

 

The Company has available at December 31, 2017, unused operating loss carryforwards of approximately $1,539,721, which may be applied against future taxable income and which expire in various years through 2036. However, if certain substantial changes in the Company’s ownership should occur, there could be an annual limitation on the amount of net operating loss carryforward which can be utilized. The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation allowance equal to the tax effect of the loss carryforwards and other temporary differences of approximately $598,181 and $3,351 at December 31, 2017 and 2016, respectively, and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The change in the valuation allowance is approximately $594,830 and $3,351 for the years ended December 31, 2017 and 2016, respectively.

 

 

 

  F- 11  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

4. INCOME TAXES (Continued)

 

Deferred tax assets are comprised of the following:

 

Deferred tax assets:   2017     2016  
NOL carryover   $ 598,181     $ 3,351  
Valuation allowance     (598,181 )     (3,351 )
Net deferred tax asset   $     $  

 

The reconciliation of the provisions for income taxes computed at the U.S. federal statutory tax rate (34%) to the Company’s effective tax rate for the periods ended December 31, 2017 and 2016 is as follows:

 

    2017     2016  
Book Loss   $ 520,572     $ 2,933  
State taxes     74,258       418  
Change in valuation allowance     (594,830 )     (3,351 )
Provision for Income Taxes   $     $  

 

5. COMMITMENTS AND CONTINGENCIES

 

The Company entered into a consulting agreement with DATHNA Partners, LLC on October 1, 2017 in which 10,000 shares were earned by the consultant on the first day of each month for the period of the contract (October, November and December of 2017). The shares were valued at fair market value and are accounted for as issued and outstanding at December 31, 2017 although the certificates representing the 30,000 shares were subsequently issued by the Company in January of 2018.

 

The Company also entered into a consulting agreement with Draco Financial, LLC in which the Company agreed to issue the consultant 500,000 shares of common stock. The shares were valued at fair marked valued and are accounted for as issued and outstanding at December 31, 2017 although the certificates representing the shares were subsequently issued in January and February of 2018 of 350,000 and 150,000, respectively.

 

The Company entered into a lease agreement with a related party on August 1, 2017 which begins on January 1, 2018 and will terminate on December 31, 2018. The Company shall pay the landlord monthly installments of $2,000 for a total lease payment of $24,000 in 2018.

 

6. STOCKHOLDERS' EQUITY

 

Common Stock

 

The Company has authorized 190,000,000 shares of $0.001 par value common stock and 10,000,000 shares of $0.001 par value preferred stock. At December 31, 2017 and 2016 the Company had 38,983,327 and 33,197,769 shares of common stock and no shares of preferred stock issued and outstanding, respectively.

 

Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratable in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefore. In the event of liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to share pro rata in all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.

 

 

 

  F- 12  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

6. STOCKHOLDERS' EQUITY (Continued)

 

On March 16, 2017, the Board of Directors and a majority of the shareholders approved the IIOT-OXYS, Inc. 2017 Stock Awards Plan, (the “ Plan ”). The Plan provided for granted incentive stock options, options that do not constitute incentive stock options, stock appreciation rights, restricted stock awards, phantom stock awards, or any combination of the foregoing, as is best suited to the particular circumstances. The Plan was effective upon its adoption by the Board. The aggregate number of common shares that may be issued under the Plan were 7,000,000 common shares. No further awards were to be granted under the Plan after ten years following the effective date. The Plan was to remain in effect until all awards granted under the Plan had been satisfied or expired. This Plan was terminated and replaced by the 2017 Stock Inventive Plan (the “ 2017 Plan ”) on December 14, 2017 (the “ Effective Date ”) as approved by the Board of Directors. Awards may be made under the 2017 Plan for up to 4,500,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the 2017 Plan. No awards can be granted under the 2017 Plan after the expiration of 10 years from the Effective Date, but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards. With the approval of the 2017 Plan, the Board terminated the 2017 Stock Awards Plan with no awards having been granted thereunder.

 

On July 28, 2017, the Company executed and closed the Securities Exchange Agreement dated effective March 16, 2017, between the Company, OXYS, and the shareholders of OXYS and changed its name to IIOT-OXYS, Inc. As a result of the closing, the Company issued 34,687,244 shares on a pro rata basis to the shareholders of OXYS, and OXYS became a wholly owned subsidiary of the Company. In addition, the Company cancelled 1,500,000 outstanding shares held by principal shareholders of the Company, which resulted in a total of 38,453,328 shares issued and outstanding upon completion of the Closing.

 

On December 14, 2017, the Company entered into a Securities Exchange Agreement dated December 14, 2017, between the Company, OXYS, and HereLab, Inc., a Delaware corporation (“ HereLab ”), and the shareholders of HereLab. Upon completion of the closing of the Exchange Agreement, the Company will issue an aggregate of 1,650,000 shares of its common stock on a pro rata basis to the two shareholders of HereLab and HereLab will become a wholly owned subsidiary of the Company.

 

7. EARNINGS PER SHARE

 

The following table sets forth the composition of the weighted average shares (denominator) used in the basic per share computation for the year ended December 31, 2017 and for the period from inception (August 4, 2016) to December 31, 2016.

 

    For the year ended December 31, 2017    

For the period

from inception

(August 4, 2016) to December 31, 2016

 
Net Loss   $ (1,531,095 )   $ (8,626 )
                 
Weighted average share outstanding basic     36,241,821       31,768,822  
                 
Basic and diluted loss per share   $ 0.0422     $ 0.0003  

 

 

 

  F- 13  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

8. RELATED PARTIES

 

For the years ended December 31, 2017 and 2016, the amount due to stockholders was $1,000. The balance is payable to two stockholders related to opening bank balances.

 

In August 2017 the Company entered into a lease agreement with a stockholder of the Company and paid monthly installments of $2,000 between August and December 2017. For the years ended December 31, 2017 and 2016, rent expense paid to the stockholder amounted to $10,000 and $0, respectively.

 

The Company entered into a verbal arrangement with a company controlled by a shareholder to provide administrative services. Total payments to the related party for administrative services amounted to approximately $33,000 and $0, as of December 31, 2017 and 2016, respectively.

 

For the years ended December 31, 2017 and 2016, professional expense paid to directors and officers of the Company amounted to $40,000 and $0, respectively. For the years ended December 31, 2017 and 2016, travel expense reimbursed to directors and officers of the Company amounted to approximately $5,000 and $0, respectively.

 

9. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined there are the following items to disclose:

 

On January 18, 2018, the Board of Directors of the Company approved a non-public offering of up to $1,000,000 aggregate principal amount (the “ Offering ”) of its 12% Senior Secured Convertible Notes (the “ Notes ”). The Notes are convertible, in whole or in part, into shares of the Company’s Common Stock, at any time at a rate of $0.65 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The Notes bear interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The Notes mature January 15, 2020.

 

The Notes are governed by a Securities Purchase Agreement (the “SPA”) and are secured by all of the assets of the Company pursuant to a Security and Pledge Agreement. In addition to the issuance of the Notes in the Offering, the Company’s Board of Directors approved, as part of the Offering, the issuance of warrants to purchase one share of the Company’s Common Stock for 50% of the number of shares of Common Stock issuable upon conversion of each Note (the “Warrants”). Each Warrant is immediately exercisable at $0.75 per share and expires on January 15, 2023.

 

On January 22, 2018, the Company entered into a SPA and Security and Pledge Agreement with its first investor in the Offering and issued a Note to the investor in the principal amount of $500,000. Subscription funds were received by the Company from the investor on February 7, 2018. In addition to the Note, the Company issued to the investor 384,615 Warrants.

 

On January 11, 2018, the closing of the Securities Exchange Agreement dated December 14, 2017, between the Company, HereLab, Inc., and the shareholders of HereLab was held. Upon completion of the closing, the Company issued an aggregate of 1,650,000 shares of its Common Stock on a pro rata basis to the two shareholders of HereLab, and HereLab became a wholly owned subsidiary of the Company.

 

The following unaudited pro forma condensed combined balance sheet aggregates the balance sheet of IIOT-OXYS, Inc., a Nevada corporation (the “Company”) as of December 31, 2017 and the balance sheet of HereLab, Inc., a Delaware corporation (“HereLab”) as of December 31, 2017 accounting for the transaction as an acquisition with the issuance of an aggregate of 1,650,000 shares of common stock of the Company to the shareholders of HereLab in exchange for all of the outstanding common shares of HereLab, giving effect to the transaction, as if the transaction had occurred as of the end of the period.

 

 

 

  F- 14  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

9. SUBSEQUENT EVENTS (Continued)

 

The following unaudited pro forma condensed combined statement of operations combines the results of operations of the Company for the year ending December 31, 2017 and the results of operations of HereLab for the period from inception (February 27, 2017) to December 31, 2017 as if the transaction had occurred at the beginning of the periods.

 

The pro forma condensed combined financial statements should be read in conjunction with the separate financial statements and related notes thereto of the Company and HereLab. These pro forma financial statements are not necessarily indicative of the combined financial position, had the acquisition occurred at the end of the periods indicated above, or the combined results of operations which might have existed for the periods indicated or the results of operations as they may be in the future.

 

IIOT-OXYS, INC.

AND HERELAB, INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEET

[ Unaudited ]

 

December 31, 2017

 

ASSETS

 

    IIOT-OXYS,     HereLab,              
    Inc.     Inc.     Pro Forma        
    12/31/2017     12/31/2017     Increase     Pro Forma  
    [Company]     [HereLab]     (Decrease)     Combined  
ASSETS:                                
Cash   $ 60,863     $ 119     $     $ 60,982  
Cash in Escrow     1,782                   1,782  
Accounts Receivable     39,800       3,000             42,800  
Prepaid Insurance     14,778                   14,778  
Licensing Agreement     1,000                   1,000  
                      1,650   [A]      
Investment in Subsidiary                 (1,650 ) [B]    
Total Assets   $ 118,223     $ 3,119     $     $ 121,342  
                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                
                                 
LIABILITIES:                                
Accounts Payable   $ 38,357     $     $     $ 38,357  
Credit Card Payable     203                   203  
Due to Stockholders     1,000                   1,000  
Income Tax Payable           3,332             3,332  
Total Liabilities     39,560       3,332               42,892  
STOCKHOLDERS’ EQUITY (DEFICIT):                                
                      1,650   [A]      
Common stock     38,983       33       (33 ) [B]   40,633  
Additional paid in capital     1,579,401       2,673       (4,536 ) [B]   1,577,538  
Accumulated Deficit     (1,539,721 )     (2,919 )     2,919 [B]   (1,539,721 )
Total Stockholders’ Equity (Deficit)     78,663       (213 )           78,450  
    $ 118,223     $ 3,119     $     $ 121,342  

 

See Notes To Unaudited Pro Forma Condensed Financial Statements.

 

 

 

  F- 15  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

9. SUBSEQUENT EVENTS (Continued)

 

IIOT-OXYS, INC.

AND HERELAB, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

 

[ Unaudited ]

 

   

IIOT- OXYS Inc.
For the Year

Ended

    HereLab, Inc. For the Period Since Inception
(February 27, 2017)
    Pro Forma        
    12/31/2017     to 12-31-2017     Increase     Pro Forma  
    [Company]     [HereLab]     (Decrease)     Combined  
                         
REVENUE   $ 39,800     $ 27,759     $ (17,304 ) [C] $ 50,255  
                                 
COST OF SALES     47,887                   47,887  
                                 
GROSS (LOSS) PROFIT     (8,087 )     27,759       (17,304 )     2,368  
                                 
                                 
EXPENSES:                                
Selling, General and Administrative     106,467       13,609             120,076  
Professional fees     1,416,527             (17,304 ) [C]   1,399,223  
                                 
Total Expenses     1,522,996       13,609       (17,304 )     1,519,301  
                             
(LOSS) INCOME FROM OPERATIONS     (1,531,083 )     14,150             (1,516,933 )
                                 
OTHER INCOME (EXPENSE)                                
Interest expense     (12 )                 (12 )
                                 
Total Other Income (Expense)     (12 )                 (12 )
                                 
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES     (1,531,095 )     14,150             (1,516,945 )
                                 
INCOME TAX EXPENSE           (3,332 )           (3,332 )
                                 
NET (LOSS) INCOME FROM                                
CONTINUING OPERATIONS     (1,531,095 )     10,818             (1,520,277 )
DISCONTINUED OPERATIONS                        
NET (LOSS) INCOME   $ (1,531,095 )   $ 10,818     $     $ (1,520,277 )
                                 
BASIC NET (LOSS) PER COMMON SHARE (Note 4)                           $ (0.07 )

 

See Notes To Unaudited Pro Forma Condensed Financial Statements.

 

 

 

  F- 16  
 

 

IIOT-OXYS, Inc. and Subsidiary

Notes to Audited Consolidated Financial Statements

For the Fiscal Year Ended December 31, 2017

 

9. SUBSEQUENT EVENTS (Continued)

 

IIOT-OXYS, INC.

AND HERELAB, INC.

Notes to Unaudited Proforma Financial Statements

 

[A] To record the issuance of 1,650,000 shares of common stock pursuant to the Securities Exchange Agreement.

 

[B] To eliminate the common stock accounts and the prior retained earnings of HereLab, Inc.

 

[C] To eliminate the sales and expenses incurred between the Company and Herelab, Inc. during the fiscal year.

 

 

 

 

 

 

 

 

 

 

  F- 17  

 

Exhibit 10.7

 

 

 

 

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

 

 

NONEXCLUSIVE PATENT LICENSE AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

     
 

 

TABLE OF CONTENTS

 

 

RECITALS 1  
1.          Definitions 2  
2.          Grant of Rights 4  
3.          Company Diligence Obligations. 5  
4.          Royalties and Payment Terms 6  
5.          Reports and Records. 8  
6.          Patent Prosecution 9  
7.          Infringement. 10  
8.          Indemnification and Insurance. 11  
9.          No Representations or Warranties. 12  
10.       Assignment. 12  
11.       General Compliance with Laws. 12  
12.       Termination 14  
13.       Dispute Resolution 15  
14.       Miscellaneous. 16  
APPENDIX A 19  

 

 

 

 

 

 

ii

     
 

  

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

NONEXCLUSIVE PATENT LICENSE AGREEMENT

 

This Agreement, effective as of February 1, 2018 (the "EFFECTIVE DATE"), is between the Massachusetts Institute of Technology ("MIT"), a Massachusetts non-profit corporation, with a principal office at 77 Massachusetts Avenue, Cambridge, MA 02139-4307 and IIOT-OXYS, Inc. ("COMPANY"), a corporation, with a principal place of business at 705 Cambridge St. Cambridge, MA 02141.

 

RECITALS

 

WHEREAS, MIT is the owner of certain PATENT RIGHTS (as later defined herein) relating to MIT Case No. 13930, "Non-Intrusive Monitoring of Power and Other Parameters" by Al-Thaddeus Avestruz, Zachary Alan Clifford, John Jacob Cooley, and Steven B. Leeb, MIT Case No. 16022, "Non-Intrusive Monitoring," by John Sebastian Donnal, Steven B. Leeb, Jin (Jinyeong) Moon, James Paris, and Christopher James Schantz, and MIT Case No. 18553, "Noncontact Power Sensing," by John Sebastian Donnal, David Morris, Lawrence and Steven B. Leeb and has the right to grant licenses under said PATENT RIGHTS; and

 

WHEREAS, MIT desires to have the PATENT RIGHTS developed and commercialized to benefit the public and is willing to grant a license hereunder; and

 

WHEREAS, COMPANY has represented to MIT, to induce MIT to enter into this Agreement, that COMPANY shall commit itself to a thorough, vigorous and diligent program of exploiting the PATENT RIGHTS so that public utilization shall result therefrom; and

 

WHEREAS, COMPANY desires to obtain a license under the PATENT RIGHTS upon the terms and conditions hereinafter set forth; and

 

NOW, THEREFORE, MIT and COMPANY hereby agree as follows:

 

 

 

 

  1  
 

 

1.        DEFINITIONS.

 

1.1       "AFFILIATE" shall mean any legal entity (including, but not limited to, a corporation, partnership, or limited liability company) that is controlled by COMPANY. For the purposes of this definition, the term "control" means (i) beneficial ownership of at least fifty percent (50%) of the voting securities of a corporation or other business organization with voting securities or (ii) a fifty percent (50%) or greater interest in the net assets or profits of a partnership or other business organization without voting securities.

 

1.2       "COVERED" shall mean, with respect to a given product, process, method or service, that a claim of the PATENT RIGHTS would (absent a license thereunder or ownership thereof) be infringed by the making, using, selling, offering for sale, importation or other exploitation of such product, process, method or service. With respect to a claim of a pending patent application, "infringed" refers to activity that would infringe or be covered by a claim of the PATENT RIGHTS if it were contained in an issued patent.

 

1.3       "FIELD" shall mean power and load monitoring of industrial equipment in factories.

 

1.4       "LICENSED PRODUCT" shall mean any product or service that, in whole or in part:

 

(a) is COVERED by one or more issued, unexpired claims or pending claims of the PATENT RIGHTS; or

 

(b) is manufactured by using a LICENSED PROCESS or that, when used, practices a LICENSED PROCESS.

 

1.5       "LICENSED PROCESS" shall mean any process that, in whole or in part:

 

(a) is COVERED by one or more issued, unexpired claims or pending claims of the PATENT RIGHTS; or

 

(b) which uses a LICENSED PRODUCT.

 

1.6      "LICENSED SERVICE" shall mean any service that cannot be performed, in whole or in part, without the practice of at least one method or process which is COVERED by one or more issued, unexpired claims or pending claims of the PATENT RIGHTS or that uses a LICENSED PRODUCT."

 

1.7       "NET SALES" shall mean the gross amount billed by COMPANY and, as applicable, its AFFILIATES for LICENSED PRODUCTS, LICENSED PROCESSES, and LICENSED SERVICES, less the following:

 

 

 

 

  2  
 

 

(a) customary trade, quantity, or cash discounts to the extent actually allowed and taken;

 

(b) amounts repaid or credited by reason of rejection or return;

 

(c) to the extent separately stated on purchase orders, invoices, or other documents of sale, any taxes or other governmental charges levied on the production, sale, transportation, delivery, or use of a LICENSED PRODUCT or LICENSED PROCESS or LICENSED SERVICE which is paid by or on behalf of COMPANY; and

 

(d) to the extent separately stated on invoices, outbound transportation costs prepaid or allowed and costs of insurance in transit.

 

No deductions shall be made for commissions paid to individuals whether they be with independent sales agencies or regularly employed by COMPANY and on its payroll, or for cost of collections. NET SALES shall occur on the date of billing for a LICENSED PRODUCT or LICENSED PROCESS or LICENSED SERVICE. If a LICENSED PRODUCT or a LICENSED PROCESS or LICENSED SERVICE is distributed at a discounted price that is substantially lower than the customary price charged by COMPANY, or distributed for non-monetary consideration (whether or not at a discount), NET SALES shall be calculated based on the non-discounted amount of the LICENSED PRODUCT or LICENSED PROCESS or LICENSED SERVICE charged to an independent third party during the same REPORTING PERIOD or, in the absence of such sales, on the fair market value of the LICENSED PRODUCT or LICENSED PROCESS or LICENSED SERVICE.

 

Non-monetary consideration shall not be accepted by COMPANY for any LICENSED PRODUCTS or LICENSED PROCESSES or LICENSED SERVICE without the prior written consent of MIT

 

1.8       "PATENT CHALLENGE" shall mean a challenge to the validity, patentability, scope, or enforceability of any of the PATENT RIGHTS (as defined below) or otherwise opposing any of the PATENT RIGHTS.

 

1.9       "PATENT RIGHTS" shall mean:

 

(a) the United States and international patents listed on Appendix A;

 

(b) the United States and international patent applications and/or provisional applications listed on Appendix A and the resulting patents;

 

(c) any patent applications resulting from the provisional applications listed on Appendix A, and any divisionals, continuations, continuation-in-part applications, and continued prosecution applications (and their relevant international equivalents) of the patent applications listed on Appendix A and of such patent applications that result from the provisional applications listed on Appendix A, to the extent the claims are directed to subject matter specifically described in the patent applications listed on Appendix A, and the resulting patents;

 

 

 

 

  3  
 

 

(d) any patents resulting from reissues, reexaminations, or extensions (and their relevant international equivalents) of the patents described in (a), (b), and (c) above; and

 

(e) international (non-United States) patent applications and provisional applications filed after the EFFECTIVE DATE and the relevant international equivalents to divisionals, continuations, continuation-in-part applications and continued prosecution applications of the patent applications to the extent the claims are directed to subject matter specifically described in the patents or patent applications referred to in (a), (b), (c), and (d) above, and the resulting patents.

 

1.10       "REPORTING PERIOD" shall begin on the first day of each calendar quarter and end on the last day of such calendar quarter.

 

1.11       "TERM" shall mean the term of this Agreement, which shall commence on the EFFECTIVE DATE and shall remain in effect until the expiration or abandonment of all issued patents and filed patent applications within the PATENT RIGHTS, unless earlier terminated in accordance with the provisions of this Agreement.

 

1.12       "TERRITORY" shall mean worldwide.

 

2.        GRANT OF RIGHTS.

 

2.1       License Grants. Subject to the terms of this Agreement, MIT hereby grants to COMPANY for the TERM a royalty-bearing nonexclusive license under the PATENT RIGHTS to develop, make, have made, use, sell, offer to sell, lease, and import LICENSED PRODUCTS in the FIELD in the TERRITORY and to develop and perform LICENSED PROCESSES in the FIELD in the TERRITORY. COMPANY shall not have the right to enter into sublicensing agreements with respect to the PATENT RIGHTS.

 

2.2       No Additional Rights. Nothing in this Agreement shall be construed to confer any rights upon COMPANY by implication, estoppel, or otherwise as to any technology, patent, or other rights of MIT or any other entity other than the PATENT RIGHTS, regardless of whether such technology or patent rights shall be dominant or subordinate to any PATENT RIGHTS.

 

 

 

 

  4  
 

 

3.        COMPANY DILIGENCE OBLIGATIONS.

 

3.1        Diligence Requirements. COMPANY shall use diligent efforts to develop LICENSED PRODUCTS or LICENSED PROCESSES and to introduce LICENSED PRODUCTS or LICENSED PROCESSES into the commercial market; thereafter, COMPANY shall make LICENSED PRODUCTS or LICENSED PROCESSES reasonably available to the public. Specifically, COMPANY shall fulfill the following obligations:

 

(a) Within four (4) months after the EFFECTIVE DATE, COMPANY shall furnish MIT with a written research and development plan describing the major tasks to be achieved in order to bring to market a LICENSED PRODUCT or a LICENSED PROCESS or LICENSED SERVICE specifying the number of staff and other resources to be devoted to such commercialization effort.

 

(b) Within sixty (60) days after the end of each calendar year, COMPANY shall furnish MIT with a written report on the progress of its efforts during the immediately preceding calendar year to develop and commercialize LICENSED PRODUCTS or LICENSED PROCESSES, with specific reference to the diligence obligations required under this Section 3.1. The report shall also contain a discussion of intended efforts and sales projections for the year in which the report is submitted.

 

(c) COMPANY shall permit an in-plant inspection by MIT at regular intervals with at least six (6) months between each such inspection.

 

(d) All LICENSED PRODUCTS shall be subject to stringent quality control testing to ensure product performance in accordance with stated product specifications. Any time after first commercial sale, MIT reserves the right to test LICENSED PRODUCTS at random intervals to assure that quality standards have been maintained.

 

(e) COMPANY shall make a first commercial sale of a LICENSED PRODUCT and/or a first commercial performance of a LICENSED PROCESS on or before September 30, 2018.

 

(f)   COMPANY shall make NET SALES according to the following schedule:

 

2018 $100,000;
2019 $500,000;
2020 $1,000,000
2020 and each year thereafter $1,500,000.

 

 

 

 

  5  
 

 

In the event that MIT determines that COMPANY (or an AFFILIATE) has failed to fulfill any of its obligations under this Section 3.1, then MIT may treat such failure as a material breach in accordance with Section 12.3(b).

 

4.        ROYALTIES AND PAYMENT TERMS.

 

4.1        Consideration for Grant of Rights.

 

(a) License Issue Fee and Patent Cost Reimbursement. COMPANY shall pay to MIT, within thirty (30) days of invoicing, a license issue fee of ten thousand dollars ($10,000), and, in accordance with Section 6.2, shall reimburse MIT for its actual expenses incurred as of the EFFECTIVE DATE in connection with obtaining the PATENT RIGHTS. These payments are nonrefundable.

 

(b) License Maintenance Fees. COMPANY shall pay to MIT the following license maintenance fees on the dates set forth below:

 

January 1, 2019   $20,000
January 1, 2020   $40,000
and each January 1 of every year thereafter   $60,000

 

This annual license maintenance fee is nonrefundable; however, the license maintenance fee may be credited to running royalties subsequently due on NET SALES earned during the same calendar year, if any. License maintenance fees paid in excess of running royalties due in such calendar year shall not be creditable to amounts due for future years.

 

(c) Running Royalties. COMPANY shall pay to MIT a running royalty of two percent (2.0%) of NET SALES made in the calendar years 2018, 2019, and 2020. COMPANY shall pay to MIT a running royalty of 4.0% of NET SALES made in the calendar year 2021 and every calendar year thereafter through the TERM. Running royalties shall be payable for each REPORTING PERIOD and shall be due to MIT within sixty (60) days of the end of each REPORTING PERIOD.

 

(d) Consequences of a PATENT CHALLENGE. In the event that (i) COMPANY or any of its AFFILIATES brings a PATENT CHALLENGE against MIT, or (ii) COMPANY or any of its AFFILIATES assists another party in bringing a PATENT CHALLENGE against MIT (except as required under a court order or subpoena), and (iii) MIT does not choose to exercise its rights to terminate this Agreement pursuant to Section 12.4, then all payments due under this Article 4 shall be doubled for the remainder of the term of the Agreement. In the event that such a PATENT CHALLENGE is successful, COMPANY will have no right to recoup any payments made during the period of challenge. In the event that a PATENT CHALLENGE is unsuccessful, COMPANY shall reimburse MIT for all reasonable legal fees and expenses incurred in its defense against the PATENT CHALLENGE.

 

 

 

 

  6  
 

 

(e) No Multiple Royalties. If the manufacture, use, lease, or sale of any LICENSED PRODUCT or the performance of any LICENSED PROCESS is covered by more than one of the PATENT RIGHTS, multiple royalties shall not be due.

 

4.2        Payments.

 

(a) Invoices. All invoices issued by MIT under this Agreement shall be addressed to COMPANY as follows, or as otherwise provided by COMPANY in writing to MIT:

 

IIoT-OXYS, Inc.

705 Cambridge St.
Cambridge, MA 02141

Attention to:

Giro DiBiase, CEO
giro@oxyscorp.com

 

(b) Method of Payment. All payments under this Agreement shall be made payable to "Massachusetts Institute of Technology" and sent to the address identified on the invoice received. Each payment should reference this Agreement and identify the obligation under this Agreement that the payment satisfies. Unless otherwise stated on the invoice, payments sent by wire transfer shall be paid to:

 

Account Holder: Massachusetts Institute of Technology

Bank Account # 004632424694

Bank Name: Bank of America, NA, 100 Federal Street, Boston, MA 02110

Swift # BOFAUS3N

WIRE Routing (ABA) # 026 009 593

Bank Contact: Christine Brouillard (866) 222-1948 x 2703

Reference: MIT TLO & Invoice Number

 

(c) Payments in U.S. Dollars. All payments due under this Agreement shall be drawn on a United States bank and shall be payable in United States dollars. Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States (as reported by the Federal Reserve Bank of St. Louis) on the last working day of the calendar quarter of the applicable REPORTING PERIOD. Such payments shall be without deduction of exchange, collection, or other charges, and, specifically, without deduction of withholding or similar taxes or other government imposed fees or taxes, except as permitted in the definition of NET SALES.

 

 

 

 

  7  
 

 

(d) Taxes. In the event that any payment under this Agreement is or becomes subject to any levy or tax, including, but not limited to any form of tax withholding, income tax, service tax, sales tax or VAT, by local, regional or federal government authorities, COMPANY shall (i) pay to the applicable tax authorities, whether on its own or MIT's behalf, such amount of levy or tax and, if applicable, penalties and interest; and (ii) promptly provide MIT with a copy of the withholding tax certificate or other tax filing documentation evidencing remittance was made. For the avoidance of doubt, any payments made by or on behalf of COMPANY pursuant to this Section 4.2(d) shall not be deducted from any amounts due to MIT under this Agreement.

 

(e) Late Payments. Any payments by COMPANY that are not paid on or before the date such payments are due under this Agreement shall bear interest, to the extent permitted by law, at five (5) percentage points above the Prime Rate of interest as reported by the Federal Reserve Bank of St. Louis on the last business day of the calendar quarterly reporting period to which such royalty payments relate.

 

5.        REPORTS AND RECORDS.

 

5.1        Progress Reports. COMPANY shall deliver progress reports to MIT annually, within sixty (60) days of the end of each calendar year, sufficient to illustrate compliance with this Agreement and specifically discussing the progress of efforts to develop and commercialize LICENSED PRODUCTS or LICENSED PROCESSES, with specific reference to the diligence obligations set forth under Article 3.

 

5.2        Royalty Reports. COMPANY's obligation to submit reports under this Section 5.2 shall commence upon a first commercial sale or performance. Thereafter, COMPANY shall deliver royalty reports to MIT within sixty (60) days of the end of each REPORTING PERIOD, containing at least the following information for the immediately preceding REPORTING PERIOD:

 

(a) the number of LICENSED PRODUCTS sold, leased or distributed by COMPANY to independent third parties in each country, and, if applicable, the number of LICENSED PRODUCTS used by COMPANY in the provision of services in each country;

 

(b) a description of LICENSED PROCESSES performed by COMPANY in each country as may be pertinent to a royalty accounting hereunder;

 

 

 

 

  8  
 

 

(c) the gross price charged by COMPANY for each LICENSED PRODUCT and, if applicable, the gross price charged for each LICENSED PRODUCT used to provide services in each country; and the gross price charged for each LICENSED PROCESS performed by COMPANY in each country;

 

(d) calculation of NET SALES for the applicable REPORTING PERIOD in each country, including a listing of applicable deductions; and

 

(e) total royalty payable on NET SALES in U.S. dollars, together with the exchange rates used for conversion.

 

If no amounts are due to MIT for any REPORTING PERIOD, the report shall so state.

 

5.3        Financial Statements. On or before the ninetieth (90th) day following the close of COMPANY's fiscal year, COMPANY shall provide MIT with COMPANY's financial statements for the preceding fiscal year including, at a minimum, a balance sheet and an income statement, certified by COMPANY's treasurer or chief financial officer or by an independent auditor.

 

5.4        Records. COMPANY and its agents, as applicable, shall keep, in accordance with generally accepted accounting principles, up-to-date, complete, true and accurate books of account in sufficient detail to permit calculation of all amounts due hereunder, including without limitation, copies of all invoices, which will be properly itemized. MIT, or MIT's appointed agents, shall have the right, at MIT's expense, to audit all existing and relevant records for all prior periods to the extent necessary to perform an audit. COMPANY shall fully cooperate fully with such audit and shall permit MIT, or MIT's agents, to inspect and copy such portions of books and records that MIT deems appropriate and necessary. Books of account and supporting records shall be retained for at least seven (7) years following the later of (i) the end of the REPORTING PERIOD to which they pertain, or (ii) the end of the calendar year in which any request for an audit under this Section is made. In the event that any audit performed under this Section reveals an underpayment in excess of the lesser of (i) three percent (3%) for the audited period or any REPORTING PERIOD or (ii) Twenty Five thousand dollars ($25,000), COMPANY shall bear the full cost of such audit and shall remit any amounts due to MIT within thirty (30) days of receiving notice thereof from MIT The parties agree that all applicable statutes of limitation and time-based defenses (including, but not limited to, estoppel and laches) shall be tolled upon any request by MIT for an audit under this Section. The parties shall cooperate in taking any actions necessary to achieve this result.

 

6.        PATENT PROSECUTION.

 

6.1        Responsibility for PATENT RIGHTS. MIT shall, in its sole discretion, apply for, seek issuance of, maintain, or abandon the PATENT RIGHTS during the term of this Agreement.

 

 

 

 

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6.2        Payment of Expenses. Payment of all fees and costs, including attorneys' fees, relating to the filing, prosecution and maintenance of the PATENT RIGHTS including, without limitation, interferences, reexaminations and reissues, shall be the responsibility of COMPANY and other nonexclusive licensees of the PATENT RIGHTS as they exist from time to time. COMPANY shall be responsible for its pro rata share of all such patent related costs, whether such amounts were incurred before or after the EFFECTIVE DATE. As of January 9, 2018, COMPANY's pro rata share is one hundred percent (100%) of the total. and MIT has incurred approximately $120,381.62 for such patent-related fees and costs (the "OUTSTANDING BALANCE"). COMPANY shall reimburse all amounts due pursuant to this Section within thirty (30) days of invoicing; late payments shall accrue interest pursuant to Section 4.2(c). In all instances, MIT shall pay the fees prescribed for large entities to the United States Patent and Trademark Office. COMPANY shall reimburse MIT for costs incurred before the EFFECTIVE DATE, as follows:

 

February 15, 2018
September 1, 2018
November 1, 2018
February 1, 2019
May 1, 2019

20% of the OUTSTANDING BALANCE

20% of the OUTSTANDING BALANCE

20% of the OUTSTANDING BALANCE

20% of the OUTSTANDING BALANCE

20% of the OUTSTANDING BALANCE

 

7. INFRINGEMENT.

 

7.1        Notification of Infringement. COMPANY shall inform MIT promptly in writing of any alleged infringement of the PATENT RIGHTS by a third party and of any available evidence thereof.

 

7.2        Right to Prosecute. MIT shall have the right, but not the obligation, to prosecute at its own expense all infringements of the PATENT RIGHTS. The total cost of any such infringement action commenced or defended solely by MIT shall be borne by MIT, and MIT shall keep any recovery or damages derived therefrom, whether compensatory for past infringement or punitive.

 

7.3        Cooperation. In any infringement suit which MIT may institute to enforce the PATENT RIGHTS pursuant to this Agreement, COMPANY shall, at MIT's expense, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.

 

 

 

 

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8.        INDEMNIFICATION AND INSURANCE.

 

8.1        Indemnification.

 

(a) Indemnity. COMPANY shall indemnify, defend, and hold harmless MIT and its trustees, officers, faculty, students, employees, and agents and their respective successors, heirs and assigns (the "Indemnitees"), against any liability, damage, loss, or expense (including reasonable attorneys' fees and expenses) incurred by or imposed upon any of the Indemnitees in connection with any third party claims, suits, investigations, actions, demands or judgments arising out of or related to the exercise of any rights granted to COMPANY under this Agreement or any breach of this Agreement by COMPANY.

 

(b) Procedures. The Indemnitees agree to provide COMPANY with prompt written notice of any claim, suit, action, demand, or judgment for which indemnification is sought under this Agreement. COMPANY agrees, at its own expense, to provide attorneys reasonably acceptable to MIT to defend against any such claim. The Indemnitees shall cooperate fully with COMPANY in such defense and will permit COMPANY to conduct and control such defense and the disposition of such claim, suit, or action (including all decisions relative to litigation, appeal, and settlement); provided, however, that any Indemnitee shall have the right to retain its own counsel, at the expense of COMPANY, if representation of such Indemnitee by the counsel retained by COMPANY would be inappropriate because of actual or potential differences in the interests of such Indemnitee and any other party represented by such counsel. COMPANY agrees to keep MIT informed of the progress in the defense and disposition of such claim and to consult with MIT with regard to any proposed settlement.

 

8.2        Insurance. COMPANY shall obtain and carry in full force and effect commercial general liability insurance and, as applicable to COMPANY's performance with respect to the intellectual property received from MIT pursuant to this Agreement, professional liability insurance, which shall protect COMPANY and Indemnitees with respect to events covered by Section 8.1(a) above. Such insurance shall be issued by an insurer pre-approved by MIT, such approval not to be unreasonably withheld, shall list MIT as an additional insured thereunder, shall be endorsed to include product liability coverage, and shall require thirty (30) days written notice to be given to MIT prior to any cancellation or material change thereof. The limits of such insurance shall not be less than One Million Dollars ($1,000,000) per occurrence with an aggregate of Two Million Dollars ($2,000,000) for bodily injury including death; One Million Dollars ($1,000,000) per occurrence with an aggregate of Two Million Dollars ($2,000,000) for property damage; and, with respect to any professional liability policy, One Million Dollars ($1,000,000) per occurrence with an aggregate of Two Million Dollars ($2,000,000) for errors and omissions. In the alternative, COMPANY may self-insure subject to prior approval of MIT. COMPANY shall provide MIT with Certificates of Insurance evidencing compliance with this Section.

 

 

 

 

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9.        NO REPRESENTATIONS OR WARRANTIES.

 

EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, MIT MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND CONCERNING THE PATENT RIGHTS AND HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS OF MIT OR THIRD PARTIES, VALIDITY, ENFORCEABILITY, AND SCOPE OF PATENT RIGHTS, WHETHER ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE.

 

IN NO EVENT SHALL MIT, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGES OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER MIT SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.

 

10.        ASSIGNMENT.

 

This Agreement is personal to COMPANY. None of the rights or obligations hereunder may be assigned or transferred, whether by merger, consolidation, acquisition or other change of control, without the prior written consent of MIT Any purported assignment or transfer in violation of the foregoing shall be null and void and of no force and effect.

 

11.        GENERAL COMPLIANCE WITH LAWS.

 

11.1        Compliance with Laws. COMPANY shall, and shall cause its AFFILIATES as necessary to, use reasonable commercial efforts to comply with all commercially material local, state, federal, and international laws and regulations relating to the development, manufacture, use, and sale of LICENSED PRODUCTS and LICENSED PROCESSES.

 

 

 

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11.2        Registration. As required by applicable law, COMPANY shall, and shall cause its AFFILIATES as necessary to, register or record this Agreement with the relevant government authority. After the completion of the registration and recordation, COMPANY shall provide MIT with documentation of registration and recordation issued by the government authorities with respect to this Agreement. The costs of the registration and filing shall be borne by COMPANY.

 

11.3        Export Control. COMPANY shall, and shall cause its AFFILIATES as necessary to, comply with all United States laws and regulations controlling the export of certain commodities and technical data, including without limitation all Export Administration Regulations of the United States Department of Commerce. Among other things, these laws and regulations prohibit or require a license for the export of certain types of commodities and technical data to specified countries. COMPANY hereby gives written assurance that it will comply all United States export control laws and regulations, that it bears sole responsibility for any violation of such laws and regulations by itself or its AFFILIATES. and that it will indemnify, defend, and hold MIT harmless (in accordance with Section 8.1) for the consequences of any such violation.

 

11.4        Use of MIT Name. COMPANY and is AFFILIATES shall not use the name of "Massachusetts Institute of Technology," "Lincoln Laboratory" or any variation, adaptation, or abbreviation thereof, or of any of its trustees, officers, faculty, students, employees, or agents, or any trademark owned by MIT, or any terms of this Agreement in any promotional material or other public announcement or disclosure without the prior written consent of M.I.T, which consent MIT may withhold in its sole discretion. The foregoing notwithstanding, without the consent of MIT, COMPANY may make factual statements during the term of this Agreement that COMPANY has a license from MIT under one or more of the patents and/or patent applications comprising the PATENT RIGHTS in business literature. Such statements may not be used in marketing, promotion, or advertising.

 

11.5        Marking of LICENSED PRODUCTS. To the extent commercially feasible and consistent with prevailing business practices, COMPANY shall mark, and shall cause its AFFILIATES to mark, all LICENSED PRODUCTS that are manufactured or sold under this Agreement with the number of each issued patent under the PATENT RIGHTS that applies to such LICENSED PRODUCT.

 

 

 

 

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12. TERMINATION.

 

12.1        Voluntary Termination by COMPANY. COMPANY shall have the right to terminate this Agreement, for any reason, (i) upon at least six (6) months prior written notice to MIT, such notice to state the date at least six (6) months in the future upon which termination is to be effective, and (ii) upon payment of all amounts due to MIT through such termination effective date.

 

12.2        Cessation of Business. If COMPANY ceases to carry on its business related to this Agreement, MIT shall have the right to terminate this Agreement immediately upon written notice to COMPANY.

 

12.3        Termination for Default.

 

(a) Nonpayment. In the event COMPANY fails to pay any amounts due and payable to MIT hereunder, and fails to make such payments within thirty (30) days after receiving written notice of such failure, MIT may terminate this Agreement immediately upon written notice to COMPANY.

 

(b) Material Breach. In the event COMPANY commits a material breach of its obligations under this Agreement, except as described in Section 12.3(a), and fails to cure that breach within sixty (60) days after receiving written notice thereof, MIT may terminate this Agreement immediately upon written notice to COMPANY.

 

12.4        Termination as a Consequence of PATENT CHALLENGE By COMPANY. If COMPANY or any of its AFFILIATES brings a PATENT CHALLENGE against MIT, or assists others in bringing a PATENT CHALLENGE against MIT (except as required under a court order or subpoena), then MIT may immediately terminate this Agreement.

 

12.5        Disputes Regarding Termination. If COMPANY disputes any termination by MIT under this Section, it must notify MIT of the nature of such dispute and the proposed manner in which to resolve the dispute within (10) days of receipt of notification of breach or notification of termination by MIT, whichever is sooner. If the parties do not resolve such dispute within ten (10) days of such notification, then COMPANY shall be required to initiate the dispute resolution procedures outlined in Article 13 immediately. If it does not do so, COMPANY shall be considered to have waived its rights to dispute the termination.

 

 

 

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12.6        Effect of Termination.

 

(a) Survival. The following provisions shall survive the expiration or termination of this Agreement:

 

n   Article 1 ("Definitions");

n   Section 5.2 ("Royalty Reports");

n   Section 5.4 ("Records");

n   Article 8 ("Indemnification and Insurance");

n   Article 9 ("No Representations or Warranties");

n   Article 13 ("Dispute Resolution");

n   Article 14 ("Miscellaneous");

n   Section 11.1 ("Compliance With Laws");

n   Section 11.3 ("Export Control"); and

n   Section 12.6 ("Effect of Termination").

 

(b) Pre-termination Obligations. In no event shall termination of this Agreement release COMPANY or its AFFILIATES from the obligation to pay any amounts that became due on or before the effective date of termination.

 

13.        DISPUTE RESOLUTION.

 

13.1        Mandatory Procedures. The parties agree that any dispute arising out of or relating to this Agreement shall be resolved solely by means of the procedures set forth in this Article, and that such procedures constitute legally binding obligations that are an essential provision of this Agreement. If either party fails to observe the procedures of this Article, as may be modified by their written agreement, the other party may bring an action for specific performance of these procedures in any court of competent jurisdiction.

 

13.2        Equitable Remedies. Although the procedures specified in this Article are the sole and exclusive procedures for the resolution of disputes arising out of or relating to this Agreement, either party may seek a preliminary injunction or other provisional equitable relief if, in its reasonable judgment, such action is necessary to avoid irreparable harm to itself or to preserve its rights under this Agreement.

 

13.3        Dispute Resolution Procedures.

 

(a) Mediation. In the event of any dispute arising out of or relating to this Agreement, either party may initiate mediation upon written notice to the other party ("Notice Date") pursuant to Section 14.1, whereupon both parties shall be obligated to engage in a mediation proceeding. The mediation shall commence within forty-five (45) days of the Notice Date. The mediation shall be conducted by a single mediator in Boston, Massachusetts. The party requesting mediation shall designate two (2) or more nominees for mediator in its notice. The other party may accept one of the nominees or may designate its own nominees by notice addressed to the American Arbitration Association (AAA) and copied to the requesting party. If within, fifteen (15) days following the request for mediation, the parties have not selected a mutually acceptable mediator, a mediator shall be appointed by the AAA according to the Commercial Mediation Rules. The mediator shall attempt to facilitate a negotiated settlement of the dispute, but shall have no authority to impose any settlement terms on the parties. The expenses of the mediation shall be borne equally by the parties, but each party shall be responsible for its own counsel fees and expenses.

 

 

 

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(b) Trial Without Jury. If the dispute is not resolved by mediation within forty-five (45) days after commencement of mediation, each party shall have the right to pursue any other remedies legally available to resolve the dispute, provided, however, that the parties expressly waive any right to a jury trial in any legal proceeding under this Article.

 

13.4        Performance to Continue. Each party shall continue to perform its undisputed obligations under this Agreement pending final resolution of any dispute arising out of or relating to this Agreement; provided, however, that a party may suspend performance of its undisputed obligations during any period in which the other party fails or refuses to perform its undisputed obligations. Nothing in this Article is intended to relieve COMPANY from its obligation to make undisputed payments pursuant to Articles 4 and 6 of this Agreement.

 

13.5        Statute of Limitations. The parties agree that all applicable statutes of limitation and time-based defenses (including, but not limited to, estoppel and laches) shall be tolled while the procedures set forth in Section 13.3 are pending. The parties shall cooperate in taking any actions necessary to achieve this result.

 

14.        MISCELLANEOUS.

 

14.1        Notice. Any notices required or permitted under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be sent by hand, recognized national overnight courier, confirmed facsimile transmission, confirmed electronic mail, or registered or certified mail, postage prepaid, return receipt requested, to the following addresses or facsimile numbers of the parties:

 

 

 

 

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If to MIT:

Massachusetts Institute of Technology

Technology Licensing Office, Room NE18-501

255 Main Street, Kendall Square

Cambridge, MA 02142-1601

Attention: Director

Tel: 617-253-6966
Fax: 617-258-6790

   
If to COMPANY:

IIoT-OXYS, Inc.
705 Cambridge St.
Cambridge, MA 02141
Attention to:

Giro DiBiase, CEO
giro@Oxyscorp.com

 

All notices under this Agreement shall be deemed effective upon receipt. A party may change its contact information immediately upon written notice to the other party in the manner provided in this Section.

 

14.2        Governing Law/Jurisdiction. This Agreement and all disputes arising out of or related to this Agreement, or the performance, enforcement, breach or termination hereof, and any remedies relating thereto, shall be construed, governed, interpreted and applied in accordance with the laws of the Commonwealth of Massachusetts, U.S.A., without regard to conflict of laws principles, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted. The state and federal courts having jurisdiction over Cambridge, MA, USA, provide the exclusive forum for any PATENT CHALLENGE and/or any court action between the parties relating to this Agreement. COMPANY submits to the jurisdiction of such courts and waives any claim that such court lacks jurisdiction over COMPANY or its AFFILIATES or constitutes an inconvenient or improper forum.

 

14.3        Force Majeure. Neither party will be responsible for delays resulting from causes beyond the reasonable control of such party, including without limitation fire, explosion, flood, war, strike, or riot, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever such causes are removed.

 

14.4        Amendment and Waiver. This Agreement may be amended, supplemented, or otherwise modified only by means of a written instrument signed by both parties. Any waiver of any rights or failure to act in a specific instance shall relate only to such instance and shall not be construed as an agreement to waive any rights or fail to act in any other instance, whether or not similar.

 

 

 

 

 

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14.5        Severability. In the event that any provision of this Agreement shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect any other provision of this Agreement, and the parties shall negotiate in good faith to modify the Agreement to preserve (to the extent possible) their original intent. If the parties fail to reach a modified agreement within thirty (30) days after the relevant provision is held invalid or unenforceable, then the dispute shall be resolved in accordance with the procedures set forth in Article 13. While the dispute is pending resolution, this Agreement shall be construed as if such provision were deleted by agreement of the parties.

 

14.6        Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.

 

14.7        Headings. All headings are for convenience only and shall not affect the meaning of any provision of this Agreement.

 

14.8        Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements or understandings between the parties relating to its subject matter.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

 

 

MASSACHUSETTS INSTITUTE OF TECHNOLOGY   HOT-OXYS INC.
     
     
     
By: /s/Jim Freedman   By: /s/ Giro DiBiase

 

Name: Jim Freedman   Name: Giro DiBiase
         
Title: Associate Director   Title: CEO
  Technology Licensing Office      

 

 

 

 

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APPENDIX A

 

List of Patent Applications and Patents

 

M.I.T. Case No. 13930

 

United States of America Patent No. 8344724, Issued January 1, 2013

Publication Number: US11/0109306

United States of America Patent No. 8907664, Issued December 9, 2014

Publication Number: US13/0141088

"Non-Intrusive Monitoring Of Power And Other Parameters"

 

by Al-Thaddeus Avestruz, Zachary Alan. Clifford, John Jacob. Cooley and Steven B. Leeb

 

 

M.I.T. Case No. 16022

 

United States of America Serial No. 14/263407, Filed April 28, 2014

Publication Number: US14/0320125

'Non-Intrusive Monitoring"

 

by John Sebastian. Donnal, Steven B. Leeb, Jin (Jinyeong) Moon, James Paris and Christopher James Schantz

 

 

M.I.T. Case No. 18553

Patent Cooperation Treaty Serial No. PCT1US2016/057165, Filed October 14, 2016

Publication Number: W017/066658

"Noncontact Power Sensing"

 

by John Sebastian. Donnal, David Morris. Lawrence, Steven B. Leeb and James Paris

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit 10.8

 

OXYS/SIGMA TECHNOLOGY COOPERATION AGREEMENT

 

This Technology Cooperation Agreement (the “ Agreement ”) is made by and between Sigma Labs, Inc., a corporation organized under the laws of Nevada, having an office and place of business at 3900 Paseo del Sol Santa Fe, NM 87506, USA (“ Sigma ”), and OXYS Corporation, a corporation organized under the laws of Nevada, having an office and place of business at 719 Cambridge St., Cambridge, MA 02141, (hereinafter referred to as “OXYS”). This Agreement shall be effective as of the date of signature of the latter to sign of the two parties (the “ Effective Date ”).

 

1. Background.

 

1.1. Sigma has expertise in the field of in-process quality assurance and process control in the field of advanced manufacturing and additive manufacturing, including its In-Process Quality Assurance TM (IPQA®) systems equipment, software and services.

 

1.2. OXYS has expertise in the Industrial Internet of Things (IIoT), associated hardware, sensors, data processing, and algorithms as well as connections to various frontend field devices and backend cloud and big data analytics services.

 

1.3. Sigma and OXYS desire to cooperate in one or more projects to facilitate integration of Sigma’s technology and OXYS’s technology.

 

2. Projects.

 

2.1. Each project will be set forth in a separate addendum to this Agreement (each such project hereinafter referred to as “Project” and each such addendum hereinafter referred to as “Addendum”).

 

2.2. The terms of this Agreement will apply to each Project, except as expressly set forth in the respective Addendum. If there is any conflict between a provision of this Agreement and an Addendum, then the provision in the Addendum will prevail only if such prevalence is expressly provided for in the Addendum and even then only for the Project corresponding to that Addendum.

 

2.3. Neither party will have any obligation arising out of any Project unless and until a corresponding Addendum has been agreed to in writing.

 

2.4. Each party shall bear its own costs arising under this Agreement.

 

2.5. The provisions of this Agreement are intended to govern the parties’ relationship only during specific Projects as set out in one or more Addendums to this Agreement, and shall be binding as of the Effective Date and continue until termination of this Agreement.

 

3. Data and Intellectual Property.

 

3.1. Background IP ” of a party shall be all proprietary technology, know-how, inventions, data or information, and all pending and issued patents and other intellectual property rights thereto, that were either (i) developed or otherwise acquired by such party prior to the Effective Date, or (ii) initially developed or otherwise acquired by such party after the Effective Date and prior to termination of this Agreement but outside all Projects and not developed in the course of performing work set forth in an Addendum and were developed without relying on confidential information of the other party.

 

3.2. Each party shall retain ownership of its own Background IP. Each party agrees to and hereby does grant to the other party a limited-use license to Background IP only to the extent required to perform work set forth in an Addendum. Such limited-use license shall expire at the expiration or termination of the Addendum giving rise to such license, and all such limited licenses shall terminate at the termination of this Agreement.

 

 

 

 

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3.3. Project IP ” shall be all proprietary technology, know-how, inventions, data or information, and all pending and issued patents and other intellectual property rights thereto, that were initially developed or otherwise acquired by either party, after the Effective Date and prior to termination of this Agreement, (i) in the course of performing Project work set forth in an Addendum, or (ii) with reliance on confidential information of the other party.

 

3.4. Inventions included in Project IP, whether or not patented or patentable, shall be owned by the party whose employees or agents qualify as inventors under United States patent law. If each party has at least one employee or agent who qualifies as an inventor under United States patent law of an invention, then such invention shall be “ Joint Project IP ”.

 

3.5. The rights of use to works subject to copyright included in Project IP, shall be owned by the party whose employees or agents qualify as authors under United States copyright law. If each party has at least one employee or agent who qualifies as an author under United States copyright law of a work, then such work shall be Joint Project IP.

 

3.6. Each party shall own an interest in all Joint Project IP. The percentage of interest of each party shall be agreed upon separately based on each party’s contribution to the respective project IP. Each party shall have the right to use Joint IP in its own business and include Joint IP in its own products, but shall not have the right to license Joint IP to third parties or to sell or assign Joint IP except as part of a transfer of substantially all of the assets of such party to which such Joint IP relates, and where the foregoing limitations are binding on the transferee.

 

3.7. For clarity, ownership or rights to any Joint IP does not create or imply a license to any Background IP, even if such license is required for exercise of any Joint IP.

 

3.8. All data generated by a party under this Agreement shall belong to the party whose employees or agents who produced such data, or, in the case of data produced by automated systems, to the party who owns rights to such automated system. The parties anticipate that some data under Projects may be shared, and that the scope of such sharing shall be set forth in the respective Addendum.

 

3.9. Neither party shall use the other party’s trademarks, or contest the other party’s rights in its trademarks.

 

4. Confidentiality.

 

4.1. The parties may have other agreements relating to the use and protection of confidential information, which agreements are not altered or replaced by this Agreement.

 

 

 

 

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4.2. Confidential Information for the purposes of this Agreement and the Addendums shall comprise all information which is communicated in written, oral or tangible form from one Party (“Disclosing Party”) to the other Party (“Receiving Party”). Notwithstanding the foregoing, Confidential Information is deemed not to include any information which

 

- was known by the Receiving Party prior to its disclosure by the Disclosing Party or is provided to the Receiving Party by a third Party with no obligation to keep confidential, or

 

- was in the public domain at the time of disclosure by the Disclosing Party or thereafter becomes part of the public domain other than as a result of a disclosure by the Receiving Party or its representatives, or

 

- is developed by the Receiving Party without access to the Confidential Information.

 

4.3 The Parties commit to keep confidential all Confidential Information which they receive directly or indirectly from the other Party with respect to this Agreement or any Addendum and use it only for the purpose of the Projects. The Receiving Party agrees to protect Confidential Information with the same degree of care as it uses to protect its own confidential information, but no less than a reasonable degree of care. The Receiving Party shall be entitled to disclose Confidential Information only to those of its employees, representatives or advisors (or those of its subsidiaries) who have a need to know for the performance of the Projects.

 

4.4 Upon request of the Disclosing Party, the Receiving Party shall return the Confidential Information and destroy all copies, summaries, or notes pertaining to it provided that the Receiving Party shall be entitled to retain one copy in its legal files for archival purposes only and provided that such return and destruction do not hinder the Receiving Party in using Joint Project IP.

 

5. Expiration and Termination.

 

5.1. This Agreement shall expire 5 years after the Effective Date.

 

5.2. Either Party may terminate this Agreement or any Addendum upon the occurrence of any of the following:

 

5.2.1. upon or after bankruptcy, insolvency for a period greater than six (6) months, or dissolution of the other Party; or

 

5.2.2. upon or after an breach of any material provision of this Agreement by the other Party; provided the other Party has not either (i) commenced to cure such breach within thirty (30) days after the receipt of a written notice of the breach from the infringed Party and the other Party has not thereafter proceeded diligently to cure such breach within a reasonable time (in no event shall such reasonable time to cure such breach exceed sixty (60) days from the date of such notice).

 

5.3. Either Party may terminate this Agreement upon written notice to the other Party, in which case this Agreement shall terminate after the last to occur of: (a) all Addenda in force as of the date of such notice have been concluded or terminated, and (b) 30 days after the date of such notice.

 

5.4. Expiration or termination of this Agreement shall not relieve any Party of any obligation accruing prior to such expiration or termination. The provisions relating to rights in Data and Intellectual Property, Confidentiality, Liability, and Other Provisions shall survive termination of this Agreement.

 

 

 

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6. Liability.

 

6.1. Liability. Each Party shall be responsible for any and all suits, actions, claims, demands, judgments, losses, damages, expenses (including reasonable attorneys’ fees), and awards (collectively, a “ Claim ”), including third party Claims, which are proximately caused by the wrongful or negligent acts or omissions or willful misconduct of that Party or its officers, directors, employees, representatives, agents, associates, contractors, or consultants in performance of this Agreement.

 

6.2. Limitation of Liability. EACH PARTY AGREES THAT UNDER NO CIRCUMSTANCES SHALL ONE PARTY BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT OR PUNITIVE DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, BREACH OF WARRANTY, TORT OR ANY OTHER LEGAL THEORY, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES.

 

7. Other Provisions.

 

7.1. Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial [or other] Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

 

7.2. It is expressly agreed that the relationship between the two Parties under this Agreement shall not constitute a partnership or agency of any kind. Neither Party shall have the authority to make statements, representations or commitments of any kind, or to take any action, which shall be binding on the other, without the prior written authorization of the Party to do so.

 

7.3. This Agreement contains the entire understanding of the Parties with respect to the subject matter hereof. All express or implied agreements and understandings, either oral or written, heretofore made are expressly merged in and made a part of this Agreement. If any of the provisions of this Agreement are determined to be invalid under applicable law, they are, to that extent, deemed omitted. The invalidity of any portion of this Agreement shall not render any other portion invalid.

 

7.4. No waiver by either Party with respect to any breach, default, right, remedy or performance will constitute a continuing waiver of any other breach, default or any other right or remedy, unless such waiver is expressed in writing by the Party to be bound.

 

7.5. This Agreement may be executed in two or more identical counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute the Agreement when a duly authorized representative of each Party has signed a counterpart.

 

 

 

 

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IN WITNESS WHEREOF, the PARTIES have caused this Agreement to be executed in duplicate originals by their duly authorized representatives.

 

 

SIGMA LABS, INC.   OXYS
     
     
     
By: /s/ Mark J. Cola   By: /s/ Giro DiBiase
         

 

Name: Mark J. Cola   Name: Giro DiBiase
         
         
Title: President and CEO   Title: CEO
         
         
Date: 1/24/17   Date: 1/26/17

 

 

 

 

 

 

 

 

 

 

  5  

Exhibit 10.13

 

CONSULTING AGREEMENT

 

THIS CONSULTING Agreement (the "Agreement") is made and entered into on the 22 nd day of August, 2017 by and between OXYS Inc., a Nevada Corporation (the "Company"), and Herelab Inc., a Delaware Corporation, (the "Consultant").

 

W I T N E S S E T H THEREFORE:

 

WHEREAS , Consultant desires to provide services to the Company under the terms and conditions herein stated; and

 

NOW, THEREFORE, in consideration of the mutual premises, covenants and Agreements hereinafter set forth, the parties hereby agree as follows:

 

1.                   Term. The Company hereby engages the Consultant, and Consultant hereby accepts engagement hereunder, for a term of month to month for one year (the "Term") commencing on August 22, 2017.

 

2.                   Duties. The Consultant will provide the Company with services which could include, but may not be limited to, the following list of job responsibilities and tasks:

 

l   HELP LEAD: Serve as Acting COO

o    Help mgmt. with daily / weekly tasks in running company

o    Help with strategic thinking on fundraising, partnerships, etc.

o    Help with presentations to investors

o    Help with negotiations with strategic partners and channel partners

o    Help with technical and marketing vision and associated presentations

 

l   HELP DELIVER: Provide Tactical support as Program Manager

o    Put all projects on resource loaded schedules that are tracked daily

o    Communicate and negotiate with customers regarding milestones and deliverables

o    Coordinate allocation of internal and external resources to accomplish said projects

 

l   HELP MAKE IT RAIN: Help with Business Development

o    Help meet our revenue target of $100K per month in either project work or consulting work

o    Attend important tradeshows and other events to represent OXYS

o    Be our official representative to IIC, Edge Computing Consortium, and other industry groups

o    Help track business development progress and sales cycle

 

3.                   Compensation. For Consultant's services hereunder, the Company shall pay to Consultant a monthly fee of $7,000 per month. Payment shall be made to the Consultant on the fifteenth day of each month. NOTE: the month of August 2017 will be prorated based on the fraction of working days the Consultant will work with the Company. So as the Consultant is starting on August 22, 2017, the number of working days in August that the Consultant will work is 8 (i.e., the number of working days between 8/22/2017 and 8/31/2017 inclusive of the start date) . There are a total of 23 working days in August 2017. Therefore the prorated amount that the Consultant will be paid in August 2017 is: [(8/23) * $7,000] = ($2,434.78). The August 2017 Payment thus calculated will be made immediately upon acceptance by both parties of this present Agreement. Starting in September 2017, the Consultant will receive the full $7,000 per month stipend for the Term in accordance with Provision 1 of this present Agreement.

 

 

 

 

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4.                   Expenses. During the Term, Consultant shall be entitled to receive reimbursement for all reasonable business expenses incurred by Consultant in performing services hereunder, provided that Consultant properly accounts therefore and that these additional expenses are pre-approved by the Company.

 

5.                   Relationship. The Consultant shall be an independent contractor and not an employee of the Corporation for the duration of this Agreement. This Agreement shall not be construed to create between the Corporation and Consultant the relationship of principal or agent, employer and employee, joint venturer or co-partners, until and unless superseded by additional or subsequent agreements.

 

6.                   Restrictions Respecting Confidential Information, Competing Businesses, etc.

 

6.1          The Consultant acknowledges and agrees that by virtue of the Consultant's

involvement with the business and affairs of the Company, the Consultant will develop substantial expertise and knowledge with respect to all aspects of the business, affairs and operations of the Company and will have access to significant aspects of the business and operations of the Company and to Confidential and Proprietary Information (as such term is hereinafter defined). The Consultant acknowledges and agrees that the Company will be damaged if the Consultant were to breach any of the provisions of this Section 6 or if the Consultant were to disclose or make unauthorized use of any Confidential and Proprietary Information. Accordingly, the Consultant expressly acknowledges and agrees that the Consultant is voluntarily entering into this Agreement and that the terms, provisions and conditions of this Section 6 are fair and reasonable and necessary to adequately protect the Company and its interests and those of its shareholders.

 

6.2          For purposes of this Agreement, the term "Confidential and Proprietary Information" shall mean any and all (i) confidential or proprietary information or material not in the public domain about or relating to the business, operations, assets, financial condition, plans and/or prospects of the Company or its trade secrets, including, without limitation business improvements, processes, marketing and selling strategies; strategic business plans (whether pursued or not); budgets; unpublished financial statements; licenses; pricing, pricing strategy and cost data; information regarding the skills and compensation of Employees; the identities and contact information of clients and potential clients; intellectual property rights and strategies regarding intellectual property including any work on any patents, trademarks or tradenames; the terms of contractual concepts with clients and other third parties, pricing, timing, sales terms, methods, practices, strategies, forecasts; and (ii) any other information, documentation or material not in the public domain by virtue of any action by or on the part of the Consultant, the knowledge of which gives or may give the Company a competitive advantage over any entity not possessing such information. For purposes hereof, the term Confidential and Proprietary Information shall not include any information or material that (i) is or becomes known to the general public other than due to a breach of this Agreement by the Consultant, or (ii) is or was disclosed to the Consultant by a person or entity who the Consultant did not reasonably believe was bound to a confidentiality or similar agreement with the Company, or (iii) is currently known to the Consultant other than by reason of disclosure to it by the Company.

 

 

 

 

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6.3          The Consultant hereby covenants and agrees that, while the Consultant is engaged by the Company and thereafter, unless otherwise authorized by the Company’s Board of Directors in writing, the Consultant shall not, directly or indirectly, under any circumstance: (i) disclose to any other person or entity any Confidential and Proprietary Information (other than in the regular course of the Consultant's duties to the Company for the benefit of the Company), other than pursuant to applicable law, regulation or subpoena or with the prior written consent of the Company; (ii) act or fail to act so as to impair the confidential or proprietary nature of any Confidential and Proprietary Information; (iii) use any Confidential and Proprietary Information other than for the sole and exclusive benefit of the Company; or (iv) offer or agree to, or cause or assist in the inception or continuation of, any such disclosure, impairment or use of any Confidential and Proprietary Information. Following the termination of the Consultant’s engagement hereunder , the Consultant shall return all documents, records and other items containing any Confidential and Proprietary Information to the Company (regardless of the medium in which maintained or stored), without retaining any copies, notes or excerpts thereof, or at the request of the Company, shall destroy such documents, records and items (any such destruction to be certified by the Consultant to the Company in writing). Following the termination of the Consultant’s engagement hereunder, the Consultant shall return to the Company any property or assets of the Company in the Consultant's possession.

 

7.                 Indemnification. The Company shall indemnify, hold harmless and defend Consultant from and against any and all claims, causes of action, damages, penalties and costs which may result from their respective affiliation with or services provided to or on behalf of the Company.

 

8.                 General Provisions.

 

8.1           Notices. All notices required to be given under the terms of this Agreement shall be in writing and shall be deemed to have been duly given only if delivered to the addressee in person or mailed by certified mail, return receipt requested, to the address as included in the Company's records or to any such other address as the party to receive the notice shall advise by due notice given in accordance with this paragraph. Any party hereto may change its or his address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the manner aforesaid to the other party hereto.

 

8.2           Benefit of Agreement and Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, administrators, successors and assigns; provided, however, that Consultant may not assign any of its rights or duties hereunder except upon the prior written consent of the Board of Directors of the Company.

 

8.3           Applicable Law. This Agreement is made in and is to be governed by and construed under the laws of the State of Nevada.

 

8.4           Captions. The captions appearing at the commencement of the sections hereof are descriptive only and for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

 

 

 

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8.5           Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument.

 

8.6           Entire Agreement . This Agreement contains the entire Agreement of the parties, and supersedes any and all other Agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof. Each party to this Agreement acknowledges that no representations, inducements, promises, or Agreements, oral or otherwise, have been made by either party, or anyone acting on behalf of either party, which are not embodies herein, and that no other Agreement, statement or promise not contained in this Agreement shall be valid or binding.

 

8.7           Amendments. This Agreement may be modified or amended only by an Agreement in writing signed by the Company and Consultant.

 

8.8           Waiver . No waiver of any provision hereof shall be valid unless made in writing and signed by the party making the waiver. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver.

 

8.9           Attorneys' Fees. Should any party hereto institute any action or proceeding at law or in equity, or in connection with any arbitration, to enforce any provision of this Agreement, including an action for declaratory relief, or for damages by reason of an alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement, or any provision hereof, each party shall be responsible for the payment of its own respective legal fees and costs in such action or proceeding.

 

8.10           Representations and Warranties. Each party hereto represents and warrants that it or he has the power and authority to execute and deliver this Agreement and to perform its or his obligations hereunder.

 

8.11           Compliance with Laws and Policies . Consultant agrees that it will at all times comply strictly with all applicable laws and all current and future policies of the Company.

 

8.12           Arbitration. Any dispute or controversy arising under or in connection with this Agreement, other than matters pertaining to injunctive relief, including, without limitation, temporary restraining orders, preliminary injunctions and permanent injunctions, shall, upon the written demand of either party served upon the other party, be submitted to arbitration.

 

IN WITNESS WHEREOF, this Agreement is executed on the day and year first above written.

 

     
OXYS, Inc.   HERELAB, Inc.
     
     
By: /s/ Giro DiBiase   By: /s/ Patrick Phillips
  Giro DiBiase, CEO     Patrick Phillips, CEO

 

 

 

 

 

  4  

Exhibit 14.1

 

IIOT-OXYS, Inc.

 

CODE OF BUSINESS CONDUCT AND ETHICS

 

1. Introduction

 

This Code of Business Conduct and Ethics (this “ Code ”) has been adopted by our board of directors (the “ Board of Directors ”) to summarize the standards of business conduct that must guide our actions. This Code applies to all directors, officers, and employees of IIOT-OXYS, Inc. and its subsidiaries (the “ Company ”), including, but not limited to, the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company has issued this Code to deter wrongdoing and to promote:

 

· honest and ethical conduct;
· full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (the “ SEC ”) and in other public communications made by the Company;
· avoidance and ethical handling of actual or apparent conflicts of interest, including disclosure to an appropriate person of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
· confidentiality of corporate information;
· protection and proper use of corporate assets and opportunities;
· compliance with applicable governmental laws, rules, and regulations;
· prompt internal reporting of any violations of this Code to an appropriate person; and
· accountability for adherence to the Code.

 

This Code provides guidance to you on your ethical and legal responsibilities. We expect all directors, officers, and employees to comply with this Code, and the Company is committed to taking prompt and consistent action against violations of this Code. Violation of the standards outlined in this Code may be grounds for disciplinary action up to and including termination of employment or other business relationships. Employees, officers and directors who are aware of suspected misconduct, illegal activities, fraud, abuse of the Company’s assets, or violations of the standards outlined in this Code are responsible for reporting such matters.

 

Because rapid changes in our industry and regulatory environment constantly pose new ethical and legal considerations, no set of guidelines should be considered to be the absolute last word under all circumstances. Although laws and customs will vary in the different countries in which we operate, our basic ethical responsibilities are global. In some instances, there may be a conflict between the laws of countries that apply to the operations of the Company. When you encounter such a conflict, you should consult the Company’s senior management and/or legal counsel to understand how to resolve that conflict properly.

 

2. Basic Obligations

 

Under the Company’s ethical standards, directors, officers, and employees share certain responsibilities. It is your responsibility to (i) become familiar with, and conduct Company business in compliance with applicable laws, rules, and regulations and this Code; (ii) treat all Company employees, customers, and business partners in an honest and fair manner; (iii) avoid situations where your personal interests are, or appear to be, in conflict with the Company interests; and (iv) safeguard and properly use the Company’s proprietary and confidential information, assets, and resources, as well as those of the Company’s customers and business partners.

 

Certain of the Company’s policies may be complemented by specific responsibilities set forth in documents subsequently adopted by the Company such as the Company’s Confidential Information Policy, an insider trading policy, a disclosure policy, a cybersecurity policy, etc . Those polices should be separately consulted by the Company’s directors, officers, and employees and are not incorporated by reference into this Code.

 

3. Raising Concerns

 

If you should learn of a potential or suspected violation of this Code, you have an obligation to promptly report the violation. You may do so orally or in writing and, if preferred, anonymously. You have several options for raising concerns.

 

1. Raise your concerns with your supervisor or manager;
2. Raise your concerns with the Company’s Chief Executive Officer and/or
3. Company legal counsel.

 

 

 

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If the issue or concern is related to the internal accounting controls of the Company or any accounting or auditing matter, you should report it to the Chief Financial Officer.

 

4. Policy Against Retaliation

 

The Company prohibits any director or employee from retaliating or taking adverse action against anyone for raising, in good faith, suspected conduct violations or helping to resolve a conduct concern. Any individual who has been found to have engaged in retaliation against a Company director, officer or employee for raising, in good faith, a conduct concern or for participating in the investigation of such a concern, may be subject to discipline, up to and including termination of employment or other business relationships. If any individual believes that he or she has been subjected to such retaliation, that person is encouraged to report the situation as soon as possible to one of the people detailed in the “Raising Concerns” section above.

 

5. Conflicts of Interest

 

Directors, officers, and employees should not engage in any activity, practice or act which conflicts with the best interests of the Company. A conflict of interest occurs when a director, officer or employee places or finds himself/herself in a position where his/her private interests conflict with the best interests of the Company or have an adverse effect on the person’s motivation or the proper performance of their office or job. Examples of such conflicts could include, but are not limited to:

 

· accepting outside employment with, or accepting personal payments from, any organization which does business with the Company or is a competitor of the Company;
· accepting or giving gifts of more than modest value to or from vendors or clients of the Company;
· competing with the Company for the purchase or sale of property, services or other interests or taking personal advantage of an opportunity in which the Company has an interest;
· personally having immediate family members who have a financial interest in a firm which does business with the Company; and
· having an interest in a transaction involving the Company or a customer, business partner or supplier (not including routine investments in publicly traded companies).

 

Directors, officers, and employees must not place themselves or remain in a position in which their private interests conflict with the interests of the Company. Knowledge of any potential conflict of interest must be reported as soon as possible to one of the people detailed in the “Raising Concerns” section above.

 

If the Company determines that the outside work or other relationship of an officer, director or employee interferes with performance or the ability to meet the requirements of the Company, as they are modified from time to time, the party may be asked to terminate the outside employment or other relationship if he or she wishes to remain employed by the Company or as an officer or director of the Company. To protect the interests of both the officers, directors, and employees and the Company, any such outside work or other activity that involves potential or apparent conflict of interest may be undertaken only after disclosure to the Company by the party and review and approval by management.

 

6. Confidentiality Concerning Company Affairs

 

It is the Company’s policy that business affairs of the Company are confidential and should not be discussed with anyone outside the organization except for information that has already been made available to the public. See the Company’s “Confidential Information Policy” for more detail.

 

7. Competition and Fair Dealing

 

We seek to out-perform our competition fairly and honestly. We seek competitive advantages through superior performance, not through unethical or illegal business practices. Information about other companies and organizations, including competitors, must be gathered using appropriate methods. Illegal practices such as trespassing, burglary, misrepresentation, wiretapping, and stealing are prohibited. Possessing trade secrets that were obtained without the owner’s consent, or inducing such disclosures by customers or past or present employees of other companies is prohibited. Each employee and officer should endeavor to respect the rights of, and deal fairly with, our customers, suppliers, competitors, and employees. No employee, officer or director should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair business practice.

 

 

 

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8. Insider Trading

 

The Company encourages all employees to become shareholders on a long-term investment basis. However, management, employees, members of the Board of Directors and others who are in a “special relationship” with the Company from time to time, may become aware of corporate developments or plans which may affect the value of the Company’s shares (inside information) before these developments or plans are made public. Blackout periods may be imposed during certain times throughout the year and during this time, all Company employees, officers and directors are prohibited from buying or selling the Company’s securities. In order to avoid civil and criminal insider trading violations, the Company may establish an insider trading policy.

 

9. Telecommunications

 

Telecommunications facilities such as telephone, cellular phones, facsimile, internet, and email are the Company property. Use of these facilities imposes certain responsibilities and obligations on all employees, officers and directors. Usage must be ethical and honest with a view to preservation of and due respect for the Company’s intellectual property, security systems, personal privacy, and freedom of others from intimidation, harassment, or unwanted annoyance.

 

10. Accuracy of Company Records

 

We are required to record and, in certain instances, publicly report all internal and external financial records in compliance with U.S. Generally Accepted Accounting Principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (the “ SEC ”). Therefore, you are responsible for ensuring the accuracy of all books and records within your control and complying with all of the Company’s policies and internal controls. All Company information must be reported accurately, whether in internal personnel, safety, or other records or in information we release to the public or file with government agencies.

 

11. Financial Reporting and Disclosure Controls

 

If in the future we are required to file periodic and other reports with the SEC and other securities regulators and to make certain public communications, we will be required to maintain effective “disclosure controls and procedures” so that financial and non-financial information is reported timely and accurately both to our senior management and in the filings we make. You are expected, within the scope of your employment duties, to support the effectiveness of our disclosure controls and procedures.

 

12. Customers and Business Partners

 

We strive to achieve satisfied customers who will be repeat buyers of our products and services and to building mutually advantageous alliances with our business partners.

 

Our long-term reputation and business viability depend upon our continued maintenance of the high quality of the products and services we provide. We are committed to delivering products that perform as documented and as represented to the customer.

 

Our policy is to build lasting relationships with our customers and business partners through superior delivery and execution and honest sales and marketing. We will comply with applicable advertising laws and standards, including a commitment that our advertising and marketing will be truthful, non-deceptive, and fair and will be backed up with evidence before advertising claims are made. Our policy also prohibits making false or deceptive statements about our competitors and giving or accepting kickbacks, bribes, inappropriate gifts and other matters prohibited under the conflict of interest topic in this Code.

 

13. Health and Safety

 

The Company is committed to making the work environment safe, secure, and healthy for its employees and others. The Company complies with all applicable laws and regulations relating to safety and health in the workplace. We expect each of you to promote a positive working environment for all. You are expected to consult and comply with all Company rules regarding workplace conduct and safety. You should immediately report any unsafe or hazardous conditions or materials, injuries, and accidents connected with our business and any activity that compromises Company security to your supervisor. You must not work under the influence of any substances that would impair the safety of others. All threats or acts of physical violence or intimidation are prohibited.

 

 

 

 

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14. Respect for Our Employees

 

The Company’s employment decisions will be based on reasons related to our business, such as job performance, individual skills and talents, and other business-related factors. The Company policy requires adherence to all national, provincial or other local employment laws. In addition to any other requirements of applicable laws in a particular jurisdiction, the Company policy prohibits discrimination in any aspect of employment based on race, color, religion, sex, national origin, disability, age or gender orientation, within the meaning of applicable laws.

 

15. Abusive or Harassing Conduct Prohibited

 

The Company policy prohibits abusive or harassing conduct by our employees and officers toward others, such as unwelcome sexual advances, comments based on ethnicity, religion, gender orientation, or race, or other non-business, personal comments or conduct that make others uncomfortable in their employment with us. We encourage and expect you to report harassment or other inappropriate conduct as soon as it occurs.

 

16. Privacy

 

The Company, and companies and individuals authorized by the Company, collect and maintain personal information that relates to your employment, including compensation, medical and benefit information. The Company follows procedures to protect information wherever it is stored or processed, and access to your personal information is restricted. Your personal information will only be released to outside parties in accordance with the Company’s policies and applicable legal requirements. Employees, officers and directors who have access to personal information must ensure that personal information is not disclosed in violation of the Company’s policies or practices.

 

17. Waivers and Amendments

 

Only the Board of Directors may waive application of or amend any provision of this Code. A request for such a waiver should be submitted in writing to the Board of Directors for its consideration. The Company will promptly disclose to investors all substantive amendments to the Code, as well as all waivers of the Code granted to directors or officers in accordance with applicable laws and regulations.

 

18. No Rights Created

 

This Code is a statement of the fundamental principles and key policies and procedures that govern the conduct of our business. It is not intended to and does not, in any way, constitute an employment contract or an assurance of continued employment or create any rights in any employee, director, client, supplier, competitor, stockholder or any other person or entity.

 

Any change or waiver to this Code may be made only by the Board of Directors and will be promptly disclosed as required by law or regulation.

 

[ Adopted by the Board of Directors on March 9, 2018 ]

 

 

 

 

 

 

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Exhibit 21.1

 

LIST OF SUBSIDIARIES

IIOT-OXYS, INC.

 

IIOT-OXYS, Inc., a Nevada corporation, has the following wholly owned subsidiaries:

 

1. OXYS Corporation, a Nevada corporation.
2. HereLab, Inc., a Delaware corporation.

Exhibit 31.1

 

Certifications

 

I, Nevan Hanumara, certify that:

 

1. I have reviewed this Form 10-K for the twelve months ended December 31, 2017, of IIOT-OXYS, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 17, 2018

 

 

/s/ Nevan Hanumara  

Nevan Hanumara,

Chief Executive Officer and Interim Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of IIOT-OXYS, Inc. (the “Company”) on Form 10-K for the twelve months ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned principal executive officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: April 17, 2018

 

 

/s/ Nevan Hanumara  

Nevan Hanumara,

Chief Executive Officer and Interim Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)