What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-15 · 301 added, 305 removed, 42 unchanged (94% of the section changed)

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.

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

Our forward-looking statements reflect our current views about future events;

are based on assumptions

and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated

by these statements.

Factors that may cause differences between actual results and those contemplated by forward-looking statements include,

but are not limited to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended

December 31, 2021.

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.

we cannot guarantee future results, events, levels of activity, performance, or achievements

are based on assumptions and are subject to

known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited

to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021.

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

Basis of Presentation

The financial information

presented below and the following Management Discussion and Analysis of the Consolidated Financial Condition, Results of Operations,

Stockholders’ Equity and Cash Flow for the quarterly periods ended June 30, 2021 and 2022 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.

Forward-Looking

Statements in this

management’s discussion and analysis of financial condition and results of operations contain certain forward-looking statements.

To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which,

by definition involve risks and uncertainties.

Where in any forward-looking statements, if we express an expectation or belief as to

future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can

be no assurance that the statement of expectation or belief will result or be achieved or accomplished.

Factors that may

cause differences between actual results and those contemplated by forward-looking statements include those discussed in “Risk

Factors” and are not limited to the following:

the unprecedented impact of COVID-19 pandemic on our business, customers,

employees, subcontractors and supply chain, consultants, service providers, stockholders, investors and other stakeholders;

the impact of conflict between the Russian Federation and Ukraine on

our operations;

geo-political events, such as the crisis in Ukraine, government responses

to such events and the related impact on the economy both nationally and internationally;

The financial information presented below and the

following Management Discussion and Analysis of the Consolidated Financial Condition, Results of Operations, Stockholders’ Equity

and Cash Flow for the quarterly periods ended September 30, 2021 and 2022 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.

Forward-Looking Statements

Statements in this management’s discussion and

analysis of financial condition and results of operations contain certain forward-looking statements.

To the extent that such statements

are not recitations of historical fact, such statements constitute forward looking statements which, by definition involve risks and uncertainties.

Where in any forward-looking statements, if we express an expectation or belief as to future results or events, such expectation or belief

is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or

belief will result or be achieved or accomplished.

Factors that may cause differences between actual

results and those contemplated by forward-looking statements include those discussed in “Risk Factors” and are not limited

to the following:

the unprecedented impact of COVID-19 pandemic on our business, customers, employees, subcontractors and supply chain, consultants, service providers, stockholders, investors and other stakeholders;

the impact of conflict between the Russian Federation and Ukraine on our operations;

geo-political events, such as the crisis in Ukraine, government responses to such events and the related impact on the economy both nationally and internationally;

general market and economic conditions;

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new product introductions by competitors;

the ability of competitors to more fully leverage low-cost geographies

for manufacturing or distribution;

the ability of competitors to more fully leverage low-cost geographies for manufacturing or distribution;

product pricing, including the impact of currency exchange rates;

3 unchanged sentences

product quality and performance;

protection of our products and brand by effective use of intellectual

property laws;

protection of our products and brand by effective use of intellectual property laws;

the financial strength of our competitors;

the outcome of any future litigation or commercial dispute;

barriers to entry imposed by competitors with significant market power

in new markets;

barriers to entry imposed by competitors with significant market power in new markets;

government actions throughout the world;

our ability to service secured debt, when due.

You should not

rely on forward-looking statements in this document.

This management’s discussion contains forward looking statements that involve

risks and uncertainties.

We use words such as “anticipates,” “believes,” “plans,” “expects,”

“future,” “intends,” and similar expressions to identify these forward-looking statements.

Prospective investors

should not place undue reliance on these statements, which apply only as of the date of this document.

Our actual results could differ

materially from those anticipated in these forward-looking statements.

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.

You should not rely on forward-looking statements

in this document.

This management’s discussion contains forward looking statements that involve risks and uncertainties.

words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,”

and similar expressions to identify these forward-looking statements.

Prospective investors should not place undue reliance on these statements,

which apply only as of the date of this document.

Our actual results could differ materially from those anticipated in these forward-looking

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

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.

Uncertainties

On July 28, 2017,

we closed the reverse acquisition transaction under the Securities Exchange Agreement dated March 16, 2017, as reported in our Current

Report on Form 8-K filed with the Commission on August 3, 2017.

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 our Current Report on Form 8-K filed with the

Commission on August 3, 2017.

Following the closing, our business has been that of OXYS, Inc.

Inc., our wholly owned subsidiaries.

Our operations have varied significantly following the closing since, prior to that time, we were

an inactive shell company.

During the year

2020, the effects of a new coronavirus (“ COVID-19 ”) and related actions to attempt to control its spread began to

impact our business.

The impact of COVID-19 on our operating results for the year ended December 31, 2020 was limited, in all material

respects, due to the government mandated numerous measures, including closures of businesses, limitations on movements of individuals

and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country.

On March 11, 2020,

the World Health Organization designated COVID-19 as a global pandemic.

Governments around the world have mandated, and continue to introduce,

orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, significant restrictions

on travel, as well as work restrictions that prohibit many employees from going to work.

Uncertainty with respect to the economic effects

of the pandemic has introduced significant volatility in the financial markets.

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.

and HereLab, Inc., our wholly owned subsidiaries.

Our operations have varied significantly following the closing since, prior to that time, we were an inactive shell company.

Impact of COVID-19

During the year 2020, the effects of a new coronavirus

(“ COVID-19 ”) and related actions to attempt to control its spread began to impact our business.

The impact of COVID-19

on our operating results for the year ended December 31, 2021 was limited, in all material respects, due to the government mandated numerous

measures, including closures of businesses, limitations on movements of individuals and goods, and the imposition of other restrictive

measures, in its efforts to mitigate the spread of COVID-19 within the country.

On March 11, 2020, the World Health Organization designated

COVID-19 as a global pandemic.

Governments around the world have mandated, and continue to introduce, orders to slow the transmission

of the virus, including but not limited to shelter-in-place orders, quarantines, significant restrictions on travel, as well as work restrictions

that prohibit many employees from going to work.

Uncertainty with respect to the economic effects of the pandemic has introduced significant

volatility in the financial markets.

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.

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 the issued voting shares of OXYS in exchange for 34,687,244 shares of our Common Stock.

We also cancelled

1,500,000 outstanding shares of our Common Stock and changed our management to Mr.

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 the issued voting shares of OXYS in exchange for 34,687,244 shares of our Common Stock.

We also cancelled 1,500,000 outstanding shares

of our Common Stock and changed our management to Mr.

DiBiase who also served in management of OXYS.

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.

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

We received our first revenues in the last quarter of 2017, continued to realize revenues until 2020 when the pandemic hit,

and we realized nominal revenues through 2021.

We develop hardware,

software and algorithms that monitor, measure and predict conditions for energy, structural, agricultural and medical applications.

use domain-specific Artificial Intelligence to solve industrial and environmental challenges.

Our engineered solutions focus on common

sense approaches to machine learning, algorithm development and hardware and software products.

We use off the

shelf components, with reconfigurable hardware architecture that adapts to a wide range of customer needs and applications.

We use open-source

software tools, while still creating proprietary content for customers, thereby reducing software development time and cost.

works with the hardware to collect data from the equipment or structure that is being monitored.

We focus on developing

We develop algorithms that help our customers create insights from vast data streams.

The data collected is analyzed and reports

are created for the customer.

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

Both companies were, and presently are, early-stage technology startups that are largely pre-revenue in their development

HereLab is also an early-stage technology development company.

We received our first revenues in the last quarter

of 2017, continued to realize revenues until 2020 when the pandemic hit, and we realized nominal revenues through 2021.

We develop hardware, software and algorithms that

monitor, measure and predict conditions for energy, structural, agricultural and medical applications.

We use domain-specific Artificial

Intelligence to solve industrial and environmental challenges.

Our engineered solutions focus on common sense approaches to machine learning,

algorithm development and hardware and software products.

We use off the shelf components, with reconfigurable

hardware architecture that adapts to a wide range of customer needs and applications.

We use open-source software tools, while still creating

proprietary content for customers, thereby reducing software development time and cost.

The software works with the hardware to collect

data from the equipment or structure that is being monitored.

We focus on developing insights.

We develop algorithms

that help our customers create insights from vast data streams.

The data collected is analyzed and reports are created for the customer.

From these insights, the customer can act to improve their process, product or structure.

Operations for the Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

The Company reported

$16,500 and $0 in service revenues with cost of sales of $510 and $0 for the three months ended June 30, 2022 and 2021, respectively.

The Company incurred

general and administrative expenses (“ G&A ”) of $217,621 for the three months ended June 30, 2022 as compared to

$268,932 for the same comparable period in 2021.

The net decrease of $51,311 in G&A expenses resulted primarily due to reduction

in professional fees paid to consultants of $97,157 offset by an increase in payroll and stock compensation earned by the Officers and

Director of $33,692.

The Company recorded a gain of $36,057 due to the change in the fair market value of derivative liabilities during

the three months ended June 30, 2022 as compared to a gain of $105,961 for the same comparable period in 2021.

The Company recorded

interest income of $5,661 for the three months ended June 30, 2022 due to the unsecured promissory note extended to a third party earning

10% interest per annum compared to $0 interest earned in the comparable period of 2021.

The Company recorded an interest expense of $16,319

for the three months ended June 30, 2022 as compared to $110,891 for the same comparable period in 2021.

The interest expense decreased

because the Company did not record any amortization of debt discount during the quarter ended June 30, 2022 as compared to recording

$90,684 in amortization of debt discounts to interest expense during the quarter ended June 30, 2021.

Operations for the Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

The Company recorded

$16,500 and $0 of revenues and $510 and $0 in cost of sales during the six months ended June 30, 2022 and 2021, respectively.

The Company incurred

general and administrative expenses (“ G&A ”) of $384,630 for the six months ended June 30, 2022 as compared to

$529,215 for the same comparable period in 2021.

The decrease in G&A expenses resulted primarily due to reduction in professional

and consulting fees of $268,757 in the six months ended June 30, 2022 as compared to the same comparable period in 2021.

This reduction

of expense was offset by an increase in payroll costs of $102,669 during the six months ended June 30, 2022 as compared to the same comparable

Results of Operations for the Three Months Ended

September 30, 2022 Compared to the Three Months Ended September 30, 2021

The Company reported $23,003 and $5,280 in service

revenues with cost of sales of $5,140 and $1,275 for the three months ended September 30, 2022 and 2021, respectively.

The Company incurred general and administrative expenses

(“ G&A ”) of $158,818 for the three months ended September 30, 2022 as compared to $208,531 for the same comparable

period in 2021.

The Company recorded a gain of $151,856 due to the change in the fair market value of derivative liabilities during the

six months ended June 30, 2022 as compared to a gain of $190,661 for the same comparable period in 2021.

The net decrease of $49,713 in G&A expenses resulted primarily due to a reduction in professional fees paid to consultants

of $40,778 and reduction in payroll and stock compensation earned by the Officers and Director of $2,946.

The Company recorded a gain

of $125,568 due to the change in the fair market value of derivative liabilities during the three months ended September 30, 2022 as compared

to a loss of $18,103 for the same comparable period in 2021.

The Company recorded interest income of $5,986 for the three months ended

September 30, 2022 due to the unsecured promissory note extended to a third party earning 10% interest per annum compared to $0 interest

earned in the comparable period of 2021.

The Company recorded an interest expense of $14,913 for the three months ended September 30,

2022 as compared to $100,701 for the same comparable period in 2021.

The interest expense decreased because the Company did not record

any amortization of debt discount during the three months ended September 30, 2022 as compared to recording $82,329 in amortization of

debt discounts to interest expense during the three months ended September 30, 2021.

Results of Operations for the Nine Months Ended

September 30, 2022 Compared to the Nine Months Ended September 30, 2021

The Company recorded $39,503 and $5,280 of revenues

and $5,650 and $1,275 in cost of sales during the nine months ended September 30, 2022 and 2021, respectively.

The Company incurred general and administrative

expenses (“ G&A ”) of $543,449 for the nine months ended September 30, 2022 as compared to $737,746 for the same

comparable period in 2021.

The decrease in G&A expenses resulted primarily due to reduction in professional and consulting fees of

$316,400 in the nine months ended September 30, 2022 as compared to the same comparable period in 2021.

This reduction of expense was

offset by an increase in payroll costs of $99,723 during the nine months ended September 30, 2022 as compared to the same comparable period

The Company recorded a gain of $277,424 due to the change in the fair market value of derivative liabilities during the nine

months ended September 30, 2022 as compared to a gain of $172,558 for the same comparable period in 2021.

The Company recorded a loss

on derivatives of $201,943 and $0 for the six months ended June 30, 2022 and 2021, respectively, due to the change in mark to market

on derivatives of $207,447 and $0 for the nine months ended September 30, 2022 and 2021, respectively, due to the change in mark to market

of the fair value of derivative liabilities.

In addition, the Company recorded a gain of $120,000 on the extinguishment of debt upon

agreeing with the note holders to a reduction in the debt conversion price during the six months ended June 30, 2021, whereas, no such

gain or loss was recorded for the same comparable period in 2022.

The Company recorded an interest income of $5,661 for the six months

ended June 30, 2022 as compared to $0 for the same comparable period in 2021.

In addition, the Company recorded a gain of $120,000 on the extinguishment of debt upon agreeing

with the note holders to a reduction in the debt conversion price during the nine months ended September 30, 2021, whereas, no such gain

or loss was recorded for the same comparable period in 2022.

The Company recorded an interest income of $11,647 for the nine months ended

September 30, 2022 as compared to $0 for the same comparable period in 2021.

The Company recorded interest expense of $278,605 and $333,039

for the six months ended June 30, 2022 and 2021, respectively.

The interest expense increased due to the Company recording increase in

the fair market value of the derivative liability to interest expense.

Our revenue for

the quarter ending June 30, 2022 exceeded the total revenue for 2021, as was anticipated in our Quarterly Report on Form 10-Q for the

first quarter of 2022.

We continue to

gain traction with strategic partners, customers, and potential customers in our key two markets:

Smart Manufacturing / Industry 4.0

and Structural Health Monitoring (SHM).

for the nine months ended September 30, 2022 and 2021, respectively.

The interest expense decreased due to the Company recording reduction

in the fair market value of the derivative liability to interest expense.

As a result, the Company recorded a loss of $775,217 for the

nine months ended September 30, 2022 as compared to a loss of $818,211 for the same comparable period in 2021.

Our revenue for the quarter ended September 30, 2022

exceeded the total revenue for 2021, as was anticipated in our Quarterly Report on Form 10-Q for the first quarter of 2022.

We continue to gain traction with strategic partners,

customers, and potential customers in our key two markets:

Smart Manufacturing / Industry 4.0 and Structural Health Monitoring (SHM).

These are both high growth markets.

Market research shows the worldwide Industry 4.0 market in

2021 was $64.9 billion USD and is projected to be $165.5 billion USD by 2026 (20.6% CAGR).

1 Also, the worldwide Structural

Health Monitoring industry was $2.0 billion USD in 2021 and will reach $4.0 billion USD by 2027 (CAGR of 14.6%).

our collaborations with Aretas Sensor Networks, we have access to a third market, Indoor Air Quality Monitors, which is estimated at

$3.7 billion USD in 2020 and projected to reach $6.4 billion USD in 2027, growing at 8.2% CAGR.

Year to Date Accomplishments

announced in the first quarter that we entered into an NDA with an EU Electrical Technology

Original Equipment Manufacturer.

Collaborative discussions continue and we expect this agreement

to lead to new business in due time.

Canadian Indoor Air Quality Sensor and IIoT Platform company, Aretas Sensor Networks, with

whom we entered into an NDA in the first quarter, continues to progress as well.

to the initial collaborative agreement signed in the first quarter, we signed an algortihm

development contract in the second quarter and continue to explore additional collaborations

expected this year.

Structural Health Monitoring business continues to gather momentum, receiving a contract

extension with a New England State’s DOT for Bridge Monitoring announced in the first

quarter for monitoring throughout the second quarter.

A proposal for monitoring and equipment

upgrades for the 2022 to 2023 fiscal year was submitted in the second quarter, and we anticipate

its approval in the second half of 2022.

continue to secure significant and supportive funding.

full time Machine Learning Engineer, hired in the first quarter, continues to expand our

focus on the Artificial Intelligence (AI) and Machine Learning (ML) aspects of our business

CEO, Cliff Emmons, and COO, Karen McNemar, both renewed their employment contracts in June,

ensuring stable experienced leadership focused on long-term growth.

Market research shows the worldwide Industry 4.0 market in 2021 was $64.9 billion USD and is projected

to be $165.5 billion USD by 2026 (20.6% CAGR).

the worldwide Structural Health Monitoring industry was $2.0 billion USD in 2021 and will reach $4.0 billion USD by 2027 (CAGR of 14.6%).

Through our collaborations with Aretas Sensor Networks, we have access to a third market, Indoor Air Quality Monitors, which is estimated

at $3.7 billion USD in 2020 and projected to reach $6.4 billion USD in 2027, growing at 8.2% CAGR.

Year to Date Accomplishments in 2022:

We announced in the first quarter that we entered into an NDA with

an EU Electrical Technology Original Equipment Manufacturer.

Collaborative discussions continue and we expect this agreement to lead

to new business in due time.

The Canadian Indoor Air Quality Sensor and IIoT Platform company, Aretas

Sensor Networks, with whom we entered into an NDA in the first quarter, continues to progress as well.

In addition to the initial collaborative

agreement signed in the first quarter, we signed an algorithm development contract in the second quarter and recorded revenue from that

contract in this quarter.

We also signed a co-marketing and co-selling agreement with Aretas in this quarter and expect revenue from sales

commissions in the fourth quarter.

Our Structural Health Monitoring business continues to gather momentum,

receiving a contract extension with a New England State’s DOT for Bridge Monitoring announced in the first quarter for monitoring

throughout the second quarter.

A proposal for monitoring and equipment upgrades for the 2022 to 2023 fiscal year was submitted in the

second quarter and received the formal contract in the third quarter of 2022.

We have recorded revenue on this contract since July and

will continue to receive revenue from the contract through June of 2023.

We continue to secure significant and supportive funding.

Our full time Machine Learning Engineer, hired in the first quarter, continues

to expand our focus on the Artificial Intelligence (AI) and Machine Learning (ML) aspects of our business

Our CEO, Cliff Emmons, and COO, Karen McNemar, both renewed their employment

contracts in June, ensuring stable experienced leadership focused on long-term growth.

_________________________

https://www.marketsandmarkets.com/Market-Reports/industry-4-market-102536746.html

1 unchanged sentence

https://www.reportlinker.com/p05957040/Global-Indoor-Air-Quality-Monitors-Industry.html

We believe the

underlying strengths of the Company are gathering momentum for expected growth:

We believe the underlying strengths of the Company

are gathering momentum for expected growth:

an experienced leadership team;

contributions of our

new Machine Learning Engineer, a PhD level Machine Learning Algorithms specialist;

contributions of our new Machine Learning Engineer, a PhD

level Machine Learning Algorithms specialist;

strong execution on contracts to date;

focus on prospecting, submitting proposals, and securing Proof of Concepts (POCs).

Those completed contracts to date have produced

two successful pilot programs:

one on manufacturing operations for our Fortune 500 Pharma customer, and a pilot with a full year of data

collection and analysis on our structural health monitoring program for a New England state’s DOT – which has now led to

a bridge monitoring contract extension.

and a steady focus on prospecting, submitting proposals,

and securing Proof of Concepts (POCs).

Those completed contracts to date have produced two successful pilot programs:

one on manufacturing

operations for our Fortune 500 Pharma customer, and a pilot with a full year of data collection and analysis on our structural health

monitoring program for a New England state’s DOT – which has now led to a bridge monitoring contract extension, which includes

equipment upgrades and additional analysis.

Our continued focus on high potential growth markets (specifically Biotech, Pharma, and Medical

Device Operations, Structural Health Monitoring, and Indoor Air Quality), have yielded numerous prospects for future growth.

Device Operations, Structural Health Monitoring, and Indoor Air Quality), has yielded numerous prospects for future growth.

Specifically,

we secured an AI – Machine Learning sub-contract and initiated a POC for IAQ strategic partner in this quarter.

It is anticipated

that the momentum of the second quarter’s revenue will continue into the third quarter and the second half of the year.

that our third quarter revenue will match or exceed this quarter’s revenues, and revenue for the second half of 2022 will exceed

that generated in the first half of 2022.

In total, we expect that total revenue for 2022 will exceed that of 2019.

This is due to the

hard work of the past year that has resulted in two successful pilots, in two of our key target industry verticals.

We now have data

and algorithms to build strong use cases and marketing collateral that can be leveraged to extend contracts with current customers and

win additional contracts with new customers in all targeted industry segments.

Also, the strength of the collaboration agreements with

both Aingura IIoT, S.G.

and Aretas Sensor Networks have substantially bolstered financial stability, added talent breadth and depth,

and complimentary industry segment experience.

Furthermore, the continued liquidity of our stock has attracted funding opportunities,

and access to additional capital has and will enable funding of business development, intellectual property development, staff augmentation,

and inorganic growth opportunities.

we secured an AI – Machine Learning sub-contract and initiated a POC for our IAQ strategic partner in the second quarter and signed

a co-marketing and co-selling agreement with the same strategic partner in the third quarter.

We are pleased that the momentum of the second quarter’s revenue

continued into the third quarter and expect it will continue through the fourth quarter.

Our third quarter revenue exceeded our second

quarter revenue and expect revenue for the second half of 2022 will exceed that generated in the first half of 2022.

In total, we expect

that total revenue for 2022 will be approaching 2019 levels.

This is due to the hard work of the past year that has resulted in two successful

pilots, in two of our key target industry verticals.

We now have data and algorithms to build strong use cases and marketing collateral

that can be leveraged to extend contracts with current customers and win additional contracts with new customers in all targeted industry

Also, the strength of the collaboration agreements with both Aingura IIoT, S.G.

and Aretas Sensor Networks have substantially

bolstered financial stability, added talent breadth and depth, and complimentary industry segment experience.

Furthermore, the continued

liquidity of our stock has attracted funding opportunities, and access to additional capital has and will enable funding of business development,

intellectual property development, staff augmentation, and inorganic growth opportunities.

Combined with our underlying strengths:

experienced leadership;

savvy technological talent, and operational

execution excellence;

savvy technological talent, and operational execution excellence;

we believe these revenue goals are achievable.

and Capital Resources

At June 30, 2022,

the Company had a cash balance of $73,496, which represents a $26,675 increase from the $46,821 balance at December 31, 2021.

This increase

was primarily the result of cash provided by the sale of common stock and Series B preferred stock (net of offering costs of $7,867)

in the aggregate amount of $573,498, offset by net cash used in operating activities of $346,823 to satisfy the requirements of a reporting

company and due to acceleration in product development activities.

The Company’s working capital at June 30, 2022 was a deficit

of $1,571,149, as compared working capital deficit of $1,108,786 at December 31, 2021.

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 $726,012 for the six months ended June 30, 2022, and has an accumulated

deficit of $8,956,269 at June 30, 2022, 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.

plans to seek additional debt and/or equity financing for the Company but cannot assure that such financing will be available on acceptable

At the Company’s current rate of expenditure, the Company anticipates being able to maintain current operations for three

however, management is proposing to raise any necessary additional funds not provided by operations through loans or through

additional sales of equity securities.

There is no assurance that the Company will be successful in raising this additional capital or

in achieving profitable operations.

The Company’s

continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow

to meet its obligations, and obtain additional financing as may be required.

Our auditors have included a going concern qualification

in their auditors’ report dated April 14, 2022.

Such a going concern qualification may make it more difficult for us to raise funds

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.

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.

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

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.

As of September 30, 2022, the total principal amount

owed to Sergey Gogin was $205,000.

For more information on the note, please see NOTE 6 - CONVERTIBLE NOTES PAYABLE of the footnotes to

the consolidated, unaudited financial statements.

Liquidity and Capital Resources

At September 30, 2022, the Company had a cash

balance of $34,284, which represents a $12,537 reduction from the $46,821 balance at December 31, 2021.

This reduction was primarily the

result of cash provided by the sale of common stock of $481,657 and Series B preferred stock (net of offering costs of $9,633) in the

aggregate amount of $187,000, offset by net cash used in operating activities of $471,561 due to acceleration in product development activities,

and cash used in investing activities by executing a note receivable of $200,000 from Aretas.

The Company’s working capital at September

30, 2022 was a deficit of $1,473,996, as compared to a working capital deficit of $1,108,786 at December 31, 2021.

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 $775,217 for the nine months ended September 30, 2022, and has an accumulated deficit of $9,005,473 at September

30, 2022, 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 the Company’s

current rate of expenditure, the Company anticipates being able to maintain current operations for three months;

however, management is

proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of equity securities.

There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations.

The Company’s continuation as a going concern

is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain

additional financing as may be required.

Our auditors have included a going concern qualification in their auditors’ report dated

April 14, 2022.

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

Recently Issued Accounting Standards

Management does not believe that any other recently

issued, but not yet effective, accounting standards 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:

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;

an exemption from the adoption of new or revised financial accounting

standards until they would apply to private companies;

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;

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;

an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

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;

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

As a result of this election, our financial statements may not be comparable to public companies required to adopt these new

requirements.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting

company, the Company has elected not to provide the disclosure required by this item.

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.

Quantitative and Qualitative Disclosures

About Market Risk

As a smaller reporting company, the Company has elected

not to provide the disclosure required by this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis