What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-07-03 compared with 2023-04-13 · 118 added, 169 removed, 138 unchanged (68% of the section changed)

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

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

to, those discussed above and in “Risk Factors.” We undertake no obligation to publicly update or revise any forward-looking

statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon

forward-looking statements.

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

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 periods ended December 31, 2022 and 2021 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.

The financial information presented below

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

Stockholders’ Equity and Cash Flow for the periods ended December 31, 2023 and 2022 gives effect to our acquisition of OXYS

Corporation (“ OXYS ”) on July 28, 2017 and HereLab, Inc.

In accordance with the accounting reporting requirements

for the recapitalization related to the “reverse merger” of OXYS, the consolidated 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 its subsidiaries have been eliminated.

Forward-Looking Statements

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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:

results and those contemplated by forward-looking statements 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;

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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,”

This management 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.

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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.

We continually evaluate the accounting policies and estimates used to prepare 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.

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.

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, 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.

Historical Background

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of our Common Stock and changed our management to Mr.

DiBiase who also served in management of OXYS.

DiBiase who also served in the management of OXYS.

Also, one of our principal shareholders

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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.

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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December 31, 2023 compared to the year ended December 31, 2022

the year ended December 31, 2023, we earned revenues of $114,666 and incurred related cost of sales of $76,645.

Our operating expenses

were $731,430 which included professional fees of $172,704, payroll costs of $244,083, amortization of intangible assets of $49,500, bad

debts of $215,069 and other general and administrative expenses of $51,029.

We recorded net other expenses of $374,530 consisting of a

loss of $185,973 due to debt extinguishment on notes payable

due to change in conversion price, interest income on note receivable of $25,969, offset by interest expense of $210,426 and loss on change

in fair market value of derivative liability of $4,100.

We also recorded $68,531 as preferred stock dividend on convertible preferred

stock for the year ended December 31, 2023.

As a result, we incurred a net loss of $1,136,460 for

the year ended December 31, 2023.

For the year ended December 31, 2022, we earned

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a net loss of $1,076,881 for the year ended December 31, 2022.

Comparatively, for the year ended December 31,

2021, we earned revenues of $11,280 and incurred related cost of sales of $2,040.

Our Operating expenses were $889,141 which included

professional fees of $508,153, payroll costs of $301,707, amortization of intangible assets of $49,771, and general and administrative

expenses of $29,510.

We recorded net other expenses of $161,333, consisting of interest expense of $430,999 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 $102,966,

gain on extinguishment of debt of $120,000, other income of $46,700 consisting of forgiveness of PPP Loan of $36,700 and EIDL advance

of $10,000, We also recorded $22,320 as preferred stock dividend on convertible preferred stock for the year ended December 31, 2021.

As a result, we incurred a net loss of $1,063,554 for the year ended December 31, 2021.

During the current and prior period, we did not

During the current and prior year, we did not

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

Year over Year (YoY) revenue increased significantly

in 2022 over 2021, by 7.9X (688% increase).

This YoY growth was anticipated by our leadership team in our 2021 Annual Report on Form 10-K,

and we’re pleased to deliver this growth for our shareholders.

We had a strong finish to 2022, with fourth quarter revenue exceeding

that in the third quarter, also as promised.

It marked three consecutive quarters of quarter-over-quarter revenue growth.

While our Quarterly

Report on Form 10-Q for the period ended September 30, 2022 disclosed risks of ongoing concerns (and those concerns still exist), there

are several factors that led to this strong growth in 2022 which are as follows:

- Our DOT Bridge Monitoring contract:

We were awarded a six-figure sub-contract from a major northeast state's

DOT for bridge monitoring, in addition to the extension that was given on the previous contract.

This enabled us to deliver consistent

revenue beginning in the second quarter, continuing through the remainder of the year, and will continue through June of 2023.

this substantiates the strength of our Structural Health Monitoring (SHM) solutions and bolsters our ability to gain new business in this

vertical with both current and new customers.

- Our continued focus on our Smart Manufacturing vertical enabled us to secure a CNC Proof of Concept (POC)

contract in December 2022.

The POC successfully kicked off in January 2023.

- Our partnership with the Canadian Indoor Air Quality Sensor and IIoT Platform company, Aretas Sensor Networks,

with whom we entered into an NDA in the first quarter, progressed well through the year.

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 the third quarter.

We also signed a co-marketing and co-selling agreement with Aretas in the third quarter and began selling in the

fourth quarter of 2022.

- We secured and retained key talent.

The full time Machine Learning Engineer, hired in the first quarter,

expanded 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.

These accomplishments are proof that our successful

pilots in our key industry verticals have resulted in new business and will continue to do so in 2023 and beyond.

Also, the strength of

the Aingura IIoT, S.G.

collaboration agreement has bolstered financial stability, added talent breadth and depth, and provides complimentary

industry segment experience.

Furthermore, liquidity of our stock has attracted funding that gives us access to additional capital.

capital will enable the funding of business development, staff augmentation, and inorganic growth opportunities.

It is anticipated that 2023 YoY revenue growth

will meet or exceed that of 2022.

This is due to these aforementioned reasons:

the strength of the Aingura IIoT, S.G.

collaboration,

successful pilots in all three of our key target industries, use cases and marketing collateral from the pilots’ data and algorithms,

experienced leadership, savvy technological talent, and operational execution excellence.

Our continued focus on high potential growth

markets, has yielded numerous prospects for future growth.

Furthermore, the strength of our target markets continues, the global smart

manufacturing (also known as Industry 4.0) was $97.6 B USD in 2022 and will reach $228.3 B USD by 2027 (CAGR 18.5%);

worldwide Structural Health Monitoring (SHM) 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 was

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

3 We believe our

strengths in these markets will yield breakthroughs in additional new contracts with current customers, as well as new customers in all

targeted industry segments.

By combining the resulting organic growth with strong strategic partnerships, we believe these revenue goals

are achievable.

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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

Revenues earned in 2023 were a substantial improvement

over the same period in 2022 (an increase of 29%).

We expect revenue to moderate in 2024, as our ability to raise funding to fuel sales

& marketing efforts has been limited.

Potential future revenue growth is possible, pending adequate funding for sales and marketing

efforts and building on the strength of the following factors:

Our current DOT Bridge Monitoring Contract and overall Structural Health Monitoring (“ SHM ”) vertical is the foundation of our revenue stream.

Discussions with our main contractor to the DOT for extensions and expansions continue to be favorable.

We also continue to 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 2024.

Our Smart Manufacturing vertical is benefiting from the progress on our CNC SaaS contract that commenced in June 2023 and continued through the fourth quarter of 2023.

In February 2024, we renewed our CNC SaaS contract with our current customer.

Initial public endorsements and promotional videos have been released and additional videos are planned for release in the third quarter of 2024.

These endorsements and promotional videos along with grass-roots sales & marketing efforts have generated additional sales leads for potential paid CNC POCs and additional SaaS contracts, which may contribute to revenue in the third quarter of 2024 and beyond.

It is also 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.

Our strategic partnership development continues to be a “force multiplier” for us.

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.

Despite these strengths, we continue to face significant

headwinds and we have not been able to raise material 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 has

severely 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 its options for both the short and long term.

Given the current challenges in raising adequate

funds, management is pursuing options including vetting suitable companies to merge with or acquire us.

We believe we’ve created substantial value

from our business development in these industries, which have potential for success, due to the strength of their size and growth.

global smart manufacturing (also known as Industry 4.0) was $108.9 billion in 2023 and will reach $241 billion by 2028 (CAGR 17.2%), 1

and the worldwide SHM industry is $2.5 billion in 2024 and will reach $4.1 billion by 2029 (CAGR of 10.4%).

Given the valuable real-world data we have collected,

our Artificial Intelligence (“AI”) Machine Learning algorithms we have developed, compelling use cases and marketing collateral

developed from our data and algorithms, combined with our experienced leadership, savvy technological talent, and prudent operational

execution, we believe our company’s assets have potential continued annual revenue growth, that will be attractive to prospective

partners interested in an acquisition or merger.

Liquidity and Capital Resources for the

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

At December 31, 2022, we had a cash balance of

$33,336, which represents a $13,485 decrease from the $46,821 cash balance at December 31, 2021.

This decrease was primarily as a result

of net cash used in operating activities of $657,009, cash paid for note receivable of $200,000, and cash received from convertible notes

payable of $545,924 and cash received from the sale of Series B Preferred Stock of $297,600.

Our working capital deficit at December 31,

2022 was $1,606,828, as compared to a working capital deficit of $1,108,786 at December 31, 2021, respectively.

For the year ended December 31, 2022, we incurred

a net loss of $1,076,881.

Net cash flows used in operating activities was $657,009 for the year ended December 31, 2022.

For the year ended December 31, 2021, we incurred

a net loss of $1,063,554.

Net cash flows used in operating activities was $628,103 for the year ended December 31, 2021.

For the year ended December 31, 2022, cash used

in investing activities was $200,000 payment towards a note receivable.

For the year ended December 31, 2022, net cash

flows provided by financing activities were $843,534, consisting of cash received from the issuance of Convertible Notes payable of $545,924

and cash proceeds from sale of Series B Preferred Stock of $297,600, respectively.

For the year ended December 31, 2021, net cash

flows provided by financing activities were $571,850, consisting of cash received from the issuance of Convertible Notes payable of $470,850

and cash proceeds from sale of Series B Preferred Stock of $101,000, respectively.

As of December 31, 2023, we reported a cash

balance of $644 as a result of decrease of $32,692 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 $146,564 and net cash provided by financing activities of $113,872.

Operating Activities

Net cash flows used in operating activities for

the year ended December 31, 2023 was $146,564, primarily attributed to the net loss of $1,136,460, stock compensation expense of $4,665,

bad debts of $214,103, amortization of debt discount on notes payable and preferred stock of $12,400, amortization of intangible assets

of $49,500 and loss on extinguishment of notes payable of $186,294.

The Company recorded changes in operating assets and liabilities of

$522,935 primarily attributable to decrease in accounts receivable of $4,662 due to collections from customers, decrease in prepaid expenses

and other current assets of $5,467, increase in accounts payable of $86,145 due to negotiating longer payment terms, increase in accrued

liabilities of $248,368 due to non-payment of additional interest accrued on notes payable, increase in derivative liabilities due to

the change in the fair value of derivative liabilities of $65,779, decrease in unearned interest of $5,151, increase in shares payable

to related parties of $601, and increase in salaries payable to related parties of $117,063.

Net cash flows used in operating activities for

the year ended December 31, 2022 was $657,009, primarily attributable to net loss of $1,076,881, stock compensation expense of $900, discount

on note receivable of $4,719, and amortization of intangible assets of $49,500.

The Company recorded a net change in operating assets

and liabilities of $364,756 attributable to net increase in accounts receivable of $17,661, decrease in accounts payable of $27,763, net

increase in accrued liabilities of $148,558, net increase in derivative liabilities of $267,257, increase in unearned interest of $5,151,

decrease in deferred revenues of $15,000, increase in shares payable to related parties of $14,624, and a net increase in salaries payable

to related parties of $10,410.

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

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

Investing Activities

Net cash used in investing activities for the

year ended December 31, 2023 was $0.

Net cash used in investing activities for the year ended December 31, 2022 resulted due to cash advanced

for a promissory note receivable totaling $200,000.

Financing Activities

Net cash provided by financing activities for

the year ended December 31, 2023 was $113,872 primarily due to sale of our common stock of $51,872 net of costs incurred in capital raise,

and sale of Series B convertible preferred stock of $62,000.

Cash provided by financing activities for the year ended December 31, 2022

was $843,524 primarily due to cash received from sale of common stock of $557,065 net of $11,141 cash paid for costs incurred in raising

capital, and cash received from sale of Series B convertible preferred stock of $297,600.

As a result of the above activities, the Company

recorded a decrease in cash of $32,692 for the year ended December 31, 2023, and a decrease in cash of $13,485 for the same comparable

period ended December 31, 2022, respectively.

The accompanying consolidated financial statements

have been prepared assuming we will continue as a going concern.

As shown in the accompanying financial statements, we have incurred net

loss from operations of $1,076,881 for the year ended December 31, 2022, and net loss of $1,063,554 for the year ended December 31, 2021,

and have an accumulated deficit of $9,307,137 as of December 31, 2022, which raises substantial doubt about our ability to continue as

a going concern.

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

As shown in the financial statements, the Company has suffered

continuing operating losses, has a working capital deficit of $2,067,461, used cash flows in operating activities of $146,564, and has

an accumulated deficit of $10,443,597 as of December 31, 2023.

These factors, among others, raise 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.

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards

Board issued Accounting Standards Update (“ ASU ”) ASU No.

2019-12, Income Taxes (Topic 740) , Simplifying the

Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes

certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, and interim

periods within fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company is currently evaluating the

impact of this guidance on its consolidated financial statements.

Effective January 1, 2022, we early adopted ASU

2020-06, “ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own

Equity” using the modified retrospective method of adoption.

ASU 2020-06 simplifies the accounting for convertible instruments by

removing certain separation models in Subtopic 470- 20, Debt—Debt with Conversion and Other Options , for convertible

Under ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments

with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do

not result in substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument will be accounted for

as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives.

By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest

rate when applying the guidance in Topic 835, Interest.

We now account for our Convertible Notes as single liabilities measured at amortized

Other accounting standards that have been issued

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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-K

Item 7. Management’s Discussion and Analysis