0001683168-20-002810.txt : 20200819 0001683168-20-002810.hdr.sgml : 20200819 20200819133403 ACCESSION NUMBER: 0001683168-20-002810 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 43 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200819 DATE AS OF CHANGE: 20200819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IIOT-OXYS, Inc. CENTRAL INDEX KEY: 0001290658 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 562415252 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-50773 FILM NUMBER: 201116434 BUSINESS ADDRESS: STREET 1: 705 CAMBRIDGE ST. CITY: CAMBRIDGE STATE: MA ZIP: 02141 BUSINESS PHONE: 401-307-3092 MAIL ADDRESS: STREET 1: 705 CAMBRIDGE ST. CITY: CAMBRIDGE STATE: MA ZIP: 02141 FORMER COMPANY: FORMER CONFORMED NAME: Gotham Capital Holdings, Inc. DATE OF NAME CHANGE: 20150805 FORMER COMPANY: FORMER CONFORMED NAME: Creative Beauty Supply of New Jersey CORP DATE OF NAME CHANGE: 20040517 10-Q 1 iiot_10q-033120.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

		For the quarterly period ended March 31, 2020

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

		For the transition period from _______________________to___________________________

Commission File Number: 000-50773

IIOT-OXYS, Inc.

(Exact name of registrant as specified in its charter)

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

705 Cambridge Street, Cambridge, MA	02141
(Address of principal executive offices)	(Zip Code)

(401) 307-3092

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of each exchange on which registered
Not applicable		Not applicable		Not applicable

Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports).

Yes x No ☐

Indicate by check mark whether the registrant has been subject to such filing requirements for the past 90 days.

Yes x No ☐

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

Yes x No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	x
		Emerging growth company	x

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares outstanding of the registrant’s common stock on August 18, 2020, was 141,825,630.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION	4

Item 1. Financial Statements	4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3. Quantitative and Qualitative Disclosures About Market Risk	25

Item 4. Controls and Procedures	25

PART II—OTHER INFORMATION	26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3. Defaults Upon Senior Securities	26

Item 6. Exhibits	26

SIGNATURES	27

Introductory Comment

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

In filing the Quarterly Report on Form 10-Q (the “Quarterly Report”) at this time, we are relying upon the orders (the “Orders”) issued by the Securities and Exchange Commission (the “SEC”) on March 4, 2020 and March 25, 2020 pursuant to Section 36 (Release Nos. 34-88318 and 34-88465) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), extending the time in which certain reports required to be filed pursuant to the Exchange Act are filed, and the Current Report on Form 8-K we filed on March 27, 2020, pursuant to which we reported that we may be unable to file this Quarterly Report on a timely basis because of the impact of COVID-19, which had and would adversely impact the ability of the individuals preparing the Quarterly Report to complete such task on a timely basis. We were unable to file this Quarterly Report on the original due date because (i) of the impact of COVID-19 for the reasons disclosed in the Current Report on Form 8-K filed on March 27, 2020 and (ii) management's devoting significant time and attention to assessing and responding to the impact of COVID-19.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

IIOT-OXYS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of March 31, 2020 and December 31, 2019

(unaudited)

	March 31, 2020			December 31, 2019

Assets
Current Assets
Cash and Cash Equivalents	$	34,105		$	24,212
Accounts Receivable, net		15,600			28,004
Prepaid Expense		4,081			3,710
Inventory		–			–
Total Current Assets		53,786			55,926

Intangible Assets, net		385,151			397,492
Total Assets	$	438,937		$	453,418

Liabilities and Stockholders' (Deficit)
Current Liabilities
Shares Payable to Related Parties	$	1,283,872		$	1,102,645
Salaries Payable to Related Parties		347,205			343,227
Derivative Liability		146,410			–
Accounts Payable		145,728			164,562
Accrued Liabilities		50,189			54,497
Deferred Revenue		46,425			–
Total Current Liabilities		2,019,829			1,664,931

Notes Payable, net		858,092			706,508
Due to Stockholder		1,000			1,000
Total Liabilities		2,878,921			2,372,439

Commitments and Contingencies (Note 8)

Stockholders' (Deficit)
Preferred stock $0.001 par value, 10,000,000 shares authorized; 0 issued and outstanding		–			–
Common stock $0.001 par value, 190,000,000 shares authorized; 67,063,547 and 43,313,547 shares issued and outstanding, respectively		67,064			43,314
Additional Paid-in Capital		3,526,326			3,077,972
Accumulated Deficit		(6,033,374	)		(5,040,307	)

Total Stockholders' Deficit		(2,439,984	)		(1,919,021	)
Total Liabilities and Stockholders' Deficit	$	438,937		$	453,418

See accompanying notes to unaudited condensed consolidated financial statements.

IIOT-OXYS, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2020 and 2019

(unaudited)

	Three Months Ended March 31,
	2020			2019
Revenues
Sales	$	15,600		$	42,837
Cost of Sales		8,634			12,169
Gross Profit		6,966			30,668

Expenses
Demo Parts		–			63
Bank Service Charges		1,422			700
Office Expenses		973			6,871
Organization Costs		11,147			5,240
Insurance		–			6,906
Professional		187,121			488,806
Travel		–			4,816
Patent License Fee		1,644			1,430
Amortization of Intangible Assets		12,341			12,206
Total Expenses		214,648			527,038

Other Income (Expense)
Loss on Change in FMV of Derivative Liability		(63,908	)		–
Loss on Extinguishment of Debt		–			(221,232	)
Interest Expense		(518,289	)		(62,436	)
Miscellaneous Income		409			–
Total Other Income (Expense)		(581,788	)		(283,668	)

Net Loss	$	(789,470	)	$	(780,038	)

Loss per Common Share	$	(0.02	)	$	(0.02	)

Weighted Average Number of Shares Outstanding - Basic and Diluted		45,245,415			41,175,686

See accompanying notes to unaudited condensed consolidated financial statements.

IIOT-OXYS, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity (Deficit)

For the Three Months Ended March 31, 2020 and 2019

(unaudited)

	Common Stock			Additional Paid-In		Accumulated			Total Stockholders' Equity
	Shares	Amount		Capital		Deficit			(Deficit)
Balance December 31, 2018	40,633,327	$	40,633	$	2,572,751	$	(3,153,020	)	$	(539,636	)

Stock-based compensation	1,176,996		1,177		169,114		–			170,291

Beneficial conversion feature discount on note payable	–		–		38,222		–			38,222

Net loss	–		–		–		(780,038	)		(780,038	)

Balance March 31, 2019	41,810,323	$	41,810	$	2,780,087	$	(3,933,058	)	$	(1,111,161	)

Balance December 31, 2019	43,313,547	$	43,314	$	3,077,972	$	(5,040,307	)	$	(1,919,021	)

Common stock issued for conversion of convertible note payable	23,750,000		23,750		3,938		–			27,688

Relief of derivative liabilities	–		–		77,386		–			77,386

Warrants issued for default of convertible note payables	–		–		163,433		–			163,433

Changes in FMV of warrants related to convertible note payables	–		–		203,597		(203,597	)		–

Net loss	–		–		–		(789,470	)		(789,470	)

Balance March 31, 2020	67,063,547	$	67,064	$	3,526,326	$	(6,033,374	)	$	(2,439,984	)

See accompanying notes to unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2020 and 2019

(unaudited)

	Three Months Ended March 31,
	2020			2019

Cash Flows from Operating Activities:
Net Loss	$	(789,470	)	$	(780,038	)

Adjustments to reconcile net loss to net cash from operating activities:
Loss on Extinguishment of Debt		–			221,232
Stock Based Compensation		–			290,555
Amortization of Discount on Notes Payable		24,022			46,028
Amortization of Intangible Assets		12,341			12,206
Loss on Issuance of Default Warrants		163,433			–
Increase in Principal Due to Penalty Provision		146,250			–
Increase in Principal Due to Fees		9,000			–



Changes in assets and liabilities:
(Increase) Decrease in:
Accounts Receivable		12,404			(9,837	)
Inventory		–			(190	)
Prepaid Expense		(371	)		(5,622	)
Increase (Decrease) in:
Shares Payable to Related Parties		181,227			–
Salaries Payable to Related Parties		3,978			–
Derivative Liability		223,796			–
Accounts Payable		(18,834	)		106,686
Accrued Liabilities		(4,308	)		513
Deferred Revenue		46,425			–
Net Cash Provided by (Used by) Operating Activities		9,893			(118,467	)

Cash Flows from Financing Activities:
Cash Received from Convertible Note Payable		–			155,000
Net Cash Provided by Financing Activities		–			155,000

Net Increase in Cash and Cash Equivalents		9,893			36,533

Cash and Cash Equivalents at Beginning of Period		24,212			39,226

Cash and Cash Equivalents at End of Period	$	34,105		$	75,759

Supplemental disclosure of cash flow information:
Interest paid during the period	$	–		$	15,074
Taxes paid during the period	$	24,295		$	–
Supplemental disclosure of non-cash investing and financing activities:
Discount on notes payable	$	–		$	38,222
Conversion of Convertible Notes Payable and Derivative Liabilities	$	105,074		$	–
Warrant Anti-Dilution Issuance	$	203,597		$	–

See accompanying notes to unaudited condensed consolidated financial statements.

IIOT-OXYS, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2020

1. NATURE OF OPERATIONS

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Interim Financial Statements

The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2019.

Principles of Consolidation

The consolidated financial statements for March 31, 2020 and 2019 include the accounts of IIOT-OXYS, Inc., OXYS Corporation, and HereLab, Inc. All significant intercompany balances and transactions have been eliminated.

Revenue Recognition

The Company’s revenue is derived primarily from providing services under contractual agreements. The Company recognizes revenue in accordance with ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”) which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all active contracts as of the adoption date. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company's method of recognizing revenue under ASC 606 yielded similar results to the method utilized immediately prior to adoption. Accordingly, there was no effect to each financial statement line item as a result of applying the new revenue standard.

According to ASC 606, the Company recognizes revenue based on the following criteria:

	·	Identification of a contract or contracts, with a customer.
	·	Identification of the performance obligations in the contract.
	·	Determination of contract price.
	·	Allocation of transaction price to the performance obligation.
	·	Recognition of revenue when, or as, performance obligation is satisfied.

The Company used a practical expedient available under ASC 606-10-65-1(f)4 that permits it to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The Company has elected to treat shipping and handling activities as cost of sales. Additionally, the Company has elected to record revenue net of sales and other similar taxes.

Use of Estimates

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

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company was only recently formed, has incurred continuing operating losses, and has an accumulated deficit of $6,033,374 and $5,040,307 as of March 31, 2020 and December 31, 2019, respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

Management believes that the Company will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations for the next 12 months by generating cash through additional borrowings and/or issuances of equity securities, as needed. However, there can be no assurance that the Company will be able to generate sufficient liquidity to maintain its operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Concentration of Risk

Financial instruments that potentially expose the Company to concentrations of risk consist primarily of cash and cash equivalents which are generally not collateralized. The Company’s policy is to place its cash and cash equivalents with high quality financial institutions, in order to limit the amount of credit exposure. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC), up to $250,000. As of March 31, 2020, and December 31, 2019, the Company had no amounts in excess of the FDIC insurance limit.

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. The Company determines the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. There was no allowance for doubtful accounts as of March 31, 2020 and December 31, 2019.

Fair Value of Financial Instruments

The fair value of the Company’s financial instruments is determined in accordance with ASC 820, Fair Value Measurements and Disclosures.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes.

Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of its long-lived assets to determine whether indicators of impairment may exist that warrant adjustments to the carrying value or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives.

Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Convertible Debt

Convertible debt is accounted for under FASB ASC 470, Debt – Debt with Conversion and Other Options.

Basic and Diluted Net Loss Per Common Share

The Company computes basic and diluted net loss attributable to common stockholders for the period under ASC 260-10, Earnings Per Share.

3. RECENT ACCOUNTING PRONOUNCEMENTS

ASU 2019-12

In December 2019, the FASB issued 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.

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

4. COMMITMENTS AND CONTINGENCIES

In prior years, the Company entered into consulting agreements with one director, three executive officers, and one engineer of the Company which include commitments to issue shares of the Company’s common stock from the Company’s Stock Incentive Plans. Two agreements have been terminated and shares have been issued in conjunction with the related separation agreements, but the vested shares related to the remaining consulting agreements with the three executive officers have not yet been issued and, therefore, remain a liability. According to the remaining three agreements, 1,269,000 shares vested in 2019, 600,000 shares vested during the quarter ended March 31, 2020, 1,800,000 shares of common stock will vest during the remainder of 2020, and 3,600,000 shares of common stock will vest in 2021.

According to the agreements with the executive officers the shares vest annually over three years on the anniversary of each agreement.

In the event that the agreement is terminated by either party pursuant to the terms of the agreement, all unvested shares which have been earned shall vest on a pro-rata basis as of the effective date of the termination of the agreement and all unearned, unvested shares shall be terminated.

The value of the shares was assigned at fair market value on the effective date of the agreement and the pro-rata number of shares earned was calculated and amortized at the end of each reporting period. The Company accrued $1,283,872 and $1,102,645 in shares payable in conjunction with these agreements as of March 31, 2020 and December 31, 2019, respectively. A summary of these agreements is as follows.

On March 11, 2019, the Company’s Board of Directors approved the Consulting Agreement dated effective June 4, 2018 with its CEO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the CEO pursuant to the agreement are those customary for the position in which the CEO is serving. As of the effective date, the Company shall issue to the CEO an aggregate of 3,060,000 shares of the Company’s common stock which vest as follows:

1. 560,000 shares on the first-year anniversary of the effective date;

2. 1,000,000 shares on the second-year anniversary of the effective date; and

3. 1,500,000 shares on the third-year anniversary of the effective date.

The shares are issued under the 2019 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange. As of March 31, 2020, and December 31, 2019, 560,000 shares had vested, but were not yet issued.

As part of the Consulting Agreement dated June 4, 2018 the CEO shall also receive a monthly fee of $15,000 which accrues unless converted into shares of common stock of the Company at a conversion rate specified in the agreement. Until the Company closes a minimum $500,000 capital raise, the monthly fee accrues and, upon the closing of such a capital raise, $5,000 of the monthly fee will be paid to the CEO in cash and the remainder will continue to accrue. Upon the closing of a capital raise of at least $2,000,000, the entire monthly fee will be paid to the CEO in cash and all accrued and unpaid monthly fees will be paid by the Company within one year of the closing of such a capital raise.

On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the CEO, pursuant to which the CEO forgave $185,000 of accrued and unpaid consulting fees owed to him pursuant to his consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the CEO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%).

On March 11, 2019, the Company’s Board of Directors approved the Consulting Agreement dated effective October 1, 2018 with its COO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the COO pursuant to the agreement are those customary for the position in which the COO is serving. As of the effective date, the Company shall issue to the COO an aggregate of 2,409,000 shares of the Company’s common stock which vest as follows:

1. 409,000 shares on the first-year anniversary of the effective date;

2. 800,000 shares on the second-year anniversary of the effective date; and

3. 1,200,000 shares on the third-year anniversary of the effective date.

The shares are issued under the 2017 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange. As of March 31, 2020, and December 31, 2019, 409,000 shares had vested, but were not yet issued.

As part of the Consulting Agreement dated October 1, 2018 the COO shall receive a monthly fee of $12,750 which accrues unless converted into shares of common stock of the Company at a conversion rate specified in the agreement. Until the Company closes a minimum $500,000 capital raise, the monthly fee accrues and, upon the closing of such a capital raise, $4,250 of the monthly fee will be paid to the COO in cash and the remainder will continue to accrue. Upon the closing of a capital raise of at least $2,000,000, the entire monthly fee will be paid to the COO in cash and all accrued and unpaid monthly fees will be paid by the Company within one year of the closing of such a capital raise.

On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the COO, pursuant to which the COO forgave $103,250 of accrued and unpaid consulting fees owed to her pursuant to her consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the COO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%).

On March 11, 2019, the Company’s Board of Directors approved the Amended and Restated Consulting Agreement dated effective April 23, 2018 with its CTO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the CTO pursuant to the agreement are those customary for the position in which the CTO is serving. As of the effective date, the Company shall issue to the CTO an aggregate of 1,800,000 shares of the Company’s common stock which vest as follows:

1. 300,000 shares on the first-year anniversary of the effective date;

2. 600,000 shares on the second-year anniversary of the effective date; and

3. 900,000 shares on the third-year anniversary of the effective date.

As of March 31, 2020, and December 31, 2019, 900,000 and 300,000 shares had vested, respectively, but were not yet issued.

As part of the Amended and Restated Consulting Agreement dated effective April 23,2018 the CTO shall receive a monthly fee of $9,375 which accrues unless converted into shares of common stock of the Company at a conversion rate specified in the agreement. Until the Company closes a minimum $500,000 capital raise, the monthly fee accrues and, upon the closing of such a capital raise, $3,125 of the monthly fee will be paid to the CTO in cash and the remainder will continue to accrue. Upon the closing of a capital raise of at least $2,000,000, the entire monthly fee will be paid to the CTO in cash and all accrued and unpaid monthly fees will be paid by the Company within one year of the closing of such a capital raise.

On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the CTO pursuant to which the CTO forgave $82,475 of accrued and unpaid consulting fees owed to him pursuant to his consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the CTO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%).

5. STOCKHOLDERS' EQUITY

Common Stock

The Company has authorized 190,000,000 shares of $0.001 par value common stock and 10,000,000 shares of $0.001 par value preferred stock. As of March 31, 2020, and December 31, 2019, the Company had 67,063,547 and 43,313,547 shares of common stock and no shares of preferred stock issued and outstanding, respectively.

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

On December 14, 2017 (the “Effective Date”), the Board of Directors of the Company approved the 2017 Stock Inventive Plan (the “2017 Plan”). Awards may be made under the 2017 Plan for up to 4,500,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the 2017 Plan. No awards can be granted under the 2017 Plan after the expiration of 10 years from the Effective Date but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.

On March 11, 2019 (the “Effective Date”) the Board of Directors of the Company approved the 2019 Stock Incentive Plan (the “Plan”). Awards may be made under the Plan for up to 5,000,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the Plan. No awards can be granted under the Plan after the expiration of 10 years from the Effective Date but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.

Shares earned and issued related to the consulting agreements discussed in Note 4 are issued under the 2017 Stock Incentive Plan and the 2019 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange.

A summary of the status of the Company’s non-vested shares as of March 31, 2019 and 2020 and changes during the year then ended, is presented below:

	Non-vested Shares of Common Stock			Weighted Average Fair Value
Balance at December 31, 2018		7,469,000		$	0.30
Awarded		–			–
Vested		(300,000	)		0.30
Forfeited		–			–
Balance at March 31, 2019		7,169,000		$	0.30

Balance at December 31, 2019		6,000,000		$	0.30
Awarded		–			–
Vested		(600,000	)		0.30
Forfeited		–			–
Balance at March 31, 2020		5,400,000		$	0.30

As of March 31, 2020, and December 31, 2019 there was $896,828 and $1,078,055, respectively, of total unrecognized compensation costs related to the non-vested share-based compensation arrangements awarded to consultants. That cost is expected to be recognized over a weighted-average period of 1.2 years and 1.4 years, respectively, as of March 31, 2020 and December 31, 2019. The total fair value of shares recognized during the three months ended March 31, 2020 and 2019 was $181,227 and $152,765, respectively.

On March 6, 2020, six months from receipt of the first tranche of $35,000 under the Convertible Promissory Note issued on August 29, 2019, the Company failed to pay the accrued and unpaid interest, which is considered an “Event of Default” under the note. As a result, the conversion price became a “Variable Conversion Price.” Also, as a result of the occurrence of the “Event of Default,” all amounts owing under the note became immediately due and payable and the Company became obligated to pay to the holder 175% of the then outstanding balance of the note and all unpaid principal and unpaid interest accrued interest at 15%. During March 2020, the holder of the note had converted $18,668 of principle plus fees into 23,750,000 shares of Common Stock amounting to $27,688.

Total share-based compensation for the three months ended March 31, 2020 and 2019 was $208,915 and $323,056, respectively.

Warrants

A summary of the status of the Company’s warrants as of March 31, 2020 and 2019 and changes during the three months then ended, is presented below:

	Shares Under Warrants		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life
Outstanding at December 31, 2018		384,615	$0.75
Issued		286,667	$0.36
Exercised		–
Expired/Forfeited		–
Outstanding at March 31, 2019		671,282	$0.43	5.7 years

Outstanding at December 31, 2019		1,627,532	$0.21	4.5 years
Issued		42,907,532	$0.01
Exercised		–
Expired/Forfeited		–
Outstanding at March 31, 2020		44,535,064	$0.00	4.4 years

6. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share of common stock for the three months ended March 31, 2020 and 2019:

	Three months ended March 31,
	2020			2019
Net loss attributable to common stockholders (basic)	$	(789,470	)	$	(780,038	)

Shares used to compute net loss per common share, basic and diluted		42,245,415			41,175,686

Net loss per share attributable to common stockholders, basic and diluted	$	(0.02	)	$	(0.02	)

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include stock options, convertible debt, convertible preferred stock and common stock warrants have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.

The following outstanding common stock equivalents have been excluded from diluted net loss per common share for the three months ended March 31, 2020 and 2019 because their inclusion would be anti-dilutive:

	March 31, 2020		March 31, 2019
Warrants to purchase common stock		44,535,064		671,282
Potentially issuable shares related to convertible notes payable		43,338,312		3,084,615
Potentially issuable vested shares to directors and officers		1,869,000		300,000
Potentially issuable unvested shares to officers		5,400,000		7,169,000
Total anti-dilutive common stock equivalents		95,142,376		11,224,897

7. CONVERTIBLE NOTE PAYABLE

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

The notes are governed by a Securities Purchase Agreement and are secured by all the assets of the Company pursuant to a Security and Pledge Agreement. In addition to the issuance of the notes in the offering, the Company’s Board of Directors approved, as part of the offering, the issuance of warrants to purchase one share of the Company’s common stock for 50% of the number of shares of common stock issuable upon conversion of each note. Each warrant is immediately exercisable at $0.75 per share, contains certain anti-dilution down-round features and expires on January 15, 2023. If the Company ever defaults on the loan the warrants to be issued will increase from 50% of the number of shares of common stock issuable upon conversion to 100%.

On January 22, 2018, the Company entered into a SPA and Security and Pledge Agreement with its first investor in the offering and issued a note to the investor in the principal amount of $500,000. Subscription funds were received by the Company from the investor on February 7, 2018. In addition to the note, the Company issued to the investor 384,615 warrants. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.

The proceeds received upon issuing the note and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $838,404 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.1%; and volatility of 142%. The effective conversion rate resulted in a Beneficial Conversion Feature greater than the proceeds received. Thus, the discount was limited to the proceeds received of $500,000 and was amortized to interest expense using the effective interest method over the term of the note.

On March 7, 2019, the Board of Directors of the Company approved Amendment No. 1 to the 12% Senior Secured Convertible Promissory Note and the Warrant Agreement, each issued January 22, 2018, respectively, to the note holder. The amendments (i) extend the maturity date of the note to March 1, 2021 and extend the term of the warrants to March 6, 2024, (ii) lower the conversion price of the note and the exercise price of the warrants to $0.20 and $0.30, respectively, and (iii) add an adjustment to the conversion and exercise price of the note and warrants, respectively, in the event the Company does not achieve certain milestones during calendar 2019. The fair value of the warrants is $25,162 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.6%; and volatility of 127%. The effective conversion rate resulted in a discount of $23,956 and is amortized to interest expense using the effective interest method over the term of the note. The Company recognized a loss on extinguishment of debt of $221,232 related to the decrease in conversion price.

On January 1, 2020, the Company failed to achieve certain milestones during calendar 2019 and, as such, the conversion/exercise prices of the note and warrants were adjusted to $0.10 and $0.15, respectively. This resulted in an adjustment to retained earnings of $201 based on the change in fair value.

Effective January 15, 2020, the Company went into technical default of the note agreement as a result of not making the December 31, 2019 interest payment within the required period. As a result, the principal was increased by 20%, or $100,000, and the Company was required to issue an additional 384,615 warrants at the then effective exercise price of $0.15 per share. The fair value of the warrants was $44,297, determined using the Black-Scholes valuation model with the following assumptions: expected term of 4.14 years; risk free interest rate of 1.6%; and volatility of 243%. Due to the default, this value was immediately expensed.

As of March 31, 2020, the exercise price of the warrants was further adjusted to $0.00084 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $71 based on the change in fair value.

As of March 31, 2020, the Company has accrued interest related to this note of $31,578. For the three months ended March 31, 2020, the Company also amortized to interest expense $2,999 of the discount.

The unpaid principal balance of the note is $600,000 as of March 31, 2020, which includes the default penalty noted above, and the remaining unamortized discount is $11,039.

On January 22, 2019, the Company entered into a Securities Purchase Agreement and Security and Pledge Agreement with a single investor and issued a Secured Convertible Promissory Note to the investor in the principal amount of $55,000. In addition to the note, the Company issued to the investor 36,667 warrants. Each warrant is immediately exercisable at $0.75 per share, contains certain anti-dilution down-round features and expires on January 22, 2024. If the Company ever defaults on the loan, the warrants to be issued will increase from 50% of the number of shares of common stock issuable upon conversion to 100%. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.

The proceeds received upon issuing the note and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $3,217 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.6%; and volatility of 128%. The effective conversion rate resulted in a discount of $3,039 and is amortized to interest expense using the effective interest method over the term of the note.

As of March 31, 2020, the exercise price of the warrants was adjusted to $0.00084 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $7 based on the change in fair value.

The unpaid principal balance of the note and accrued interest is $55,000 and $3,270, respectively, as of March 31, 2020, and the remaining unamortized discount is $0. For the three months ended March 31, 2020, the Company amortized to interest expense $194 from the amortization of the discount. This note and accrued interest is due to a related party. On June 12, 2020, this note was amended to extend the maturity date to March 1, 2021, and all events of default were waived.

On March 7, 2019, the Board of Directors of the Company approved a non-public offering of up to $500,000 aggregate principal amount of its 12% Senior Secured Convertible Notes. The notes are convertible, in whole or in part, into shares of the Company’s common stock, at any time at a rate of $0.20 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The notes bear interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The notes mature March 1, 2021. The conversion price of the notes is also subject to adjustments if the Company does not achieve certain milestones during the calendar year 2019.

The notes are governed by a Securities Purchase Agreement and are secured by all the assets of the Company pursuant to a Security and Pledge Agreement. Funding is subject to the occurrence of certain milestones, as stated in the SPA. In addition to the issuance of the notes in the offering, the Company’s Board of Directors approved, as part of the offering, the issuance of warrants to purchase one share of the Company’s common stock for 50% of the number of shares of common stock issuable upon conversion of each note. Each warrant is immediately exercisable at $0.30 per share and expires five years from the issuance date. The exercise price of the warrants is also subject to adjustments if the Company does not achieve certain milestones during the calendar year 2019.

On March 6, 2019, the Company entered into SPAs and Security and Pledge Agreements with its first two investors in the offering and issued notes to the investors in the aggregate principal amount of $100,000. Subscription funds were received by the Company from the investors on March 6, 2019. In addition to the notes, the Company issued to the investors an aggregate of 250,000 warrants. Each warrant is immediately exercisable at $0.30 per share, contains certain anti-dilution down-round features and expires on March 6, 2024. If the Company ever defaults on the loan the warrants to be issued will increase from 50% of the number of shares of common stock issuable upon conversion to 100%. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.

The proceeds received upon issuing the notes and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $12,646 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.5%; and volatility of 127%. The effective conversion rate resulted in a discount of $11,226 and is amortized to interest expense using the effective interest method over the term of the notes.

Effective January 15, 2020, the Company went into technical default of the note agreement as a result of not making the December 31, 2019 interest payment within the required period. As a result, the principal was increased by 20%, or $20,000, in aggregate, and the Company was required to issue an additional 250,000 warrants at the then effective exercise price of $0.15 per share. The fair value of the warrants was $28,793, determined using the Black-Scholes valuation model with the following assumptions: expected term of 4.14 years; risk free interest rate of 1.6%; and volatility of 243%. Due to the default, this value was immediately expensed.

As of March 31, 2020, the unpaid principal balance of the notes is $120,000, which includes the default penalty noted above, accrued interest is $6,316 and the balance of the unamortized discount is $0. For the three months ended March 31, 2020, the Company also amortized to interest expense $2,037 from the amortization of the discount.

On August 2, 2019, the Company entered into a Securities Purchase Agreement with an investor for the purchase of a 12% Secured Convertible Note in the principal amount of up to $125,000. The note is convertible, in whole or in part, into shares of the Company’s common stock, at any time at a rate of $0.08 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The note bears interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The note matures August 2, 2021. $75,000, $25,000, and $25,000 subscription funds were received by the Company from the investor on August 2, 2019, September 6, 2019, and October 16, 2019, respectively. In addition to the note, the Company issued to the investor an aggregate of 781,250 warrants. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.

The proceeds received upon issuing the note and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $71,035 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 1.6%; and volatility of 132%. The effective conversion rate resulted in a discount of $104,941 and is amortized to interest expense using the effective interest method over the term of the note.

Effective January 30, 2020, the Company went into technical default of the note agreement as a result of not making the December 31, 2019 interest payment within the required period. As a result, the Company was required to issue an additional 781,250 warrants at the then effective exercise price of $0.12 per share. The fair value of the warrants was $90,342, determined using the Black-Scholes valuation model with the following assumptions: expected term of 4.76 years; risk free interest rate of 1.6%; and volatility of 233%. Due to the default, this value was immediately expensed.

As of March 31, 2020, the unpaid principal balance of the notes is $125,000, the accrued interest is $7,389 and the balance of the unamortized discount is $73,430. For the three months ended December 31, 2019, the Company amortized to interest expense $13,216 from the amortization of the discount. This note is payable to a related party.

On August 29, 2019, the Company entered into a Securities Purchase Agreement with an investor for the purchase of a Convertible Promissory Note in the principal amount of up to $105,000. The Note is not convertible within 180 days of receipt of funds for the first closing and is then convertible, in whole or in part, into shares of the Company’s Common Stock at a rate of $0.20 per share. Upon an “Event of Default,” as defined in the note, the conversion price becomes the “Variable Conversion Price” which is defined in the note as “60% multiplied by the Marked Price.” “Market Price” is defined in the note as “the lowest one (1) Trading Price (as defined in the note) for the common stock during the twenty-five (25) Trading Day period ending on the last complete Trading Day prior to the Conversion Date.” The note bears interest at a rate of 10% per annum with principal and accrued and unpaid interest payable six months from the receipt of funds for each tranche under the note. Subscription funds of $30,000 were received by the Company from the investor on September 6, 2019 for which the Company paid a purchase price of $35,000. In addition to the notes, the Company issued to the investor an aggregate of 175,000 warrants. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.

The proceeds received upon issuing the notes and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $15,868 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 1.4%; and volatility of 132%. The effective conversion rate resulted in a discount of $10,378 and is amortized to interest expense using the effective interest method over the term of the notes.

As of March 31, 2020, the exercise price of the warrants was adjusted to $0.00084 and the number of warrants was increased to 41,666,667 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $203,002 based on the change in fair value.

During the three months ended March 31, 2020, the note went into default upon passing its maturity date. As a result, a default penalty of $26,250 was recorded and added to the principal balance. In addition, the conversion price became the “Variable Conversion Price” as defined above. This note is now convertible into a variable number of shares of common stock for which there is no floor to the number of shares that might be required to issue. Based on the requirements of ASC 815, Derivatives and Hedging, the conversion feature represents an embedded derivative that is required to be bifurcated and accounted for as a separate derivative liability. The derivative liability is originally recorded at its estimated fair value and is required to be revalued at each conversion event and reporting period. Changes in the derivative liability fair value are reported in operating results each reporting period.

The Company valued the conversion feature on the date of default resulting in initial liability of $159,888, which was immediately expensed due to the default. During the three months ended March 31, 2020, $18,688 in principal and $9,000 in fees were converted into 23,750,000 shares of common stock. At each conversion date, the Company recalculated the value of the derivative liability associated with the convertible note recording a gain (loss) in connection with the change in fair market value. In addition, the pro-rata portion of the derivative liability as compared to the portion of the convertible note converted was reclassed to additional paid-in capital. During the three months ended March 31, 2020, the Company recorded a loss of $63,908 related to the change of fair value of the derivative liability and recorded $77,386 to additional paid-in capital.

Upon issuance and at each conversion and reporting period date, the Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from $0.0008 to $0.0028, the closing stock price of the Company's common stock on the date of valuation ranging from $0.0022 to $0.021, an expected dividend yield of 0%, expected volatility ranging from 563% to 574%, risk-free interest rates ranging from 0.11% to 0.39%, and an expected term of 0.25 years.

As of March 31, 2020, the unpaid principal balance of the notes including the default penalty is $42,562 and accrued interest is $1,636. For the three months ended March 31, 2020, $5,577 of the note discount has been amortized to interest expense leaving an unamortized balance of $0 as of March 31, 2020.

8. RELATED PARTIES

As of March 31, 2020, and December 31, 2019 the amount due to stockholders was $1,000. The balance is payable to two stockholders related to opening bank balances.

As of March 31, 2020, and December 31, 2019 accounts payable due to three officers was $347,205 and $343,227, respectively. The majority of the balance is related to deferred salary expenses while the remainder is related to reimbursable expenses.

In January 2018, the Company entered into a lease agreement with a stockholder of the Company and paid monthly installments of $2,000 which terminated on December 31, 2018. The Company renewed the lease agreement in January 2019 for monthly installments of $2,000 which terminated on June 30, 2019, the Company now rents month to month for $250 per month. For the three months ended March 31, 2020 and 2019, rent expense earned by the stockholder amounted to $750 and $6,000. $15,750 and $15,000 of rent expense is in accounts payable as of March 31, 2020 and December 31, 2019, respectively.

For the three months ended March 31, 2020 and 2019 professional expense paid to directors and officers of the Company amounted to $0, respectively. For the three months ended March 31, 2020 and 2019, travel expense paid on behalf of directors and officers of the Company amounted to approximately $0, respectively.

9. SUBSEQUENT EVENTS

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

The Company applied for and received funding from the Payroll Protection Program (the “PPP Loan”) in the amount of $36,700. under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 23, 2022 and bears interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act.

The Company is closely monitoring the impact of the 2019 novel coronavirus, or COVID-19, on all aspects of its business. COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and the President of the United States declared the COVID-19 outbreak a national emergency. The Company has implemented contingency plans, with office-based employees working remotely where possible. While the COVID-19 pandemic has not had a material adverse impact on the Company’s operations to date, the future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. It is possible that the COVID-19 pandemic, the measures taken by the governments of countries affected and the resulting economic impact may materially and adversely affect the Company’s results of operations, cash flows and financial position as well as its customers.

On May 20, 2020, the second closing of the Convertible Promissory Note occurred pursuant to which the Company paid a purchase price of $35,000 and received gross proceeds of $29,300. In addition to the issuance of the note, the Company issued to the holder warrants to purchase one share of the Company’s Common Stock for 100% of the number of shares of Common Stock issuable upon conversion of the funds received in the second closing. Each warrant is immediately exercisable at $0.20 per share, unless adjusted, and expires on May 20, 2025.

On June 12, 2020, the Company entered into Amendment No. 1 to the 5% Secured Promissory Note with Cambridge Medspace, LLC, a Massachusetts limited liability company, pursuant to which the Note was amended to extend the maturity date to January 22, 2021.

On July 29, 2020, the Company entered into a Settlement and Mutual Release Agreement with a lender pursuant to which the Company paid $100,000 to the lender in exchange for the full extinguishment of the remaining principal amount and all accrued and unpaid interest (approximately $70,000) and penalties associated with the Convertible Promissory Note dated August 29, 2019 issued to the lender. All remaining unexercised warrants to purchase the Company’s Common Stock issued to the lender were also extinguished pursuant to the Settlement Agreement. Upon receipt of the Settlement Amount by the lender, the lender agreed to release all reserved shares of the Company’s Common Stock. The Settlement Agreement also provides for a full mutual release of the parties.

On July 29, 2020, the Company entered an Equity Financing Agreement and Registration Rights Agreement with GHS Investments LLC (“GHS”), pursuant to which GHS agreed to purchase up to $5,000,000 in shares of the Company’s Common Stock, from time to time over the course of 36 months after effectiveness of a registration statement on Form S-1 of the underlying shares of Common Stock.

In connection with entering into the Equity Financing Agreement, on July 29, 2020, the Company issued to GHS a Convertible Promissory Note in the principal amount of $100,000. The $100k Note matures on April 29, 2021 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the $100k Note at 10% per annum based on a 360-day year. The $100k Note is convertible at any time, upon the election of GHS, into shares of the Company’s Common Stock at $0.01 per share. The $100k Note is subject to various “Events of Default,” which are disclosed in the $100k Note. Upon the occurrence of an uncured “Event of Default,” the $100k Note will become immediately due and payable and will be subject to penalties and adjustments to the conversion price (the lesser of: (a) $0.01 or (b) 70% multiplied by the Market Price (as defined in the $100k Note) (representing a discount rate of 30%). Upon the issuance of the $100k Note, the Company has agreed to reserve one times the amount of shares of Common Stock into which the $100k Note is convertible and, 101 days from the issuance of the $100k Note, the Company will reserve two-and-a-half times the amount of shares of Common Stock into which the $100k Note is convertible. Within three Trading Days (as defined in the $100k Note) of the sale by GHS of all of the Common Stock issued upon the conversion of the $100k Note, the Company is required to issue to GHS an amount of shares of Common Stock priced at the lowest traded price for the relevant Trading Day, which represents the difference between $130,000 and the net proceeds to GHS from the sale of aggregate Common Stock issued upon the conversion of the $100k Note.

In connection with entering into the Equity Financing Agreement, on July 29, 2020, the Company issued to GHS a Convertible Promissory Note in the principal amount of $75,000. The $75k Note matures on April 29, 2021 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the $75k Note at 10% per annum based on a 360-day year. The $75k Note is convertible at any time, upon the election of GHS, into shares of the Company’s Common Stock at $0.0099 per share. The $75k Note is subject to various “Events of Default,” which are disclosed in the $75k Note. Upon the occurrence of an uncured “Event of Default,” the $75k Note will become immediately due and payable and will be subject to penalties and adjustments to the conversion price (the lesser of: (a) $0.01 or (b) 70% multiplied by the Market Price (as defined in the $75k Note) (representing a discount rate of 30%). Upon the issuance of the $75k Note, the Company has agreed to reserve one times the amount of shares of Common Stock into which the $75k Note is convertible and, 101 days from the issuance of the $75k Note, the Company will reserve two-and-a-half times the amount of shares of Common Stock into which the $75k Note is convertible.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contain certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events; are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019. 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 period ended March 31, 2019 and 2020 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;
	·	general market and economic conditions;
	·	our ability to maintain and grow our business with our current customers;
	·	our ability to meet the volume and service requirements of our customers;
	·	industry consolidation, including acquisitions by us or our competitors;
	·	capacity utilization and the efficiency of manufacturing operations;
	·	success in developing new products;
	·	timing of our new product introductions;
	·	new product introductions by competitors;
	·	the ability of competitors to more fully leverage low cost geographies for manufacturing or distribution;
	·	product pricing, including the impact of currency exchange rates;
	·	effectiveness of sales and marketing resources and strategies;
	·	adequate manufacturing capacity and supply of components and materials;
	·	strategic relationships with our suppliers;
	·	product quality and performance;
	·	protection of our products 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;
	·	government actions throughout the world; and
	·	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.

Critical Accounting Policies

The following discussions are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. These financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies. We continually evaluate the accounting policies and estimates used to prepare the financial statements. We base our estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.

Trends and Uncertainties

On July 28, 2017, we closed the reverse acquisition transaction under the Securities Exchange Agreement dated March 16, 2017, as reported in 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.

Historical Background

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

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

Under the terms of the OXYS SEA we acquired 100% of 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. 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.

A new management team was put into place in 2018, which constitutes our current management team.

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

General Overview

IIOT-OXYS, Inc., a Nevada corporation (the “Company”), and OXYS, were originally established for the purposes of designing, building, testing, and selling Edge Computing systems for the Industrial Internet. Both companies were, and presently are, early stage technology startups that are largely pre-revenue in their development phase. HereLab is also an early-stage technology development company. The Company received its first revenues in the last quarter of 2017, continued to realize revenues during 2018 and 2019, has realized revenues during the first quarter of 2020, and expects to continue to realize revenue growth in 2020 due to its business development pipeline.

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.

Our customers have issues and they need improvements. We design a system of hardware and software, assemble, install, monitor data and apply our algorithms to help provide the customer insights.

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.

OUR SOLUTIONS ACHIEVE TWO OBJECTIVES

ADD VALUE

We show clear path to improved asset reliability, machine uptime, machine utilization, energy consumption, and quality.

We provide advanced algorithms and insights as a service.

RISK MINIMIZATION

We use simple measurements requiring almost zero integration – minimally invasive.

We do not interfere with command and control of critical equipment.

We do not physically touch machine control networks – total isolation of networks.

HOW WE DO IT

Our location in Cambridge, Massachusetts is ideal since market-leading Biotech, Medtech, and Pharma multinational firms have offices or R&D centers in Cambridge or the Greater Boston area, which gives us easier access to potential sales which, in turn, lowers our cost of sales. Additionally, we continue to add value to structural health monitoring and smart manufacturing customers as well. We, therefore, have a range of opportunities as we continue to expand our customer base.

Our goal is to help Biotech, Pharma, and Medical Device companies realize the next wave of performance, productivity, and quality gains for their organizations, and become Industry 4.0 compliant.

We have a unique value proposition in a fast-growing worldwide multi-billion USD market, and have positioned our business with strategic partners for accelerated growth. We are therefore well-poised for growth in 2020 and beyond, as we execute our plans and acquire additional customers.

WHAT MARKETS WE SERVE

SMART MANUFACTURING

We help our customers maintain machine uptime and maximize operational efficiency. We also enable then to do energy monitoring, predictive maintenance that anticipates problems before they happen, and improve part and process quality.

BIOTECH, PHARMACEUTICAL, AND MEDICAL DEVICES

We are on the operations side, not the patient-facing side. In this market vertical, our customers must provide high-quality products that must also pass rigorous review by governing bodies such as the FDA. Here again, we focus on machine uptime, operational efficiency, and predictive maintenance to avoid unplanned downtime.

SMART INFRASTRUCTURE

For bridges and other civil infrastructure, local, state and federal agencies have limited resources. We help our clients prioritize how to spend limited funds by addressing those fixes which need to be made first.

OUR UNIQUE VALUE PROPOSITION

EDGE COMPUTING AS A COMPLIMENT TO CLOUD COMPUTING

Within the Internet of Things (“IoT”) and Industrial Internet of Things (“IIoT”), most companies right now are adopting an approach which sends all sensor data to the cloud for processing. We specialize in edge computing, where the data processing is done locally right where the data is collected. We also have advanced cloud-based algorithms that implement various machine learning and artificial intelligence algorithms.

ADVANCED ALGORITHMS

We have sought to differentiate from our competitors by developing advanced algorithms on our own and in collaboration with strategic partners These algorithms are an essential part of the edge computing strategy that convert raw data into actionable knowledge right where the data is collected without having to send the data to the cloud first.

RECONFIGURABLE HARDWARE AND SOFTWARE

Instead of focusing on creating tools, we use open source tools to create proprietary content.

Results of Operations for the Three Months Ended March 31, 2020 compared to the Three Months Ended March 31, 2019

For the three months ended March 31, 2020, the Company earned revenues of $15,600 and incurred related cost of sales of $8,634. The Company incurred professional fees of $187,121, interest fees of $518,285, a loss on change in FMV of derivative liability of 63,908, and other general and administrative expenses of $27,527. The Company generated $409 in miscellaneous income. As a result, the Company incurred a net loss of $789,470 for the three months ended March 31, 2020.

Comparatively, for the three months ended March 31, 2019, we earned revenues of $42,837 and incurred related cost of sales of $12,169. We incurred professional fees of $488,806 and other general and administrative expenses of $38,232. We incurred interest fees of $62,436 and a loss on extinguishment of debt of $221,232. As a result, we incurred a net loss of $780,038 for the three months ended March 31, 2019.

During the current and prior period, the Company did not record an income tax benefit due to the uncertainty associated with the Company’s ability to utilize the deferred tax assets.

Liquidity and Capital Resources

At March 31, 2020, the Company had a cash balance of $34,105, which represents a $9,893 increase from the $24,212 balance at December 31, 2019. This increase was the result of cash provided by operating activities. The Company’s working capital at March 31, 2020 was a deficit of $(1,966,043), as compared to a December 31, 2019 working capital deficit of $(1,609,005).

For the three months ended March 31, 2020, the Company incurred a net loss of $789,470.

For the three months ended March 31, 2019, the Company incurred a net loss of $780,038.

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 $789,470 and $780,038 for the three months ended March 31, 2020 and 2019, respectively, and has an accumulated deficiency which raises substantial doubt about the Company’s ability to continue as a going concern.

Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company but cannot assure that such financing will be available on acceptable terms. At 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 June 22, 2020. Such a going concern qualification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot be assured.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve the Company’s operating results.

Recently Issued Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity capital expenditures or capital resources.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Certain specified reduced reporting and other regulatory requirements that are available to public companies that are emerging growth companies. These provisions include:

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; and

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.

Item 3. 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.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company has established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and, as such, is accumulated and communicated to the Company’s Chief Executive Officer, Clifford L. Emmons, who serves as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Mr. Emmons, evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of March 31, 2020. Based on his evaluation, Mr. Emmons concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2020.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the Company’s quarter ended March 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Convertible Note Conversions and Warrant Exercises

Pursuant to the Convertible Promissory Note issued on August 29, 2019 to a third-party lender (the “Lender”) in the principal amount of $35,000, during the quarterly period ended March 31, 2020, the Lender converted $18,668 in principal into an aggregate of 23,750,000 shares of the Company’s Common Stock at conversion prices ranging from $0.003 to $0.001.

The securities were issued without registration under the Securities Act of 1933, as amended, by reason of the exemption from registration afforded by the provisions of Section 4(a)(2) thereof, and Rule 506(b) promulgated thereunder, as a transaction by an issuer not involving any public offering. No selling commissions were paid in connection with the issuance of the securities.

Item 3. Defaults Upon Senior Securities

Convertible Note Default

Six months from receipt of the first tranche of $35,000 under the Convertible Promissory Note issued on August 29, 2019, the Company failed to pay the accrued and unpaid interest, which is considered an “Event of Default” under the note. As a result, the conversion price became a “Variable Conversion Price.” Also, as a result of the occurrence of the “Event of Default,” all amounts owing under the note became immediately due and payable and the Company became obligated to pay to the holder 175% of the then outstanding balance of the note and all unpaid principal and unpaid interest accrued interest at 15%. In addition to the adjustments to the note, the amount and exercise price of the warrants issued pursuant to the note, were also adjusted. As of the date of this Quarterly Report, the note has been extinguished.

Item 6. Exhibits

SEC Ref. No.	Title of Document
10.1*	Collaboration Agreement effective March 18, 2020 with Aingura IIoT, S.L.
31.1*	Rule 13a-14(a) Certification by Principal Executive and Financial Officer
32.1**	Section 1350 Certification of Principal Executive and Financial Officer
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*Filed with this Report.

**Furnished with this Report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	IIOT-OXYS, Inc.


Date: August 19, 2020	By	/s/ Clifford L. Emmons
		Clifford L. Emmons, Chief Executive Officer and Interim Chief Financial Officer
		(Principal Executive Officer and Principal
		Financial Officer)

EX-10.1 2 iiot_ex1001.htm COLLABORATION AGREEMENT

Exhibit 10.1

COLLABORATION AGREEMENT

executed between

AINGURA IIoT, S.L.

on the one hand

and

IIOT-OXYS, Inc. on the other

March 18, 2020

BETWEEN

Of one hand,

Mr. lmanol Kapanaga, a Spanish national, of legal age, holding Spanish national identity card number XXXXXXXXXXXX and domiciled for these purposes in San Antolin, 3, 20870 - Elgoibar (Gipuzkoa).

And of the other part,

Mr. Clifford L. Emmons, a US national, of legal age, holding valid passport number XXXXXXXXX and domiciled for these purposes in 24 Freedom Trail, Dennis, MA 02638.

ACTING

Mr. lmanol Kapanaga for and on behalf of Aingura IloT, S.L. (hereinafter, "AINGURA" or the "Company"), with registered office in Elgoibar (Gipuzkoa), Barrio San Antolin, 3, holding tax.payer identification number XXXXXXXXXXXX. His representative authority for this act is conferred on him in his capacity of legal representative of the company.

Mr. Clifford L. Emmons for and on behalf of IIOT-OXYS, Inc. (hereinafter, "OXYS"), with registered office in 705 Cambridge Street, Cambridge, MA 02141, a Nevada, USA corporation, EIN #: XXXXXXXXXX. His representative authority for this act is conferred on him in his capacity of legal representative of the company.

For the purposes of this document, AINGURA and OXYS may be referred to jointly as the "Parties" or as the "Party" where reference is made to each one of them separately.

Both Parties, acting as stated above, mutually recognize each other's legal capacity to enter into this agreement and therefore,

WITNESSETH

I.	Whereas AINGURA is a corporation formed for an indefinite term, having as its corporate purpose the design, manufacture and integration of advanced systems to optimize industrial processes.

II.	Whereas OXYS is a corporation formed for an indefinite term, having as its corporate purpose providing Saas services of IloT and Al & ML Algorithms to monitor infrastructure health and increase productivity of manufacturing operations.

III.	Whereas AINGURA is interested in improving its commercial and distribution network for the promotion of its products and services in the United States of America, and consequently, in cooperating with OXYS.

IV.

Whereas OXYS has its own material, technical and organizational resources which are suitable to exercise its activity in the United States of America, possesses all the authorizations and licences required by the legislation in force and is up to date in its tax and labour obligations. In addition, OXYS is interested in (i) assuming the promotion of acts and transactions in trade for and on behalf of the Company; and, subject to the execution of the relevant individual agreements to be negotiated on a case by case basis between the Parties, (ii) co-performing along with AINGURA the so-contracted common projects, on the terms indicated below.

V.	Now therefore, having reached a full understanding, the Parties, willingly and of their own accord, have agreed to enter into this COLLABORATION AGREEMENT (hereinafter, the "Agreement"), based on the foregoing recitals, subject to the following

CLAUSES

ONE. - SUBJECT-MATTER OF THE AGREEMENT

1.1	AINGURA hereby appoints and authorizes OXYS to act as the sales network of its services and products (hereinafter, the "Services and Products"), for the price and under the sales conditions indicated by the Company directly or indirectly for each case.

Consequently, OXYS shall promote the sale of the Services and Products for and on behalf of AINGURA. OXYS shall send the Company the purchase queries it receives from potential customers identified on Annex I, for their subsequent study by AINGURA and to AINGURA potentially prepare offers and accept orders, without assuming OXYS the risk involved in such transactions.

For the purposes of this Agreement, "promotion" shall mean those activities aimed at encouraging third parties, customers or future customers, to purchase the Company's Services and Products. These Services and Products, and the Clients vis-a-vis wich they'll be promoted and, if so, performed on an exclusive way, will be added to this Agreement as Annex I.

1.2	Likewise, OXYS may execute the sales contracts for the Services and Products for and on behalf of AINGURA with its actual customers (Takeda and Gill Engineering), if mutually agreed by both Parties.

In particular, and in order to rule out doubts, " execute" shall mean the conclusion by OXYS, for and on behalf of the Company, of said agreements with third parties, as set forth in Clause Four herein.

1.3	In addition, OXYS shall be authorized to take any steps it deems necessary for the successful outcome of the transactions that it promotes or executes as per Clause 1.2 above.

1.4

Additionally, both Parties agree that, subject to the execution of the relevant individual agreements to be negotiated on a case by case basis between the Parties, they will co perform the so-contracted projects signed by AINGURA, in which OXYS will be sub contractor, according to the allocation of tasks agreed for each project in such individual agreements. For the avoidance of doubt, the agreement to be executed with such project's client shall be executed by AINGURA.

TWO. - ENTRY INTO FORCE AND TERM OF THE AGREEMENT

2.1	This Agreement shall enter into force on the date of its execution and shall have an initial term of one (1) year from the execution date, and will be subject to the economic conditions established in Clause Four below.

Once said initial period has passed, the Agreement shall be considered automatically extended for successive annual periods, unless either Party notifies the other in writing of its express intention not to renew the Agreement at least TWO (2) months prior to the date of termination of the Agreement.

THREE. - PROCESSING OF ORDERS AND TRANSACTIONS

3.1	OXYS shall transmit queries regarding potential transactions of customers from Annex I to AINGURA.

AINGURA shall be in charge of preparing, where applicable, the relevant offers for the customer, including meeting with clients, with the collaboration of OXYS.

OXYS shall compile when transferring the query to AINGURA sufficient information regarding: (i) identification of the customer making the query, providing information on the business creditworthiness of the same, (ii) configuration of the Product / Services to be offered, (iii) the intended delivery date, as well as (iv) any specific or individual circumstances that may be necessary to adapt or personalize the Services and Products pursuant to the orders received by OXYS from among the potential adaptation options.

Both Parties will jointly process offers, establish prices, apply discounts or establish payment terms in relation to the Services and Products.

3.2	AINGURA shall serve the Services and Products of the transactions promoted by OXYS directly to the customers.

FOUR. - EMUNERATION OF OXYS

4.1	Stage One: Money in Advance

OXYS shall receive, before ten (I 0) calendar days after the signature of the Agreement, an amount of FOURTY SIX THOUSAND AND FIVE HUNDRED US DOLLARS (US$46,500) (hereinafter, the "Money in Advance"), quantity that is now the remaining amount that OXYS will invoice to its actual clients (Gill Engineering and TAKEDA).

Once OXYS receives this money from its actual clients, the amount will be discounted from the remuneration of OXYS described on Clause 4.2. The exact moment will be agreed between both Parties, within the duration of this Agreement.

4.2

Stage Two: Commission

OXYS' remuneration will consist of a commission (hereinafter, the "Commission") for all the sales of the Services and Products made during the term of the Agreement with customers from Annex I within the abovementioned territory.

4.2.1

The Commission to which OXYS will be entitled for each sale concluded as per above will be determined by applying fifteen percent (15%) of the net sale price of the Services and Products sold, that is, the sale price once the taxes, commercial discounts and technical works developed by OXYS on the contract have been deducted.

4.2.2

Payment of the Commission: The Commission shall be payable by the Company to OXYS according to the payment plan executed with the customer and no later than ten (10) calendar days from each payment made by the final customer, by means of a bank transfer to the bank account indicated for this purpose by OXYS.

(i)

The payment shall be subject to any events that may occur during the course of the payment. Consequently, if the final customer does not comply, in whole or in part, with its payment obligations with the Company, the Commission to be received by OXYS shall be reduced in proportion to the amount not paid by the final customer to the Company, the Company undertaking to make its best efforts to obtain effective and full payment by the final customer. For sales of the Services and Product concluded after the termination of the Agreement, OXYS shall be entitled to a Commission if the sale is mainly due to the activity performed by OXYS while the Agreement is in force, provided that such sale is concluded within the one (I) year following the termination of said Agreement.

4.3	Stage Three: Fees

For all the projects to be co-performed by the Parties according to the individual agreements to be executed, as the case may be, during the term of the Agreement, OXYS' remuneration will consist of a payment of a fee (hereinafter, the "Fee") to be agreed on a case by case basis.

4.3.1

AINGURA shall be the Party in charge of receiving the payments of all the aforementioned projects executed under the Agreement.

4.3.2

The invoicing to the Clients shall be carried out according to the Milestones and amounts of the signed Contracts by AINGURA.

4.3.3

The Fees to be invoiced by OXYS to AINGURA shall be VAT included (if any).

4.3.4

OXYS is intended to Invoice to AINGURA once OXYS has completed their work or milestone(s).

4.3.5

AINGURA shall not be compelled to carry out any payment, and will not accrue any delay interests, unless the work has been accepted by the Client and it has previously received payment from them.

4.3.6

If AINGURA receives an advance from the client at the beginning of the project, OXYS will have the right to collect the proportional part of it, according to its percentage of participation in the execution of the project. This advance will be deducted from subsequent invoices.

4.3.7

AINGURA will provide OXYS with an advance payment at the beginning of each project, with the limit of:

(i)

the amount of the participation of OXYS in the project;

(ii)

a cumulative amount of$ 110,000.

The accumulated amount of said advance will be reduced by deducting from the invoices of OXYS issued to AINGURA, in mutual agreement.

4.3.8

Each member, according to its own input in the contracts, shall be responsible for paying all taxes, duties and similar changes that may be levied in connection with the performance of the services, and shall carry out all necessary obligations towards the relevant fiscal authorities thereto.

FIVE. - PERFORMANCE OF THE SERVICES AND PRODUCTS

5.1	ASSIGNMENT OF SERVICES

5.1.1

Both Parties shall be responsible for the performance of their respective tasks agreed in the relevant individual agreements, according to the terms and conditions agreed with the Client.

5.1.2

The allocation of the works of each project will be done specifically on each project, on the basis of this preliminary allocation performed by OXYS: 1T2020 75%, 2T2020 50%, 3T2020 35%, 4T2020 35% and 25% the rest of the duration of the agreement.

5.1.3

The performance of additional or complementary services shall be carried out by that Party specially designated by mutual agreement.

5.2	PERFORMANCE OF THE SERVICES

5.2.1

The services agreed to be performed jointly under the relevant individual agreements shall be performed in accordance to the terms and conditions agreed with the Client, with the individual agreement(s) and with this Agreement. In the event of inconsistency between the content of the agreements with the Client and the individual agreement(s) or this Agreement, the agreements with the Client shall prevail.

5.2.2

In the event that it is deemed convenient, the Parties shall be entitled to enter into any contract by means of which they subcontract the performance of the services of which they are responsible for. In such a case, the Party shall assume all the obligations and liabilities that regarding those services result from the Contract with the client.

5.2.3

Each of the Parties shall assign for the performance of the services in relation to which it is responsible according to what it is stated in the previous Clause, all the material and personnel means that are necessary or convenient for the proper performance under the terms and conditions agreed with the Client and in the individual agreements.

5.2.4

In the event that a Party wants to subcontract all or part of the services for which ,it 1s responsible, it shall obtain the prior consent of the other Party. In such a case, the Party that has carried out the subcontracting shall be responsible before the other Party for the control and supervision of the subcontractor, and for the damages and prejudices derived from the performance of the subcontractor.

SIX. - NON-COMPETITION CLAUSE

6.1.

Each Party undertakes to refrain from performing the professional activity of promotion or sale of identical or similar and/or concurrent or competitive goods or services to those of the other Party, in those Clients decided to be treated on an exclusive way, i.e. the clients listed in Annex This restriction shall be in full force and effect during the term of the Agreement, as well as for one (1) year from the date of expiration or termination of the Agreement with Clients having a contract in force with either of the Parties at the time of expiration or termination.

6.2

Either Party may pursue any client prospected but not having a contract in force at the time of expiration or termination of the Agreement.

SEVEN. - INTELLECTUAL PROPERTY RIGHTS AND DISTINCTIVE SIGNS

The Parties recognize and accept that the performance of OXYS activity entitles it to use trademarks and distinctive signs such as brands, trade names, designs, logos, forms of advertising and any other intellectual property rights held by AINGURA.

In light of the above, while this Agreement is in force, the Company authorizes OXYS, on a non exclusive and non-transferable basis limited to promoting the obligations contained herein, to use said trademarks and distinctive signs at no charge.

OXYS authorizes AINGURA to use its address as the commercial and postal address of AINGURA while this agreement is in force. Both Parties expressly recognize that OXYS has no rights whatsoever in AINGURA's trademarks and distinctive signs and that it shall not acquire any rights arising from the promotion and execution of the Services and Products. If one Party detects any violations of the trademarks and distinctive signs for the other Party's of which it may learn, it shall provide the other Party with all the support necessary or required to stop or prevent future violations in relation to any right held by the Party in intellectual property.

EIGHT. - THE PARTIES' OBLIGATIONS

8.1

OXYS Obligations

While this Agreement is in force, OXYS in the performance of its professional activity shall act loyally and in good faith, safeguarding AINGURA 's interests at all times.

In particular, OXYS shall:

(i)

Act in mediating and promoting sales of the Services and Products, and co perform, as the case may be, the projects agreed under the relevant individual agreements.

(ii)

The Parties will hold regular meetings with a view to analyzing matters such as the status of the projects, customers and applications, new development or market possibilities, etc.

In particular, OXYS shall regularly inform Mr. Rafael Ibeas (Managing Director of AINGURA), to whom it shall send any information requested by the latter.

(iii)

Handle the negotiations of the transactions entrusted to him diligently, sending the orders placed to AINGURA for their acceptance, dispatch and conclusion, as the case may be.

(iv)

Provide the Company with any information he may have that is necessary for the adequate monitoring of the acts or transactions, the promotion entrusted to him hereunder and, in particular, any information regarding the solvency of the third parties with which the transactions are pending.

(v)

OXYS shall receive, on behalf of AINGURA any third-party claims regarding defects or flaws in the quality or quantity of the Services and Products sold and provided as a result of the transactions brought about, even if it has not concluded same, and shall send such claims, as soon as it becomes aware of same, to the Company, providing in such event full collaboration in the defense of the Company's legitimate interests. If collaboration is required of OXYS, AINGURA will pay upfront legal fees required.

(vi)

Indemnification of OXYS. AINGURA hereby agrees to indemnify and hold harmless OXYS and its present and future officers, directors, affiliates, employees and agents ("Indemnified Persons") from and against any and all claims, liabilities, losses and damages (or actions in respect thereof), in any way related to or arising out of the performance by such Indemnified Person of services under this Agreement that were performed following AINGURA's prior written express consent, and to advance and reimburse each Indemnified Person on a monthly basis for reasonable legal and other expenses incurred by it in connection with or relating to investigating, preparing to defend, or defending any actions, claims or other proceeding (including any investigation or inquiry) arising in any manner out of or in connection with such Indemnified Person's performance or non-performance under this Agreement (whether or not such Indemnified Person is a named party in such proceedings) following AINGURA's prior written express consent; provided, owever, that AINGURA shall not be responsible under this section for any claims, liabilities, losses, damages, or expenses to the extent that they are finally judicially determined to result from actions taken by such Indemnified Person that constitute willful misconduct or gross negligence.

(vi)

Notify AINGURA, as soon as it learns of same, of any encroachment on, imitation, act or conduct against the intellectual property rights inherent to the Services and Products or to the Company, providing in such event, full collaboration to legitimately defend the Company's interests.

(vii)

Support AINGURA in the acceptance and collection of invoices to customers under this Agreement and, if necessary, to withhold the goods in relation to any order in respect of which the price has not been paid.

(viii)

Keep AINGURA regularly informed of the existence of potential customers and the situation of the market in which the Services and Products are sold. OXYS may keep the Company and the customers in contact directly.

(ix)

Inform the Company of any unforeseen circumstances beyond the control of the Parties that prevent, in whole or in part, effective compliance with the obligations assumed pursuant to the Agreement.

(x)

Execute a confidentiality agreement under the clauses, terms and conditions to be established by both Parties.

8.2	Obligations of the Company

In its relations with OXYS, the Company must act loyally and in good faith. In particular, AINGURA shall:

(i)

Make available to OXYS, sufficiently in advance and in an appropriate amount, all the documentation and information necessary to perform its activities and, in particular, the catalogs, price guidelines depending on the model and accessories and other technical information necessary to perform its activities in the context of this Agreement as instructed by the Company.

(ii)

Pay the Money in Advance, the Commission and the Fees agreed in the terms established in Clause Four above.

(iii)

Keep OXYS regularly informed of the satisfactory conclusion and, where applicable, of the sales transactions promoted by OXYS.

(iv)

Be responsible for any matters and activities that may occur after the sales such as the installation of the Services and Products and provision of services during and after the warranty period.

(v)

Where applicable, offer training and commercial or technical defense programs in relation to the projects to be co-performed, as the case may be, together with OXYS.

NINE. - CONFIDENTIALITY AND BUSINESS SECRETS

9.1

The Parties undertake from today and indefinitely following expiration or termination of this Agreement for any reason, not to disclose or use for their own or a third party's benefit, directly or indirectly, any commercial, technical or financial information that is not public or confidential, of which they may have learned as a result of the performance of this Agreement.

9.2

In particular, any information or documentation exchange between both Parties in the course of this Agreement shall be used exclusively for promoting and selling the Services and Products in performance of this Agreement. Any other use, unless authorized in writing beforehand by the other Party, shall not be permitted and shall entail a serious contractual breach of this Agreement.

TEN. - ASSIGNMENT AND OUTSOURCING

OXYS may not assign or transfer to third parties the contractual position arising from this Agreement, or the rights and obligations hereunder, without the other Party's prior written consent.

The rights conferred on OXYS pursuant to this Agreement are personal, indivisible and nontransferable.

ELEVEN. - PERSONAL DATA

11.

l Both OXYS and AINGURA undertake to keep all the information to which they have access pursuant to this Agreement completely confidential and to only supply it to personnel belonged to both companies. In particular, both OXYS and AINGURA undertake not to use the personal data obtained from the other Party or those which they have accessed, for purposes other than those set out herein and not to disclose such data, not even for storage purposes to other persons.

11.2

Likewise, both OXYS and AINGURA state that they have the necessary and appropriate technical and organizational measures to guarantee the security of the personal data to which they have access as a result of its relationship with the Company and avoid their alteration, loss, processing or unauthorized access.

11.3	Once the contractual relationship has ended, both OXYS and AINGURA undertake to return the processed personal data to the other Party and to destroy all copies of such data in its possession.

TWELVE.- EARLY TERMINATION

Notwithstanding the provisions of Clause Two, this Agreement shall be terminated in advance at any time in the following cases:

(i)

Due to the special relationship on which this Agreement is based, if OXYS does not act in good faith or acts negligently or without caution in relation to the interests of AINGURA.

(ii)

Due to a mutual agreement in writing by the Parties.

(iii)

Due to prior notice of termination in writing by any of the Parties, based on a serious breach of any of the obligations acquired by the other Party hereunder, without prejudice to the right of the nonbreaching Party to choose to continue with the Agreement and require the other Party to comply in full with its obligations, providing indemnification, in both cases, for the damage and loss caused by such breach and payment of interest.

In such an event, the breaching Party shall have thirty (30) calendar days to remedy the situation. If following this term, in the opinion of the nonbreaching Party, the breaching Party has not put a stop to its conduct or remedied the cause of the breach, the nonbreaching Party shall be entitled to bring any action to which it may be entitled to pursuant to law.

(iv)

Due to the effective cessation of OXYS activity.

(v)

Failure of AINGURA to make timely payments to OXYS as outlined in this Agreement.

THIRTEEN. - EFFECTS OF EXPIRATION OR TERMINATION OF THE AGREEMENT

The expiration or termination of this Agreement, for any reason and at any time, shall have the following effects:

13.1	The rights and obligations of the Parties generated before that date shall not be affected.

13.2	The Clauses of this Agreement that are applicable despite its expiration or termination, shall continue in force and shall be observed by both Parties.

13.3	OXYS shall return within a term of fifteen (15) calendar days all of the catalogs, material and technical and commercial information provided by the Company or even that generated by OXYS in relation to the same.

FOURTEEN. - NOTICES

Unless stipulated otherwise, all important notices must be in writing. The Parties establish as their addresses for notification purposes the addresses first above written. Both Parties may change their address by sending a written communication in this regard to the other Party.

FIFTEEN.- APPLICABLE LAW

This Agreement shall be governed by and interpreted according to its own terms and the legislation ofthe Kingdom of Spain.

SIXTEEN. - DISPUTE RESOLUTION

All disputes arising out of or in connection with the present Agreement shall be settled under the Rules of Arbitration of the International Chamber of Commerce (ICC) by one (1) arbitrator appointed in accordance with the said Rules. The place of arbitration shall be New York (NY, USA) and the language of arbitration shall be English. The arbitration award shall be final and binding upon both Parties

SEVENTEEN. - INSURANCES

Each Party shall hire and maintain an insurance policy against the risks, and for the coverage, as specified in the signed individual contracts, as the case may be.

EIGHTEEN. - FINAL PROVISIONS

18.1	This Agreement and its Annex constitute all the agreements entered into by the Parties in relation to the subject-matter of the Agreement and supersede any other verbal or written agreements existing to date which the Parties deem concluded and satisfied.

18.2	No modification or amendment to this Agreement shall be valid unless made in writing and signed by each Party.

18.3	The Annex forms part of this Agreement and any modification thereof shall also be agreed in writing and signed by both Parties.

18.4	The headings of the clauses of this Agreement have been inserted for ease of reference.

18.5

Should all or any part of any of the clauses of this Agreement be held null and void or invalid only that clause or portion thereof shall be affected thereby. The Agreement shall otherwise continue to be valid and shall be construed as if the null and void or invalid clause or portion thereof did not exist. For such purposes, only the null and void or invalid provision of the Agreement shall be rendered invalid, and no other portion or provision of this Agreement shall be rendered void or invalid, or impaired or affected as a result, unless deletion of the provision would result in such a material change so as to affect the entire Agreement.

18.6	The waiver by either Party to request exact compliance with the terms of this Agreement shall not constitute, under any circumstances, a waiver of the rights to which that Party is entitled hereunder.

In witness whereof the Parties have signed this Agreement and its Annex in two (2) counterparts, as one and the same agreement in the place and on the date first above written.

/s/ Imanol Kapanaga

For and on behalf of

AINGURA IIOT, S.L.

Mr. Imanol Kapanaga

/s/ Clifford L. Emmons

For and on behalf of

IIOT-OXYS, Inc.

Mr. Clifford L. Emmons

EX-31.1 3 iiot_ex3101.htm CERTIFICATION

Exhibit 31.1

CERTIFICATIONS

I, Clifford L. Emmons, certify that:

1.	I have reviewed this Form 10-Q quarterly report of IIOT-OXYS, Inc. for the quarter ended March 31, 2020;

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

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

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

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: August 19, 2020

/s/ Clifford L. Emmons
Clifford L. Emmons, Chief Executive Officer
(Principal Executive & Financial Officer)

EX-32.1 4 iiot_ex3201.htm CERTIFICATION

Exhibit 32.1

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

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

In connection with the quarterly report of IIOT-OXYS, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission (the “Report”), the undersigned principal executive and principal financial officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 19, 2020

/s/ Clifford L. Emmons
Clifford L. Emmons, Chief Executive Officer
(Principal Executive & Financial Officer)

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

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

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

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

Fair Value of Financial Instruments   The fair value of the Company’s financial instruments is determined in accordance with ASC 820, Fair Value Measurements and Disclosures.

Income Taxes   The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes.

Long-Lived Assets   The Company regularly reviews the carrying value and estimated lives of its long-lived assets to determine whether indicators of impairment may exist that warrant adjustments to the carrying value or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives.    Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Convertible Debt   Convertible debt is accounted for under FASB ASC 470, Debt – Debt with Conversion and Other Options.

Basic and Diluted Net Loss Per Common Share   The Company computes basic and diluted net loss attributable to common stockholders for the period under ASC 260-10, Earnings Per Share.

The following tables set forth the liabilities measured at fair value on a non-recurring basis presented in the Company’s consolidated financial statements as of December 31, 2019 and 2018:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="14" style="border-bottom: black 1pt solid; text-align: center">December 31, 2019</td> <td> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Level 1</td> <td> </td> <td> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Level 2</td> <td> </td> <td> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Level 3</td> <td> </td> <td> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Total</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 44%">Shares issued in acquisition of HereLab</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 11%; text-align: right">–</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 11%; text-align: right">–</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 11%; text-align: right">–</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 11%; text-align: right">–</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Accrued share compensation</td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">1,102,645</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">1,102,645</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt">Total fair value</td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">–</td> <td> </td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">–</td> <td> </td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">1,102,645</td> <td> </td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">1,102,645</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td colspan="14" style="border-bottom: black 1pt solid; text-align: center">December 31, 2018</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Level 1</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Level 2</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Level 3</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Total</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td>Shares issued in acquisition of HereLab</td> <td> </td> <td>$</td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">495,000</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">495,000</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Accrued share compensation</td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">32,500</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">417,229</td> <td> </td> <td> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">449,729</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt">Total fair value</td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">32,500</td> <td> </td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">–</td> <td> </td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">912,229</td> <td> </td> <td> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">944,729</td> <td> </td></tr> </table>

40633327

43313547

41810323

67063547

38222

1176996

170291

1177

169114

0 38222

208915

323056

250 250

600000

1269000

1800000

3600000

1102645 1283872 181227 152765 All amounts owing under the note became immediately due and payable and the Company became obligated to pay to the holder 175% of the then outstanding balance of the note and all unpaid principal and unpaid interest accrued interest at 15%. During March 2020, the holder of the note had converted $18,668 of principle plus fees into 23,750,000 shares of Common Stock amounting to $27,688

438937

453418

385151

397492

53786

55926

4081

3710

15600

28004

2878921

2372439

1000

858092

706508

2019829

1664931

46425

50189

54497

145728

164562

146410

347205 343227 1283872 1102645

438937

453418

-6033374

-5040307

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43314

45245415

41175686

-0.02

-581788

-283668

409

518289

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527038

1644

1430

6906

11147

5240

973

6871

1422

700

6966

30668

8634

12169

15600

42837

27688

23750

3938

223796

203597 -203597

23750000

9893

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46425

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513

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106686

3978 0 181227 0

371

5622

190

-12404

9837

12341

12206

290555

34105

24212

39226

75759

9893

36533

155000

24295

15074

105074 0 203597 0

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation   The Company's financial statements are prepared on the accrual method of accounting. The accounting and reporting policies of the Company conform with generally accepted accounting principles (“GAAP”).   Interim Financial Statements   The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2019.    Principles of Consolidation   The consolidated financial statements for March 31, 2020 and 2019 include the accounts of IIOT-OXYS, Inc., OXYS Corporation, and HereLab, Inc. All significant intercompany balances and transactions have been eliminated.    Revenue Recognition   The Company’s revenue is derived primarily from providing services under contractual agreements. The Company recognizes revenue in accordance with ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”) which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all active contracts as of the adoption date. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company's method of recognizing revenue under ASC 606 yielded similar results to the method utilized immediately prior to adoption. Accordingly, there was no effect to each financial statement line item as a result of applying the new revenue standard.   According to ASC 606, the Company recognizes revenue based on the following criteria:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 24px"> </td> <td style="width: 24px">·</td> <td style="text-align: justify">Identification of a contract or contracts, with a customer.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Identification of the performance obligations in the contract.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Determination of contract price.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Allocation of transaction price to the performance obligation.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Recognition of revenue when, or as, performance obligation is satisfied.</td></tr> </table>    The Company used a practical expedient available under ASC 606-10-65-1(f)4 that permits it to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.   The Company has elected to treat shipping and handling activities as cost of sales. Additionally, the Company has elected to record revenue net of sales and other similar taxes.   Use of Estimates   Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.   Going Concern   The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company was only recently formed, has incurred continuing operating losses, and has an accumulated deficit of $6,033,374 and $5,040,307 as of March 31, 2020 and December 31, 2019, respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern.   Management believes that the Company will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations for the next 12 months by generating cash through additional borrowings and/or issuances of equity securities, as needed. However, there can be no assurance that the Company will be able to generate sufficient liquidity to maintain its operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.   Concentration of Risk   Financial instruments that potentially expose the Company to concentrations of risk consist primarily of cash and cash equivalents which are generally not collateralized. The Company’s policy is to place its cash and cash equivalents with high quality financial institutions, in order to limit the amount of credit exposure. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC), up to $250,000. As of March 31, 2020, and December 31, 2019, the Company had no amounts in excess of the FDIC insurance limit.   Cash and Cash Equivalents   For purposes of the statement of cash flows, the Company considers all unrestricted highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts   Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. The Company determines the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. There was no allowance for doubtful accounts as of March 31, 2020 and December 31, 2019.   Fair Value of Financial Instruments   The fair value of the Company’s financial instruments is determined in accordance with ASC 820, Fair Value Measurements and Disclosures.    Income Taxes   The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes.   Long-Lived Assets   The Company regularly reviews the carrying value and estimated lives of its long-lived assets to determine whether indicators of impairment may exist that warrant adjustments to the carrying value or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives.   Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.   Convertible Debt   Convertible debt is accounted for under FASB ASC 470, Debt – Debt with Conversion and Other Options.   Basic and Diluted Net Loss Per Common Share   The Company computes basic and diluted net loss attributable to common stockholders for the period under ASC 260-10, Earnings Per Share.

3. RECENT ACCOUNTING PRONOUNCEMENTS    ASU 2019-12   In December 2019, the FASB issued 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.   Other accounting standards that have been issued or proposed by FASB and do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

4. COMMITMENTS AND CONTINGENCIES   In prior years, the Company entered into consulting agreements with one director, three executive officers, and one engineer of the Company which include commitments to issue shares of the Company’s common stock from the Company’s Stock Incentive Plans. Two agreements have been terminated and shares have been issued in conjunction with the related separation agreements, but the vested shares related to the remaining consulting agreements with the three executive officers have not yet been issued and, therefore, remain a liability. According to the remaining three agreements, 1,269,000 shares vested in 2019, 600,000 shares vested during the quarter ended March 31, 2020, 1,800,000 shares of common stock will vest during the remainder of 2020, and 3,600,000 shares of common stock will vest in 2021.    According to the agreements with the executive officers the shares vest annually over three years on the anniversary of each agreement.   In the event that the agreement is terminated by either party pursuant to the terms of the agreement, all unvested shares which have been earned shall vest on a pro-rata basis as of the effective date of the termination of the agreement and all unearned, unvested shares shall be terminated.   The value of the shares was assigned at fair market value on the effective date of the agreement and the pro-rata number of shares earned was calculated and amortized at the end of each reporting period. The Company accrued $1,283,872 and $1,102,645 in shares payable in conjunction with these agreements as of March 31, 2020 and December 31, 2019, respectively. A summary of these agreements is as follows.   On March 11, 2019, the Company’s Board of Directors approved the Consulting Agreement dated effective June 4, 2018 with its CEO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the CEO pursuant to the agreement are those customary for the position in which the CEO is serving. As of the effective date, the Company shall issue to the CEO an aggregate of 3,060,000 shares of the Company’s common stock which vest as follows:   1.       560,000 shares on the first-year anniversary of the effective date; 2.       1,000,000 shares on the second-year anniversary of the effective date; and 3.       1,500,000 shares on the third-year anniversary of the effective date.    The shares are issued under the 2019 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange. As of March 31, 2020, and December 31, 2019, 560,000 shares had vested, but were not yet issued.   As part of the Consulting Agreement dated June 4, 2018 the CEO shall also receive a monthly fee of $15,000 which accrues unless converted into shares of common stock of the Company at a conversion rate specified in the agreement. Until the Company closes a minimum $500,000 capital raise, the monthly fee accrues and, upon the closing of such a capital raise, $5,000 of the monthly fee will be paid to the CEO in cash and the remainder will continue to accrue. Upon the closing of a capital raise of at least $2,000,000, the entire monthly fee will be paid to the CEO in cash and all accrued and unpaid monthly fees will be paid by the Company within one year of the closing of such a capital raise.    On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the CEO, pursuant to which the CEO forgave $185,000 of accrued and unpaid consulting fees owed to him pursuant to his consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the CEO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%).   On March 11, 2019, the Company’s Board of Directors approved the Consulting Agreement dated effective October 1, 2018 with its COO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the COO pursuant to the agreement are those customary for the position in which the COO is serving. As of the effective date, the Company shall issue to the COO an aggregate of 2,409,000 shares of the Company’s common stock which vest as follows:   1.       409,000 shares on the first-year anniversary of the effective date; 2.       800,000 shares on the second-year anniversary of the effective date; and 3.       1,200,000 shares on the third-year anniversary of the effective date.    The shares are issued under the 2017 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange. As of March 31, 2020, and December 31, 2019, 409,000 shares had vested, but were not yet issued.   As part of the Consulting Agreement dated October 1, 2018 the COO shall receive a monthly fee of $12,750 which accrues unless converted into shares of common stock of the Company at a conversion rate specified in the agreement. Until the Company closes a minimum $500,000 capital raise, the monthly fee accrues and, upon the closing of such a capital raise, $4,250 of the monthly fee will be paid to the COO in cash and the remainder will continue to accrue. Upon the closing of a capital raise of at least $2,000,000, the entire monthly fee will be paid to the COO in cash and all accrued and unpaid monthly fees will be paid by the Company within one year of the closing of such a capital raise.   On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the COO, pursuant to which the COO forgave $103,250 of accrued and unpaid consulting fees owed to her pursuant to her consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the COO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%).   On March 11, 2019, the Company’s Board of Directors approved the Amended and Restated Consulting Agreement dated effective April 23, 2018 with its CTO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the CTO pursuant to the agreement are those customary for the position in which the CTO is serving. As of the effective date, the Company shall issue to the CTO an aggregate of 1,800,000 shares of the Company’s common stock which vest as follows:   1.       300,000 shares on the first-year anniversary of the effective date; 2.       600,000 shares on the second-year anniversary of the effective date; and 3.       900,000 shares on the third-year anniversary of the effective date.   As of March 31, 2020, and December 31, 2019, 900,000 and 300,000 shares had vested, respectively, but were not yet issued.   As part of the Amended and Restated Consulting Agreement dated effective April 23,2018 the CTO shall receive a monthly fee of $9,375 which accrues unless converted into shares of common stock of the Company at a conversion rate specified in the agreement. Until the Company closes a minimum $500,000 capital raise, the monthly fee accrues and, upon the closing of such a capital raise, $3,125 of the monthly fee will be paid to the CTO in cash and the remainder will continue to accrue. Upon the closing of a capital raise of at least $2,000,000, the entire monthly fee will be paid to the CTO in cash and all accrued and unpaid monthly fees will be paid by the Company within one year of the closing of such a capital raise.   On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the CTO pursuant to which the CTO forgave $82,475 of accrued and unpaid consulting fees owed to him pursuant to his consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the CTO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%).

5. STOCKHOLDERS' EQUITY   Common Stock   The Company has authorized 190,000,000 shares of $0.001 par value common stock and 10,000,000 shares of $0.001 par value preferred stock. As of March 31, 2020, and December 31, 2019, the Company had 67,063,547 and 43,313,547 shares of common stock and no shares of preferred stock issued and outstanding, respectively.   Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available, therefore. In the event of liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to share pro rata in all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.   On December 14, 2017 (the “Effective Date”), the Board of Directors of the Company approved the 2017 Stock Inventive Plan (the “2017 Plan”). Awards may be made under the 2017 Plan for up to 4,500,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the 2017 Plan. No awards can be granted under the 2017 Plan after the expiration of 10 years from the Effective Date but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.    On March 11, 2019 (the “Effective Date”) the Board of Directors of the Company approved the 2019 Stock Incentive Plan (the “Plan”). Awards may be made under the Plan for up to 5,000,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the Plan. No awards can be granted under the Plan after the expiration of 10 years from the Effective Date but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.   Shares earned and issued related to the consulting agreements discussed in Note 4 are issued under the 2017 Stock Incentive Plan and the 2019 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange.   A summary of the status of the Company’s non-vested shares as of March 31, 2019 and 2020 and changes during the year then ended, is presented below:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Non-vested Shares of Common Stock</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Weighted Average Fair Value</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 68%">Balance at December 31, 2018</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">7,469,000</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 13%; text-align: right">0.30</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Awarded</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt">Vested</td> <td> </td> <td> </td> <td style="text-align: right">(300,000</td> <td>)</td> <td> </td> <td> </td> <td style="text-align: right">0.30</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; padding-left: 10pt">Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 2.5pt">Balance at March 31, 2019</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">7,169,000</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt">$</td> <td style="padding-bottom: 2.5pt; text-align: right">0.30</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td>Balance at December 31, 2019</td> <td> </td> <td> </td> <td style="text-align: right">6,000,000</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">0.30</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Awarded</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt">Vested</td> <td> </td> <td> </td> <td style="text-align: right">(600,000</td> <td>)</td> <td> </td> <td> </td> <td style="text-align: right">0.30</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; padding-left: 10pt">Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 2.5pt">Balance at March 31, 2020</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">5,400,000</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt">$</td> <td style="padding-bottom: 2.5pt; text-align: right">0.30</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>     As of March 31, 2020, and December 31, 2019 there was $896,828 and $1,078,055, respectively, of total unrecognized compensation costs related to the non-vested share-based compensation arrangements awarded to consultants. That cost is expected to be recognized over a weighted-average period of 1.2 years and 1.4 years, respectively, as of March 31, 2020 and December 31, 2019. The total fair value of shares recognized during the three months ended March 31, 2020 and 2019 was $181,227 and $152,765, respectively.   On March 6, 2020, six months from receipt of the first tranche of $35,000 under the Convertible Promissory Note issued on August 29, 2019, the Company failed to pay the accrued and unpaid interest, which is considered an “Event of Default” under the note. As a result, the conversion price became a “Variable Conversion Price.” Also, as a result of the occurrence of the “Event of Default,” all amounts owing under the note became immediately due and payable and the Company became obligated to pay to the holder 175% of the then outstanding balance of the note and all unpaid principal and unpaid interest accrued interest at 15%. During March 2020, the holder of the note had converted $18,668 of principle plus fees into 23,750,000 shares of Common Stock amounting to $27,688.   Total share-based compensation for the three months ended March 31, 2020 and 2019 was $208,915 and $323,056, respectively.   Warrants   A summary of the status of the Company’s warrants as of March 31, 2020 and 2019 and changes during the three months then ended, is presented below:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Shares Under Warrants</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Weighted Average Exercise Price</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Weighted Average Remaining Contractual Life</td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 52%; text-align: justify">Outstanding at December 31, 2018</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">384,615</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 15%; text-align: justify">$0.75</td> <td style="width: 1%"> </td> <td style="width: 15%; text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; text-indent: 16.8pt">Issued</td> <td> </td> <td> </td> <td style="text-align: right">286,667</td> <td> </td> <td> </td> <td style="text-align: justify">$0.36</td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="text-align: justify; text-indent: 16.8pt">Exercised</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; text-align: justify; text-indent: 16.8pt">Expired/Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 1pt; text-align: justify">Outstanding at March 31, 2019</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">671,282</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">$0.43</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">5.7 years</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="text-align: justify">Outstanding at December 31, 2019</td> <td> </td> <td> </td> <td style="text-align: right">1,627,532</td> <td> </td> <td> </td> <td style="text-align: justify">$0.21</td> <td> </td> <td style="text-align: justify">4.5 years</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; text-indent: 16.8pt">Issued</td> <td> </td> <td> </td> <td style="text-align: right">42,907,532</td> <td> </td> <td> </td> <td style="text-align: justify">$0.01</td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="text-align: justify; text-indent: 16.8pt">Exercised</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; text-align: justify; text-indent: 16.8pt">Expired/Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 1pt; text-align: justify">Outstanding at March 31, 2020</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">44,535,064</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">$0.00</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">4.4 years</td></tr> </table>

6. EARNINGS PER SHARE   The following table sets forth the computation of basic and diluted net loss per share of common stock for the three months ended March 31, 2020 and 2019:    <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td> </td> <td colspan="6" style="text-align: center">Three months ended March 31,</td> <td> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">2020</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">2019</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 68%; padding-left: 10pt; text-indent: -10pt">Net loss attributable to common stockholders (basic)</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 13%; text-align: right">(789,470</td> <td style="width: 1%">)</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 13%; text-align: right">(780,038</td> <td style="width: 1%">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt; text-indent: -10pt">Shares used to compute net loss per common share, basic and diluted</td> <td> </td> <td> </td> <td style="text-align: right">42,245,415</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">41,175,686</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt; text-indent: -10pt">Net loss per share attributable to common stockholders, basic and diluted</td> <td> </td> <td>$</td> <td style="text-align: right">(0.02</td> <td>)</td> <td> </td> <td>$</td> <td style="text-align: right">(0.02</td> <td>)</td></tr> </table>      Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include stock options, convertible debt, convertible preferred stock and common stock warrants have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.   The following outstanding common stock equivalents have been excluded from diluted net loss per common share for the three months ended March 31, 2020 and 2019 because their inclusion would be anti-dilutive:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">March 31, 2020</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">March 31, 2019</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 68%">Warrants to purchase common stock</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">44,535,064</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">671,282</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Potentially issuable shares related to convertible notes payable</td> <td> </td> <td> </td> <td style="text-align: right">43,338,312</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">3,084,615</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td>Potentially issuable vested shares to directors and officers</td> <td> </td> <td> </td> <td style="text-align: right">1,869,000</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">300,000</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt">Potentially issuable unvested shares to officers</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">5,400,000</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">7,169,000</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 2.5pt">Total anti-dilutive common stock equivalents</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">95,142,376</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">11,224,897</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

7. CONVERTIBLE NOTE PAYABLE   On January 18, 2018, the Board of Directors of the Company approved a non-public offering of up to $1,000,000 aggregate principal amount of its 12% Senior Secured Convertible Notes. The notes are convertible, in whole or in part, into shares of the Company’s common stock, at any time at a rate of $0.65 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The notes bear interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The notes mature January 15, 2020.   The notes are governed by a Securities Purchase Agreement and are secured by all the assets of the Company pursuant to a Security and Pledge Agreement. In addition to the issuance of the notes in the offering, the Company’s Board of Directors approved, as part of the offering, the issuance of warrants to purchase one share of the Company’s common stock for 50% of the number of shares of common stock issuable upon conversion of each note. Each warrant is immediately exercisable at $0.75 per share, contains certain anti-dilution down-round features and expires on January 15, 2023. If the Company ever defaults on the loan the warrants to be issued will increase from 50% of the number of shares of common stock issuable upon conversion to 100%.   On January 22, 2018, the Company entered into a SPA and Security and Pledge Agreement with its first investor in the offering and issued a note to the investor in the principal amount of $500,000. Subscription funds were received by the Company from the investor on February 7, 2018. In addition to the note, the Company issued to the investor 384,615 warrants. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.   The proceeds received upon issuing the note and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $838,404 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.1%; and volatility of 142%. The effective conversion rate resulted in a Beneficial Conversion Feature greater than the proceeds received. Thus, the discount was limited to the proceeds received of $500,000 and was amortized to interest expense using the effective interest method over the term of the note.   On March 7, 2019, the Board of Directors of the Company approved Amendment No. 1 to the 12% Senior Secured Convertible Promissory Note and the Warrant Agreement, each issued January 22, 2018, respectively, to the note holder. The amendments (i) extend the maturity date of the note to March 1, 2021 and extend the term of the warrants to March 6, 2024, (ii) lower the conversion price of the note and the exercise price of the warrants to $0.20 and $0.30, respectively, and (iii) add an adjustment to the conversion and exercise price of the note and warrants, respectively, in the event the Company does not achieve certain milestones during calendar 2019. The fair value of the warrants is $25,162 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.6%; and volatility of 127%. The effective conversion rate resulted in a discount of $23,956 and is amortized to interest expense using the effective interest method over the term of the note. The Company recognized a loss on extinguishment of debt of $221,232 related to the decrease in conversion price.    On January 1, 2020, the Company failed to achieve certain milestones during calendar 2019 and, as such, the conversion/exercise prices of the note and warrants were adjusted to $0.10 and $0.15, respectively. This resulted in an adjustment to retained earnings of $201 based on the change in fair value.   Effective January 15, 2020, the Company went into technical default of the note agreement as a result of not making the December 31, 2019 interest payment within the required period. As a result, the principal was increased by 20%, or $100,000, and the Company was required to issue an additional 384,615 warrants at the then effective exercise price of $0.15 per share. The fair value of the warrants was $44,297, determined using the Black-Scholes valuation model with the following assumptions: expected term of 4.14 years; risk free interest rate of 1.6%; and volatility of 243%. Due to the default, this value was immediately expensed.   As of March 31, 2020, the exercise price of the warrants was further adjusted to $0.00084 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $71 based on the change in fair value.   As of March 31, 2020, the Company has accrued interest related to this note of $31,578. For the three months ended March 31, 2020, the Company also amortized to interest expense $2,999 of the discount.    The unpaid principal balance of the note is $600,000 as of March 31, 2020, which includes the default penalty noted above, and the remaining unamortized discount is $11,039.   On January 22, 2019, the Company entered into a Securities Purchase Agreement and Security and Pledge Agreement with a single investor and issued a Secured Convertible Promissory Note to the investor in the principal amount of $55,000. In addition to the note, the Company issued to the investor 36,667 warrants. Each warrant is immediately exercisable at $0.75 per share, contains certain anti-dilution down-round features and expires on January 22, 2024. If the Company ever defaults on the loan, the warrants to be issued will increase from 50% of the number of shares of common stock issuable upon conversion to 100%. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.   The proceeds received upon issuing the note and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $3,217 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.6%; and volatility of 128%. The effective conversion rate resulted in a discount of $3,039 and is amortized to interest expense using the effective interest method over the term of the note.   As of March 31, 2020, the exercise price of the warrants was adjusted to $0.00084 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $7 based on the change in fair value.    The unpaid principal balance of the note and accrued interest is $55,000 and $3,270, respectively, as of March 31, 2020, and the remaining unamortized discount is $0. For the three months ended March 31, 2020, the Company amortized to interest expense $194 from the amortization of the discount. This note and accrued interest is due to a related party. On June 12, 2020, this note was amended to extend the maturity date to March 1, 2021, and all events of default were waived.   On March 7, 2019, the Board of Directors of the Company approved a non-public offering of up to $500,000 aggregate principal amount of its 12% Senior Secured Convertible Notes. The notes are convertible, in whole or in part, into shares of the Company’s common stock, at any time at a rate of $0.20 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The notes bear interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The notes mature March 1, 2021. The conversion price of the notes is also subject to adjustments if the Company does not achieve certain milestones during the calendar year 2019.   The notes are governed by a Securities Purchase Agreement and are secured by all the assets of the Company pursuant to a Security and Pledge Agreement. Funding is subject to the occurrence of certain milestones, as stated in the SPA. In addition to the issuance of the notes in the offering, the Company’s Board of Directors approved, as part of the offering, the issuance of warrants to purchase one share of the Company’s common stock for 50% of the number of shares of common stock issuable upon conversion of each note. Each warrant is immediately exercisable at $0.30 per share and expires five years from the issuance date. The exercise price of the warrants is also subject to adjustments if the Company does not achieve certain milestones during the calendar year 2019.    On March 6, 2019, the Company entered into SPAs and Security and Pledge Agreements with its first two investors in the offering and issued notes to the investors in the aggregate principal amount of $100,000. Subscription funds were received by the Company from the investors on March 6, 2019. In addition to the notes, the Company issued to the investors an aggregate of 250,000 warrants. Each warrant is immediately exercisable at $0.30 per share, contains certain anti-dilution down-round features and expires on March 6, 2024. If the Company ever defaults on the loan the warrants to be issued will increase from 50% of the number of shares of common stock issuable upon conversion to 100%. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.   The proceeds received upon issuing the notes and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $12,646 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 2.5%; and volatility of 127%. The effective conversion rate resulted in a discount of $11,226 and is amortized to interest expense using the effective interest method over the term of the notes.   On January 1, 2020, the Company failed to achieve certain milestones during calendar 2019 and, as such, the conversion/exercise prices of the note and warrants were adjusted to $0.10 and $0.15, respectively. This resulted in an adjustment to retained earnings of $131 based on the change in fair value.   Effective January 15, 2020, the Company went into technical default of the note agreement as a result of not making the December 31, 2019 interest payment within the required period. As a result, the principal was increased by 20%, or $20,000, in aggregate, and the Company was required to issue an additional 250,000 warrants at the then effective exercise price of $0.15 per share. The fair value of the warrants was $28,793, determined using the Black-Scholes valuation model with the following assumptions: expected term of 4.14 years; risk free interest rate of 1.6%; and volatility of 243%. Due to the default, this value was immediately expensed.   As of March 31, 2020, the exercise price of the warrants was further adjusted to $0.00084 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $46 based on the change in fair value.    As of March 31, 2020, the unpaid principal balance of the notes is $120,000, which includes the default penalty noted above, accrued interest is $6,316 and the balance of the unamortized discount is $0. For the three months ended March 31, 2020, the Company also amortized to interest expense $2,037 from the amortization of the discount.    On August 2, 2019, the Company entered into a Securities Purchase Agreement with an investor for the purchase of a 12% Secured Convertible Note in the principal amount of up to $125,000. The note is convertible, in whole or in part, into shares of the Company’s common stock, at any time at a rate of $0.08 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The note bears interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The note matures August 2, 2021. $75,000, $25,000, and $25,000 subscription funds were received by the Company from the investor on August 2, 2019, September 6, 2019, and October 16, 2019, respectively. In addition to the note, the Company issued to the investor an aggregate of 781,250 warrants. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.   The proceeds received upon issuing the note and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $71,035 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 1.6%; and volatility of 132%. The effective conversion rate resulted in a discount of $104,941 and is amortized to interest expense using the effective interest method over the term of the note.   Effective January 30, 2020, the Company went into technical default of the note agreement as a result of not making the December 31, 2019 interest payment within the required period. As a result, the Company was required to issue an additional 781,250 warrants at the then effective exercise price of $0.12 per share. The fair value of the warrants was $90,342, determined using the Black-Scholes valuation model with the following assumptions: expected term of 4.76 years; risk free interest rate of 1.6%; and volatility of 233%. Due to the default, this value was immediately expensed.    As of March 31, 2020, the exercise price of the warrants was adjusted to $0.00084 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $70 based on the change in fair value.    As of March 31, 2020, the unpaid principal balance of the notes is $125,000, the accrued interest is $7,389 and the balance of the unamortized discount is $73,430. For the three months ended December 31, 2019, the Company amortized to interest expense $13,216 from the amortization of the discount. This note is payable to a related party.   On August 29, 2019, the Company entered into a Securities Purchase Agreement with an investor for the purchase of a Convertible Promissory Note in the principal amount of up to $105,000. The Note is not convertible within 180 days of receipt of funds for the first closing and is then convertible, in whole or in part, into shares of the Company’s Common Stock at a rate of $0.20 per share. Upon an “Event of Default,” as defined in the note, the conversion price becomes the “Variable Conversion Price” which is defined in the note as “60% multiplied by the Marked Price.” “Market Price” is defined in the note as “the lowest one (1) Trading Price (as defined in the note) for the common stock during the twenty-five (25) Trading Day period ending on the last complete Trading Day prior to the Conversion Date.” The note bears interest at a rate of 10% per annum with principal and accrued and unpaid interest payable six months from the receipt of funds for each tranche under the note. Subscription funds of $30,000 were received by the Company from the investor on September 6, 2019 for which the Company paid a purchase price of $35,000. In addition to the notes, the Company issued to the investor an aggregate of 175,000 warrants. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11.   The proceeds received upon issuing the notes and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $15,868 determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of 1.4%; and volatility of 132%. The effective conversion rate resulted in a discount of $10,378 and is amortized to interest expense using the effective interest method over the term of the notes.   As of March 31, 2020, the exercise price of the warrants was adjusted to $0.00084 and the number of warrants was increased to 41,666,667 as a result of the down-round features being triggered. This resulted in an adjustment to retained earnings of $203,002 based on the change in fair value.   During the three months ended March 31, 2020, the note went into default upon passing its maturity date. As a result, a default penalty of $26,250 was recorded and added to the principal balance. In addition, the conversion price became the “Variable Conversion Price” as defined above. This note is now convertible into a variable number of shares of common stock for which there is no floor to the number of shares that might be required to issue. Based on the requirements of ASC 815, Derivatives and Hedging, the conversion feature represents an embedded derivative that is required to be bifurcated and accounted for as a separate derivative liability. The derivative liability is originally recorded at its estimated fair value and is required to be revalued at each conversion event and reporting period. Changes in the derivative liability fair value are reported in operating results each reporting period.   The Company valued the conversion feature on the date of default resulting in initial liability of $159,888, which was immediately expensed due to the default. During the three months ended March 31, 2020, $18,688 in principal and $9,000 in fees were converted into 23,750,000 shares of common stock. At each conversion date, the Company recalculated the value of the derivative liability associated with the convertible note recording a gain (loss) in connection with the change in fair market value. In addition, the pro-rata portion of the derivative liability as compared to the portion of the convertible note converted was reclassed to additional paid-in capital. During the three months ended March 31, 2020, the Company recorded a loss of $63,908 related to the change of fair value of the derivative liability and recorded $77,386 to additional paid-in capital.   Upon issuance and at each conversion and reporting period date, the Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from $0.0008 to $0.0028, the closing stock price of the Company's common stock on the date of valuation ranging from $0.0022 to $0.021, an expected dividend yield of 0%, expected volatility ranging from 563% to 574%, risk-free interest rates ranging from 0.11% to 0.39%, and an expected term of 0.25 years.   As of March 31, 2020, the unpaid principal balance of the notes including the default penalty is $42,562 and accrued interest is $1,636. For the three months ended March 31, 2020, $5,577 of the note discount has been amortized to interest expense leaving an unamortized balance of $0 as of March 31, 2020.

8. RELATED PARTIES   As of March 31, 2020, and December 31, 2019 the amount due to stockholders was $1,000. The balance is payable to two stockholders related to opening bank balances.   As of March 31, 2020, and December 31, 2019 accounts payable due to three officers was $347,205 and $343,227, respectively. The majority of the balance is related to deferred salary expenses while the remainder is related to reimbursable expenses.   In January 2018, the Company entered into a lease agreement with a stockholder of the Company and paid monthly installments of $2,000 which terminated on December 31, 2018. The Company renewed the lease agreement in January 2019 for monthly installments of $2,000 which terminated on June 30, 2019, the Company now rents month to month for $250 per month. For the three months ended March 31, 2020 and 2019, rent expense earned by the stockholder amounted to $750 and $6,000. $15,750 and $15,000 of rent expense is in accounts payable as of March 31, 2020 and December 31, 2019, respectively.   For the three months ended March 31, 2020 and 2019 professional expense paid to directors and officers of the Company amounted to $0, respectively. For the three months ended March 31, 2020 and 2019, travel expense paid on behalf of directors and officers of the Company amounted to approximately $0, respectively.

9. SUBSEQUENT EVENTS   The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined that there were the following items to disclose:   The Company applied for and received funding from the Payroll Protection Program (the “PPP Loan”) in the amount of $36,700. under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 23, 2022 and bears interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act.   The Company is closely monitoring the impact of the 2019 novel coronavirus, or COVID-19, on all aspects of its business. COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and the President of the United States declared the COVID-19 outbreak a national emergency. The Company has implemented contingency plans, with office-based employees working remotely where possible. While the COVID-19 pandemic has not had a material adverse impact on the Company’s operations to date, the future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. It is possible that the COVID-19 pandemic, the measures taken by the governments of countries affected and the resulting economic impact may materially and adversely affect the Company’s results of operations, cash flows and financial position as well as its customers.   On May 20, 2020, the second closing of the Convertible Promissory Note occurred pursuant to which the Company paid a purchase price of $35,000 and received gross proceeds of $29,300. In addition to the issuance of the note, the Company issued to the holder warrants to purchase one share of the Company’s Common Stock for 100% of the number of shares of Common Stock issuable upon conversion of the funds received in the second closing. Each warrant is immediately exercisable at $0.20 per share, unless adjusted, and expires on May 20, 2025.   On June 12, 2020, the Company entered into Amendment No. 1 to the 5% Secured Promissory Note with Cambridge Medspace, LLC, a Massachusetts limited liability company, pursuant to which the Note was amended to extend the maturity date to January 22, 2021.   On July 29, 2020, the Company entered into a Settlement and Mutual Release Agreement with a lender pursuant to which the Company paid $100,000 to the lender in exchange for the full extinguishment of the remaining principal amount and all accrued and unpaid interest (approximately $70,000) and penalties associated with the Convertible Promissory Note dated August 29, 2019 issued to the lender. All remaining unexercised warrants to purchase the Company’s Common Stock issued to the lender were also extinguished pursuant to the Settlement Agreement. Upon receipt of the Settlement Amount by the lender, the lender agreed to release all reserved shares of the Company’s Common Stock. The Settlement Agreement also provides for a full mutual release of the parties.   On July 29, 2020, the Company entered an Equity Financing Agreement and Registration Rights Agreement with GHS Investments LLC (“GHS”), pursuant to which GHS agreed to purchase up to $5,000,000 in shares of the Company’s Common Stock, from time to time over the course of 36 months after effectiveness of a registration statement on Form S-1 of the underlying shares of Common Stock.   In connection with entering into the Equity Financing Agreement, on July 29, 2020, the Company issued to GHS a Convertible Promissory Note in the principal amount of $100,000. The $100k Note matures on April 29, 2021 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the $100k Note at 10% per annum based on a 360-day year. The $100k Note is convertible at any time, upon the election of GHS, into shares of the Company’s Common Stock at $0.01 per share. The $100k Note is subject to various “Events of Default,” which are disclosed in the $100k Note. Upon the occurrence of an uncured “Event of Default,” the $100k Note will become immediately due and payable and will be subject to penalties and adjustments to the conversion price (the lesser of: (a) $0.01 or (b) 70% multiplied by the Market Price (as defined in the $100k Note) (representing a discount rate of 30%). Upon the issuance of the $100k Note, the Company has agreed to reserve one times the amount of shares of Common Stock into which the $100k Note is convertible and, 101 days from the issuance of the $100k Note, the Company will reserve two-and-a-half times the amount of shares of Common Stock into which the $100k Note is convertible. Within three Trading Days (as defined in the $100k Note) of the sale by GHS of all of the Common Stock issued upon the conversion of the $100k Note, the Company is required to issue to GHS an amount of shares of Common Stock priced at the lowest traded price for the relevant Trading Day, which represents the difference between $130,000 and the net proceeds to GHS from the sale of aggregate Common Stock issued upon the conversion of the $100k Note.   In connection with entering into the Equity Financing Agreement, on July 29, 2020, the Company issued to GHS a Convertible Promissory Note in the principal amount of $75,000. The $75k Note matures on April 29, 2021 upon which time all accrued and unpaid interest will be due and payable. Interest accrues on the $75k Note at 10% per annum based on a 360-day year. The $75k Note is convertible at any time, upon the election of GHS, into shares of the Company’s Common Stock at $0.0099 per share. The $75k Note is subject to various “Events of Default,” which are disclosed in the $75k Note. Upon the occurrence of an uncured “Event of Default,” the $75k Note will become immediately due and payable and will be subject to penalties and adjustments to the conversion price (the lesser of: (a) $0.01 or (b) 70% multiplied by the Market Price (as defined in the $75k Note) (representing a discount rate of 30%). Upon the issuance of the $75k Note, the Company has agreed to reserve one times the amount of shares of Common Stock into which the $75k Note is convertible and, 101 days from the issuance of the $75k Note, the Company will reserve two-and-a-half times the amount of shares of Common Stock into which the $75k Note is convertible.

Interim Financial Statements   The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2019.

Principles of Consolidation   The consolidated financial statements for March 31, 2020 and 2019 include the accounts of IIOT-OXYS, Inc., OXYS Corporation, and HereLab, Inc. All significant intercompany balances and transactions have been eliminated.

Revenue Recognition   The Company’s revenue is derived primarily from providing services under contractual agreements. The Company recognizes revenue in accordance with ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”) which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all active contracts as of the adoption date. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company's method of recognizing revenue under ASC 606 yielded similar results to the method utilized immediately prior to adoption. Accordingly, there was no effect to each financial statement line item as a result of applying the new revenue standard.   According to ASC 606, the Company recognizes revenue based on the following criteria:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 24px"> </td> <td style="width: 24px">·</td> <td style="text-align: justify">Identification of a contract or contracts, with a customer.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Identification of the performance obligations in the contract.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Determination of contract price.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Allocation of transaction price to the performance obligation.</td></tr> <tr style="vertical-align: top"> <td> </td> <td>·</td> <td style="text-align: justify">Recognition of revenue when, or as, performance obligation is satisfied.</td></tr> </table>    The Company used a practical expedient available under ASC 606-10-65-1(f)4 that permits it to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.   The Company has elected to treat shipping and handling activities as cost of sales. Additionally, the Company has elected to record revenue net of sales and other similar taxes.

Going Concern   The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company was only recently formed, has incurred continuing operating losses, and has an accumulated deficit of $6,033,374 and $5,040,307 as of March 31, 2020 and December 31, 2019, respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern.   Management believes that the Company will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations for the next 12 months by generating cash through additional borrowings and/or issuances of equity securities, as needed. However, there can be no assurance that the Company will be able to generate sufficient liquidity to maintain its operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Concentration of Risk   Financial instruments that potentially expose the Company to concentrations of risk consist primarily of cash and cash equivalents which are generally not collateralized. The Company’s policy is to place its cash and cash equivalents with high quality financial institutions, in order to limit the amount of credit exposure. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC), up to $250,000. As of March 31, 2020, and December 31, 2019, the Company had no amounts in excess of the FDIC insurance limit.

Accounts Receivable and Allowance for Doubtful Accounts   Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. The Company determines the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. There was no allowance for doubtful accounts as of March 31, 2020 and December 31, 2019.

A summary of the status of the Company’s non-vested shares as of March 31, 2019 and 2020 and changes during the year then ended, is presented below:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Non-vested Shares of Common Stock</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Weighted Average Fair Value</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 68%">Balance at December 31, 2018</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">7,469,000</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 13%; text-align: right">0.30</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Awarded</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt">Vested</td> <td> </td> <td> </td> <td style="text-align: right">(300,000</td> <td>)</td> <td> </td> <td> </td> <td style="text-align: right">0.30</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; padding-left: 10pt">Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 2.5pt">Balance at March 31, 2019</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">7,169,000</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt">$</td> <td style="padding-bottom: 2.5pt; text-align: right">0.30</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td>Balance at December 31, 2019</td> <td> </td> <td> </td> <td style="text-align: right">6,000,000</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">0.30</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Awarded</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt">Vested</td> <td> </td> <td> </td> <td style="text-align: right">(600,000</td> <td>)</td> <td> </td> <td> </td> <td style="text-align: right">0.30</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; padding-left: 10pt">Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 2.5pt">Balance at March 31, 2020</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">5,400,000</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt">$</td> <td style="padding-bottom: 2.5pt; text-align: right">0.30</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

A summary of the status of the Company’s warrants as of March 31, 2020 and 2019 and changes during the three months then ended, is presented below:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Shares Under Warrants</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Weighted Average Exercise Price</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: center">Weighted Average Remaining Contractual Life</td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 52%; text-align: justify">Outstanding at December 31, 2018</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">384,615</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 15%; text-align: justify">$0.75</td> <td style="width: 1%"> </td> <td style="width: 15%; text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; text-indent: 16.8pt">Issued</td> <td> </td> <td> </td> <td style="text-align: right">286,667</td> <td> </td> <td> </td> <td style="text-align: justify">$0.36</td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="text-align: justify; text-indent: 16.8pt">Exercised</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; text-align: justify; text-indent: 16.8pt">Expired/Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 1pt; text-align: justify">Outstanding at March 31, 2019</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">671,282</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">$0.43</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">5.7 years</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="text-align: justify">Outstanding at December 31, 2019</td> <td> </td> <td> </td> <td style="text-align: right">1,627,532</td> <td> </td> <td> </td> <td style="text-align: justify">$0.21</td> <td> </td> <td style="text-align: justify">4.5 years</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; text-indent: 16.8pt">Issued</td> <td> </td> <td> </td> <td style="text-align: right">42,907,532</td> <td> </td> <td> </td> <td style="text-align: justify">$0.01</td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="text-align: justify; text-indent: 16.8pt">Exercised</td> <td> </td> <td> </td> <td style="text-align: right">–</td> <td> </td> <td> </td> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; text-align: justify; text-indent: 16.8pt">Expired/Forfeited</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">–</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 1pt; text-align: justify">Outstanding at March 31, 2020</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">44,535,064</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">$0.00</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt; text-align: justify">4.4 years</td></tr> </table>

The following table sets forth the computation of basic and diluted net loss per share of common stock for the three months ended March 31, 2020 and 2019:    <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td> </td> <td colspan="6" style="text-align: center">Three months ended March 31,</td> <td> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">2020</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">2019</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 68%; padding-left: 10pt; text-indent: -10pt">Net loss attributable to common stockholders (basic)</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 13%; text-align: right">(789,470</td> <td style="width: 1%">)</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 13%; text-align: right">(780,038</td> <td style="width: 1%">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt; text-indent: -10pt">Shares used to compute net loss per common share, basic and diluted</td> <td> </td> <td> </td> <td style="text-align: right">42,245,415</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">41,175,686</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt; text-indent: -10pt"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-left: 10pt; text-indent: -10pt">Net loss per share attributable to common stockholders, basic and diluted</td> <td> </td> <td>$</td> <td style="text-align: right">(0.02</td> <td>)</td> <td> </td> <td>$</td> <td style="text-align: right">(0.02</td> <td>)</td></tr> </table>

The following outstanding common stock equivalents have been excluded from diluted net loss per common share for the three months ended March 31, 2020 and 2019 because their inclusion would be anti-dilutive:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">March 31, 2020</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">March 31, 2019</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="width: 68%">Warrants to purchase common stock</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">44,535,064</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 13%; text-align: right">671,282</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Potentially issuable shares related to convertible notes payable</td> <td> </td> <td> </td> <td style="text-align: right">43,338,312</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">3,084,615</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td>Potentially issuable vested shares to directors and officers</td> <td> </td> <td> </td> <td style="text-align: right">1,869,000</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">300,000</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt">Potentially issuable unvested shares to officers</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">5,400,000</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid"> </td> <td style="border-bottom: black 1pt solid; text-align: right">7,169,000</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #EEEEEE"> <td style="padding-bottom: 2.5pt">Total anti-dilutive common stock equivalents</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">95,142,376</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">11,224,897</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

2018-01-18

2019-01-22

2018-01-22

2019-03-06

2019-03-07

2019-08-02

2019-08-29

2020-01-15

2020-01-30

18688

105000

125000

500000

100000

55000

500000

1000000

100000

20000

0.10

0.12

0.20

0.65

2020-01-15

2021-03-01

2021-08-02

42562

125000

120000

55000

600000

5577

73430

11039

10378

23956

11226

3039

36667 384615 250000 781.250 175000 384615 250000 781250

2024-03-06

2023-01-15

163433

1636

7389

6316

3270

31578

9000

23750000

63908

77386

750

6000

-63908

77386

163433 0 146250 0 9000 0

44297

3217

838404

12646

25162

71035

15868

28793

90342

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Entity Filer Category Entity Small Business Entity Emerging Growth Company Entity Ex Transition Period Entity Shell Company Entity Interactive data current Entity Incorporation State Code Entity File Number Entity Common Stock, Shares Outstanding Document Fiscal Period Focus Document Fiscal Year Focus Statement of Financial Position [Abstract] Assets Current Assets Cash and cash equivalents Accounts Receivable, net Prepaid Expense Inventory Total Current Assets Intangible Assets, net Total Assets Liabilities and Stockholders' (Deficit) Current Liabilities Shares Payable to Related Parties Salaries Payable to Related Parties Derivative Liability Accounts Payable Accrued Liabilities Deferred Revenue Total Current Liabilities Note Payable, net Due to stockholder Total Liabilities Commitments and Contingencies (Note 8) Stockholders' (Deficit) Equity Preferred stock $0.001 par value, 10,000,000 shares authorized; 0 issued and outstanding Common stock $0.001 par value, 190,000,000 shares authorized; 67,063,547 and 43,313,547 shares issued and outstanding, respectively Additional paid in capital Accumulated deficit Total Stockholders' Deficit Total Liabilities and Stockholders' Deficit Preferred stock, par value Preferred stock, shares authorized Preferred stock, shares issued Preferred stock, shares outstanding Common stock, par value Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Income Statement [Abstract] Revenues Sales Cost of sales Gross profit Expenses Demo Parts Bank Service Charges Office Expenses Organization Costs Insurance Professional Travel Patent License Fee Amortization of Intangible Assets Total Expenses Other Income (Expenses): Loss on Change in FMV of Derivative Liability Loss on Extinguishment of Debt Interest expense Miscellaneous Income Total Other Income (Expense) Net Loss Loss per common share Weighted average number of shares outstanding - Basic and Diluted Statement [Table] Statement [Line Items] Beginning balance, shares Beginning balance, value Common stock issued for conversion of convertible note payable, shares Common stock issued for conversion of convertible note payable, value Relief of derivative liabilities Warrants issued for default of convertible note payables Changes in FMV of warrants related to convertible note payables Acquisition of HereLab, shares Acquisition of HereLab, value Stock-based compensation, shares Stock-based compensation, value Beneficial conversion feature discount on note payable Net loss Ending balance, shares Ending balance, value Statement of Cash Flows [Abstract] Cash Flows from Operating Activities Net Loss Adjustments to reconcile net loss to net cash from operating activities: Loss on Extinguishment of Debt Stock based compensation Amortization of Discount on Notes Payable Loss on Issuance of Default Warrants Increase in Principal Due to Penalty Provision Increase in Principal Due to Fees Changes in assets and liabilities: (Increase) Decrease in: Accounts Receivable Inventory Prepaid Expense Increase (Decrease) in: Shares Payable to Related Parties Salaries Payable to Related Parties Derivative Liability Accounts Payable Accrued Liabilities Deferred Revenue Net Cash Provided By (Used By) Operating Activities Cash Flows from Financing Activities: Cash Received from Convertible Note Payable Net Cash Provided by Financing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at beginning of period Cash and Cash Equivalents at end of period Supplemental disclosure of cash flow information: Interest paid during the period Taxes paid during the period Supplemental disclosure of non-cash investing and financing activities: Discount on notes payable Conversion of Convertible Notes Payable and Derivative Liabilities Warrant Anti-Dilution Issuance Organization, Consolidation and Presentation of Financial Statements [Abstract] Nature of Operations Accounting Policies [Abstract] Summary of Significant Accounting Policies Accounting Standards Update and Change in Accounting Principle [Abstract] Recent Accounting Pronouncements Commitments and Contingencies Disclosure [Abstract] Commitments and Contingencies Equity [Abstract] Stockholders' Equity Earnings Per Share [Abstract] Earnings Per Share Debt Disclosure [Abstract] Convertible Note Payable Related Party Transactions [Abstract] EX-101.PRE 10 itox-20200331_pre.xml XBRL PRESENTATION FILE XML 11 R1.htm IDEA: XBRL DOCUMENT

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2020	Aug. 18, 2020
Cover [Abstract]
Entity Registrant Name	IIOT-OXYS, Inc.
Entity Central Index Key	0001290658
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Interactive data current	Yes
Entity Incorporation State Code	NV
Entity File Number	000-50773
Entity Common Stock, Shares Outstanding		141,825,630
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Current Assets
Cash and cash equivalents	$ 34,105	$ 24,212
Accounts Receivable, net	15,600	28,004
Prepaid Expense	4,081	3,710
Inventory	0	0
Total Current Assets	53,786	55,926
Intangible Assets, net	385,151	397,492
Total Assets	438,937	453,418
Current Liabilities
Shares Payable to Related Parties	1,283,872	1,102,645
Salaries Payable to Related Parties	347,205	343,227
Derivative Liability	146,410	0
Accounts Payable	145,728	164,562
Accrued Liabilities	50,189	54,497
Deferred Revenue	46,425	0
Total Current Liabilities	2,019,829	1,664,931
Note Payable, net	858,092	706,508
Due to stockholder	1,000	1,000
Total Liabilities	2,878,921	2,372,439
Commitments and Contingencies (Note 8)
Stockholders' (Deficit) Equity
Preferred stock $0.001 par value, 10,000,000 shares authorized; 0 issued and outstanding	0	0
Common stock $0.001 par value, 190,000,000 shares authorized; 67,063,547 and 43,313,547 shares issued and outstanding, respectively	67,064	43,314
Additional paid in capital	3,526,326	3,077,972
Accumulated deficit	(6,033,374)	(5,040,307)
Total Stockholders' Deficit	(2,439,984)	(1,919,021)
Total Liabilities and Stockholders' Deficit	$ 438,937	$ 453,418

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	190,000,000	190,000,000
Common stock, shares issued	67,063,547	43,313,547
Common stock, shares outstanding	67,063,547	43,313,547

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenues
Sales	$ 15,600	$ 42,837
Cost of sales	8,634	12,169
Gross profit	6,966	30,668
Expenses
Demo Parts	0	63
Bank Service Charges	1,422	700
Office Expenses	973	6,871
Organization Costs	11,147	5,240
Insurance	0	6,906
Professional	187,121	488,806
Travel	0	4,816
Patent License Fee	1,644	1,430
Amortization of Intangible Assets	12,341	12,206
Total Expenses	214,648	527,038
Other Income (Expenses):
Loss on Change in FMV of Derivative Liability	(63,908)	0
Loss on Extinguishment of Debt	0	(221,232)
Interest expense	(518,289)	(62,436)
Miscellaneous Income	409	0
Total Other Income (Expense)	(581,788)	(283,668)
Net Loss	$ (789,470)	$ (780,038)
Loss per common share	$ (0.02)	$ (0.02)
Weighted average number of shares outstanding - Basic and Diluted	45,245,415	41,175,686

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Condensed Consolidated Statements of Changes in Stockholders Equity (Deficit) (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2018	40,633,327
Beginning balance, value at Dec. 31, 2018	$ 40,633	$ 2,572,751	$ (3,153,020)	$ (539,636)
Stock-based compensation, shares	1,176,996
Stock-based compensation, value	$ 1,177	169,114		170,291
Beneficial conversion feature discount on note payable		38,222		38,222
Net loss			(780,038)	(780,038)
Ending balance, shares at Mar. 31, 2019	41,810,323
Ending balance, value at Mar. 31, 2019	$ 41,810	2,780,087	(3,933,058)	(1,111,161)
Beginning balance, shares at Dec. 31, 2019	43,313,547
Beginning balance, value at Dec. 31, 2019	$ 43,314	3,077,972	(5,040,307)	(1,919,021)
Common stock issued for conversion of convertible note payable, shares	23,750,000
Common stock issued for conversion of convertible note payable, value	$ 23,750	3,938		27,688
Relief of derivative liabilities		77,386		77,386
Warrants issued for default of convertible note payables		163,433		163,433
Changes in FMV of warrants related to convertible note payables		203,597	(203,597)
Net loss			(789,470)	(789,470)
Ending balance, shares at Mar. 31, 2020	67,063,547
Ending balance, value at Mar. 31, 2020	$ 67,064	$ 3,526,326	$ (6,033,374)	$ (2,439,984)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash Flows from Operating Activities
Net Loss	$ (789,470)	$ (780,038)
Adjustments to reconcile net loss to net cash from operating activities:
Loss on Extinguishment of Debt	0	221,232
Stock based compensation	0	290,555
Amortization of Discount on Notes Payable	24,022	46,028
Amortization of Intangible Assets	12,341	12,206
Loss on Issuance of Default Warrants	163,433	0
Increase in Principal Due to Penalty Provision	146,250	0
Increase in Principal Due to Fees	9,000	0
(Increase) Decrease in:
Accounts Receivable	12,404	(9,837)
Inventory	0	(190)
Prepaid Expense	(371)	(5,622)
Increase (Decrease) in:
Shares Payable to Related Parties	181,227	0
Salaries Payable to Related Parties	3,978	0
Derivative Liability	223,796	0
Accounts Payable	(18,834)	106,686
Accrued Liabilities	(4,308)	513
Deferred Revenue	46,425	0
Net Cash Provided By (Used By) Operating Activities	9,893	(118,467)
Cash Flows from Financing Activities:
Cash Received from Convertible Note Payable	0	155,000
Net Cash Provided by Financing Activities	0	155,000
Net Increase in Cash and Cash Equivalents	9,893	36,533
Cash and Cash Equivalents at beginning of period	24,212	39,226
Cash and Cash Equivalents at end of period	34,105	75,759
Supplemental disclosure of cash flow information:
Interest paid during the period	0	15,074
Taxes paid during the period	24,295	0
Supplemental disclosure of non-cash investing and financing activities:
Discount on notes payable	0	38,222
Conversion of Convertible Notes Payable and Derivative Liabilities	105,074	0
Warrant Anti-Dilution Issuance	$ 203,597	$ 0

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1. Nature of Operations

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

1. NATURE OF OPERATIONS

XML 18 R8.htm IDEA: XBRL DOCUMENT

2. Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Interim Financial Statements

Principles of Consolidation

Revenue Recognition

According to ASC 606, the Company recognizes revenue based on the following criteria:

	·	Identification of a contract or contracts, with a customer.
	·	Identification of the performance obligations in the contract.
	·	Determination of contract price.
	·	Allocation of transaction price to the performance obligation.
	·	Recognition of revenue when, or as, performance obligation is satisfied.

The Company has elected to treat shipping and handling activities as cost of sales. Additionally, the Company has elected to record revenue net of sales and other similar taxes.

Use of Estimates

Going Concern

Concentration of Risk

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for Doubtful Accounts

Fair Value of Financial Instruments

The fair value of the Company’s financial instruments is determined in accordance with ASC 820, Fair Value Measurements and Disclosures.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes.

Long-Lived Assets

Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Convertible Debt

Convertible debt is accounted for under FASB ASC 470, Debt – Debt with Conversion and Other Options.

Basic and Diluted Net Loss Per Common Share

The Company computes basic and diluted net loss attributable to common stockholders for the period under ASC 260-10, Earnings Per Share.

XML 19 R9.htm IDEA: XBRL DOCUMENT

3. Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent Accounting Pronouncements

3. RECENT ACCOUNTING PRONOUNCEMENTS

ASU 2019-12

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

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+ Details

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4. Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies