What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-18 compared with 2023-05-22 · 119 added, 86 removed, 185 unchanged (53% of the section changed)

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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 ”)

and Cash Flow for the quarterly periods ended June 30, 2023 and 2022 gives effect to our acquisition of OXYS Corporation (“ OXYS ”)

on July 28, 2017.

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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.

revenues through 2021, and have shown increased revenues in 2022, and 2023 year-to-date.

We develop hardware, software and algorithms that

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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.

Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

For the three months ended June 30, 2023, we earned

revenues of $35,289 and incurred related cost of sales of $8,495.

Our operating expenses were $130,080 which included professional fees

of $61,505, payroll costs of $54,151, amortization of intangible assets of $12,342, and general and administrative expenses of $2,082.

We recorded net other expenses of $163,473 consisting of interest expense of $13,996, a loss due to change in fair market value of derivative

liability of $155,398, offset by interest income on note receivable of $5,921.

We also recorded $16,299 as preferred stock dividend on

convertible preferred stock for the three months ended June 30, 2023.

As a result, we incurred a net loss of $283,058 for the three months

ended June 30, 2023.

Comparatively, for the three months ended June

30, 2022, we earned revenues of $16,500 and incurred related cost of sales of $510.

Our operating expenses were $229,962 which included

professional fees of $68,184, payroll costs of $130,290, amortization of intangible assets of $12,341, and general and administrative

expenses of $19,147.

We recorded net other income of $25,399, consisting of interest expense of $16,319 on notes payable due to amortization

of debt discount and interest payable on notes payable, offset by gain on change in the fair market value of derivative liability of $36,057,

and interest income on note receivable of $5,661.

We also recorded $12,280 as preferred stock dividend on convertible preferred stock

for the three months ended June 30, 2022.

As a result, we incurred a net loss of $200,853 for the three months ended June 30, 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.

Results of Operations for the Six Months

Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

For the six months ended June 30, 2023, we earned

revenues of $78,572 and incurred related cost of sales of $25,459.

Our operating expenses were $308,485 which included professional fees

of $124,167, payroll costs of $140,258, amortization of intangible assets of $24,547, and general and administrative expenses of $19,513.

We recorded net other expenses of $173,437 consisting of interest expense of $28,524, and a loss due to change in fair market value of

derivative liability of $156,690, offset by interest income on note receivable of $11,777.

We also recorded $32,419 as preferred stock

dividend on convertible preferred stock for the six months ended June 30, 2023.

As a result, we incurred a net loss of $461,228 for the

six months ended June 30, 2023.

Comparatively, for the six months ended June 30,

2022, we earned revenues of $16,500 and related cost of sales of $510.

Our operating expenses were $409,177 which included professional

fees of $107,739, payroll costs of $240,948, amortization of intangible assets of $24,547, and general and administrative expenses of

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.

We recorded net other expenses of $308,117, consisting of interest expense of $263,691 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 $151,856 and interest income on note receivable of $5,661.

We also recorded $24,708 as preferred stock dividend

on convertible preferred stock for the six months ended June 30, 2022.

As a result, we incurred a net loss of $726,012 for the six months

ended June 30, 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.

The first half year of revenue in 2023 was a significant

improvement over the same period in 2022 (an increase of 376%) and sustained the revenue momentum achieved throughout 2022.

this momentum achieved in the first half of 2023 will continue through the remainder of 2023 – given adequate funding to fuel sales

& marketing efforts.

Our strong six months 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 revenue will continue through the second half of 2023, with the 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.

We also believe that prospects with our current DOT state, and DOT contacts in two other northeast states bode well for future business in mid-2024.

There is still potential for local municipalities in our current northeast state to contribute revenue 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 concluded in May 2023, and has resulted in a signed Software-as-a-Service (“SaaS”) contract in June 2023.

Public endorsements and promotional videos are forthcoming featuring this Smart Manufacturing customer.

We believe these endorsements and promotional videos will lead to other paid CNC POCs and additional SaaS contracts, which would contribute to revenue in the second half of 2023 and beyond.

It is expected these endorsements will also strengthen our position to secure additional POCs for other discrete manufacturing processes, including metal stamping, plastic injection molding, plastic extrusion, and automated assembly and test.

We have re-evaluated our Indoor Air Quality (“ IAQ ”) vertical and our business arrangement with Aretas Sensor Networks (“ Aretas ”).

We have decided to discontinue our efforts in this vertical and re-direct those resources to our better performing verticals of Structural Health Monitoring and Smart Manufacturing.

In addition to discontinuing our business arrangement with Aretas, on October 4, 2022, Aretas failed to make the required $20,000 interest payment under the 10% Unsecured Convertible Promissory Note issued to us by Aretas on April 4, 2022.

A notice of default was sent to Aretas on June 8, 2023 and we are currently pursuant all legal remedies.

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.

The strength 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, (with the exception of Aretas).

We believe that our business development in these

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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.

Industry 4.0) was $97.6 billion in 2022 and will reach $228.3 billion by 2027 (CAGR 18.5%), 1 and the worldwide SHM industry

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

Among our many tailwinds, we do face a significant

Since February, we have been unable to raise funds for ongoing operations through our existing financing agreements due to market

Our CEO and COO have not received any compensation since mid-April (their salaries have accrued), and the lack of funds have

significantly limited sales and marketing efforts.

Our management is working to secure funding from our lead investor to pay for ongoing

expenses and the leadership team is considering many options for both the short and long term.

These options will depend largely upon

our ability to continue to raise funds and implement a marketing and sales plan.

In the event we are unable to raise adequate funds, management

may need to consider other options such as pursuing suitable companies to merge with or acquire us.

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

through the second quarter of 2023 and that overall total revenue for 2023 will exceed that of 2022.

Revenue in Q3 2023 may be less than

in the same period in 2022 due to reduced available funds for sales and marketing efforts.

However, given the valuable real-world data

we have 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 achievable, if adequate funding for sales and marketing efforts

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.

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

At June 30, 2023, we had a cash balance of $7,896,

which represents a $25,440 reduction from the $33,336 cash balance at December 31, 2022.

This decrease was primarily as a result of net

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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,

the six months ended June 30, 2023 was $78,551, primarily attributed to the net loss of $461,228, stock compensation expense of $825,

discount received on note receivable of $1,860, and amortization of intangible assets of $24,547.

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.

assets and liabilities of $359,166 primarily attributable to decrease in accounts receivable of $3,588, increase in prepaid expenses and

other current assets of $4,987, increase in accounts payable of $81,559, increase in accrued liabilities of $80,574, increase in derivative

liabilities of $156,690, decrease in unearned interest of $2,932, increase in shares payable to related parties of $3,006, and increase

in salaries payable to related parties of $41,667.

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

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

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.

the six months ended June 30, 2022 was $346,823, primarily attributable to net loss of $726,012, stock compensation expense of $900,

discount on note receivable of $6,606, amortization of debt discount on notes payable and preferred stock of $37,400, and amortization

of intangible assets of $24,547.

The Company recorded a net change in operating assets and liabilities of $309,736 attributable to net

increase in accounts receivable of $16,500, net decrease in accounts payable of $4,371, net increase in accrued liabilities of $53,280,

net increase in derivative liabilities of $241,591, increase in unearned interest of $15,233, net increase in shares payable to related

parties of $8,604, and increase in salaries payable to related parties of $11,899.

Investing Activities

Net cash used in investing activities for the

six months ended June 30, 2023 was $0.

Net cash used in investing activities for the six months ended June 30, 2022 resulted due to cash

advanced for a promissory note totaling $200,000.

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

the six months ended June 30, 2023 was $53,111, primarily due to sales of our common stock of $54,195 and paying $1,084 in costs incurred

in raising capital.

Net cash provided by financing activities for the six months ended June 30, 2022 was $573,498 primarily due to cash

received from sale of common stock of $393,365 and paying $7,867 in costs for raising capital, and cash received from sale of Series B

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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.

recorded a decrease of $25,440 in cash for the six months ended June 30, 2023, and an increase of $26,675 for the six months ended June

30, 2022, respectively.

The accompanying condensed consolidated financial

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the Company has suffered continuing operating losses, has a working capital deficit of $1,931,009, 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.

______________

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

of $78,551, and has an accumulated deficit of $9,768,365 as of June 30, 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.

Off-Balance Sheet Arrangements

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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