What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-22 compared with 2022-11-14 · 143 added, 215 removed, 128 unchanged (74% of the section changed)

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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 quarterly periods ended September 30, 2021 and 2022 gives effect to our acquisition of OXYS Corporation (“ OXYS ”)

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 March 31, 2023 and 2022 gives effect to our acquisition of OXYS Corporation (“ OXYS ”)

on July 28, 2017.

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Forward-Looking Statements

Statements in this management’s discussion and

analysis of financial condition and results of operations contain certain 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

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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.

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.

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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.

The global COVID-19 pandemic continues to present

uncertainty and unforeseeable risks to the Company’s operations and business plan.

The Company has closely monitored recent developments,

including the lifting of COVID-19 safety measures, the spread of new strains or variants of the coronavirus (such as the Delta and Omicron

variants), and supply chain and labor shortages.

Thus, the full impact of the COVID-19 pandemic on the business and operations remains

uncertain and will vary depending on the pandemic’s future impact on the third parties with whom the Company does business, as well

as any legal or regulatory consequences resulting therefrom.

The Company has been following the recommendations of health authorities

to minimize exposure risk for its team members and may take further actions that alter our operations, including any required by federal,

state or local authorities, or that it determines are in the best interests of its employees and other third parties with whom the Company

does 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

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.

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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.

At the present time, we have two, wholly-owned

subsidiaries which are OXYS Corporation and HereLab, Inc.

(an entity immaterial to our operations), through which our operations are conducted.

General Overview

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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.

HereLab (an entity immaterial to our operations) is also an early-stage technology development company.

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 to the present.

We develop hardware, software and algorithms that

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

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 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 $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 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 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).

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.

Results of Operations for the Three Months

Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

For the three months ended March 31, 2023, we

earned revenues of $43,283 and incurred related cost of sales of $16,964.

Our operating expenses were $178,405 which included professional

fees of $62,662, payroll costs of $86,107, amortization of intangible assets of $12,205, and general and administrative expenses of $17,431.

We recorded net other expenses of $9,964 consisting of interest expense of $14,528 and a loss due to change in fair market value of derivative

liability of $1,292, offset by interest income on note receivable of $5,856.

We also recorded $16,120 as preferred stock dividend on convertible

preferred stock for the three months ended March 31, 2023.

As a result, we incurred a net loss of $178,170 for the three months ended

March 31, 2023.

Comparatively, for the three months ended March

31, 2022, we earned no revenues and no related cost of sales.

Our Operating expenses were $179,214 which included professional fees of

$39,555, payroll costs of $110,658, amortization of intangible assets of $12,205, and general and administrative expenses of $16,796.

We recorded net other expenses of $333,516, consisting of interest expense of $247,372 on notes payable due to amortization of debt discount

and interest payable on notes payable, loss on derivates of $201,943, offset by gain on change in the fair market value of derivative

liability of $115,799.

We also recorded $12,430 as preferred stock dividend on convertible preferred stock for the three months ended

March 31, 2022.

As a result, we incurred a net loss of $525,160 for the three months ended March 31, 2022.

During the current and prior period, we did not

record an income tax benefit due to the uncertainty associated with the Company’s ability to utilize the deferred tax assets.

Our first quarter revenue in 2023 was a significant

improvement over the same period in 2022, when no revenue was recorded.

We also sustained the revenue momentum achieved throughout 2022,

and we expect this momentum will continue through 2023.

Our strong first quarter revenue and our confidence this momentum will continue

through 2023, and beyond, are based on the following factors:

- Our current DOT Bridge Monitoring Contract and overall Structural Health Monitoring (“ SHM ”)

vertical is the foundation of our revenue momentum.

The current monitoring continues through June of 2023, with previously approved expansion

to continue beyond June.

We believe that discussions with our main contractor to the DOT for extensions and expansions have been favorable.

We also believe that prospects with both local municipalities in our current DOT state, and DOT contacts in two other northeast states

bode well for future business in the second half of 2023 and into 2024.

- Our Smart Manufacturing vertical is benefiting from the progress on our CNC Proof of Concept (“ POC ”),

that successfully kicked off back in January 2023, and will conclude this month.

It’s already yielding results that we believe are

impressing our customer.

We expect a SaaS contract to follow and believe this will lead to other paid CNC POCs and additional SaaS contracts,

which would contribute to revenue in the second half of 2023.

Another key goal is to secure additional POCs for other discrete manufacturing

processes, including metal stamping, plastic injection molding, plastic extrusion, and automated assembly and test.

- Our Indoor Air Quality (“ IAQ ”) vertical through our strategic partner, Aretas Sensor

Networks (“ Aretas ”), is progressing well – primarily through our direct retail sales efforts, which are beginning

to show results.

We’ve also begun focusing on larger site opportunities, both through current advertising channels, and some targeted

outreach, especially in the northeast.

- Our Strategic Partnership development continues to be a “force multiplier” for us.

of our Aingura IIoT, S.L.

partnership provides supplemental expertise, equipment and software, which ensures we continue to bring value

to our customers.

We will also continue to develop our other previously announced partnerships, including Aretas.

We believe that our business development in these

industries has high potential for success, due to the strength of their size and growth.

The global smart manufacturing (also known as

Industry 4.0) was $97.6 billion in 2022 and will reach $228.3 billion by 2027 (CAGR 18.5%);

1 the worldwide SHM industry was

$2.0 billion in 2021 and will reach $4.0 billion by 2027 (CAGR of 14.6%);

2 and the Indoor Air Quality Monitor (IAQ) market,

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

It is anticipated that revenue momentum will continue

through the second quarter of 2023, which is on track to exceed that for the same period in 2022, and that overall total revenue for 2023

will exceed that of 2022.

Given the valuable real-world data we’ve collected, our Artificial Intelligence (“ AI ”)

Machine Learning algorithms we’ve developed, compelling use cases and marketing collateral developed from our data and algorithms,

combined with our experienced leadership, savvy technological talent, and operational execution excellence, we believe these goals are

Liquidity and Capital Resources for the

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

At March 31, 2023, we had a cash balance of $25,158,

which represents a $8,178 decrease from the $33,336 cash balance at December 31, 2022.

This decrease was primarily as a result of net

cash used in operating activities of $61,289, and net cash provided by financing activities of $53,111.

Operating activities

Net cash flows used in operating activities for

the three months ended March 31, 2023 was $61,289, primarily attributed to the net loss of $178,170, stock compensation expense of $825,

discount received on note receivable of $925, and amortization of intangible assets of $12,206.

The Company recorded changes in operating

assets and liabilities of $104,775 primarily attributable to decrease in accounts receivable of $19,048, increase in accounts payable

of $38,984, increase in accrued liabilities of $46,648, increase in derivative liabilities of $1,292, increase in shares payable to related

parties of $1,735 offset by decrease in unearned interest of $2,932.

Net cash flows used in operating activities for

the three months ended March 31, 2022 was $157,058, primarily attributable to net loss of $525,160, stock compensation expense of $900,

amortization of debt discount on notes payable and preferred stock of $37,400, and amortization of intangible assets of $12,205.

recorded a net change in operating assets and liabilities of $317,597 attributable to net decrease in accounts payable of $14,349, net

increase in accrued liabilities of $39,198, net increase in derivative liabilities of $277,649, and net increase in salaries payable to

related parties of $15,099.

Financing activities

Net cash provided by financing activities for

the three months ended March 31, 2023 was $53,111 primarily due to sale of our common stock of $54,195 and paying $1,084 in costs for

raising capital.

Net cash provided by financing activities for the three months ended March 31, 2022 was $299,549 primarily due to cash

received from sale of common stock of $113,826 and paying $2,277 in costs for raising capital, and cash received from sale of series B

preferred stock of $188,000.

As a result of the above activities, the Company

recorded a decrease of $8,178 in cash for the three months ended March 31, 2023, and an increase of $142,491 for the three months ended

March 31, 2022, respectively.

The accompanying condensed consolidated financial

statements have been prepared assuming that the Company will continue as a going concern.

As shown in the accompanying financial statements,

the Company has suffered continuing operating losses, has a working capital deficit of $1,741,781, used cash flows in operating activities

of $61,289, and has an accumulated deficit of $9,485,307 as of March 31, 2023.

These factors, among others, raise a substantial doubt

about the Company’s ability to continue as a going concern.

If the Company is unable to obtain adequate capital, it could be forced

to cease operations.

______________

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

1 https://www.marketsandmarkets.com/Enquiry_Before_BuyingNew.asp?id=105448439&utm_source=SE-NA&utm_medium=Email

2 https://www.marketsandmarkets.com/Market-Reports/structural-health-monitoring-market-101431220.html

3 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:

an experienced leadership team;

contributions of our new Machine Learning Engineer, a PhD

level Machine Learning Algorithms specialist;

strong execution on contracts to date;

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), has yielded numerous prospects for future growth.

Specifically,

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:

savvy technological talent, and operational execution excellence;

we believe these revenue goals are achievable.

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

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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;

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.

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.

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