Name: IIOT-OXYS, Inc. Q3 2022 Earnings Call
Start: 2022-12-20T00:00:00.000Z

Executive Summary

Q3 2022 revenue was $0.023M, up 39% quarter-over-quarter (vs. $0.017M in Q2) and up 336% year-over-year (vs. $0.005M in Q3 2021); net loss improved to $(0.042)M from $(0.189)M in Q2 and $(0.326)M in Q3 2021 .
Management reiterated momentum: “third quarter revenue exceeded that in second quarter” and expects revenue strength to continue into Q4; H2 2022 revenue expected to exceed H1 2022, and total 2022 to be “approaching 2019 levels” .
Company highlighted strategic traction in Smart Manufacturing/Industry 4.0, Structural Health Monitoring, and Indoor Air Quality via Aretas collaboration; a state DOT bridge-monitoring contract extension is contributing revenue through June 2023 .
No Wall Street consensus estimates available (S&P Global coverage unavailable); stock reaction catalysts center on sustained revenue momentum, contract execution, and AI/ML initiatives .

What Went Well and What Went Wrong

Two consecutive quarters of revenue with Q3 > Q2; “third quarter revenue exceeded that in second quarter… momentum… will continue through the fourth quarter” .
Structural Health Monitoring contract extension with a New England State’s DOT produced Q3 revenue and is expected to continue through June 2023 .
Significant reduction in interest expense YoY and QoQ; Q3 interest expense fell to $0.015M vs. $0.101M in Q3 2021 and $0.111M in Q2 2021, aided by no amortization of debt discount in Q3 2022, while fair value change in derivative liability contributed a $0.126M gain .

Company remains loss-making; Q3 net loss was $(0.042)M and accumulated deficit reached $(9.005)M; working capital deficit was $(1.474)M and going-concern risk persists .
Gross margin compressed QoQ (from Q2 gross profit $0.016M on $0.017M revenue to Q3 gross profit $0.018M on $0.023M revenue), reflecting mix and cost of sales increase; net margin remains deeply negative .
Capital structure risk: outstanding convertible notes and derivative liabilities remained material (notes payable net $0.467M; derivative liability $0.329M at quarter-end) .

Metric	Q1 2022	Q2 2022	Q3 2022
Revenue ($USD Millions)	$0.000	$0.017	$0.023
Gross Profit ($USD Millions)	$0.000	$0.016	$0.018
Gross Margin (%)	N/A	96.9% (15,990/16,500)	77.7% (17,863/23,003)
Net Income (Loss) ($USD Millions)	$(0.513)	$(0.189)	$(0.042)
Net Margin (%)	N/A	-1,142.0% (-188,573/16,500)	-183.9% (-42,295/23,003)
Diluted EPS ($USD)	$(0.00)	$(0.00)	$(0.00)

Metric	Q3 2021	Q3 2022	YoY Change
Revenue ($USD Millions)	$0.005	$0.023	+336%
Net Income (Loss) ($USD Millions)	$(0.326)	$(0.042)	+$0.284M (improvement)
Diluted EPS ($USD)	$(0.00)	$(0.00)	Flat

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue trajectory	Q3 2022	“Q3 will match or exceed Q2 revenue” (Q2 10-Q MD&A)	Achieved: Q3 revenue exceeded Q2	Achieved/maintained
Revenue trajectory	H2 2022 vs. H1 2022	“H2 2022 will exceed H1 2022” (Q2 10-Q MD&A)	Reiterated: H2 > H1	Maintained
Full-year revenue vs. 2019	FY 2022	“Total revenue 2022 will exceed 2019” (Q2 10-Q MD&A)	“Approaching 2019 levels” (Q3 press release)	Lowered (from exceed to approach)
Q4 continuity	Q4 2022	Not explicitly stated prior	“Momentum… will continue through the fourth quarter”	New positive commentary

Topic	Previous Mentions (Q1 2022)	Previous Mentions (Q2 2022)	Current Period (Q3 2022)	Trend
AI/ML initiatives	Hired full-time ML Engineer; expanding AI/ML focus	Continued AI/ML focus and sub-contract initiation	Ongoing execution, algorithms from pilots leveraged	Steady build-out
Structural Health Monitoring (SHM)	State DOT bridge monitoring extension noted	Anticipated approval for 2022–2023, then received formal contract in Q3	Revenue recorded since July; runs through June 2023	Converting to sustained revenue
Indoor Air Quality (IAQ) via Aretas	NDA and initial collaboration	Algorithm development contract; exploring further collaboration	Co-marketing/co-selling agreement; expect sales commissions in Q4	Broadening commercial path
Funding/capital access	Equity line and Series B preferred support	Additional equity/Series B; improved cash balance	Access to capital supports BD and IP development; ongoing financing needs	Adequate but still required
Revenue outlook	No revenue in Q1; expect Q2 and H2 > 2021	Q3 to match/exceed Q2; H2 > H1; FY exceed 2019	Q3 exceeded Q2; H2 > H1; FY “approaching” 2019	Positive near-term; moderated full-year target

“We’re pleased to announce that we kept our revenue promise… third quarter revenue exceeded that in second quarter… momentum… continued into the third quarter and we expect it will continue through the fourth quarter… total revenue for 2022 will be approaching 2019 levels.” — CEO Cliff Emmons .
“We’re pleased to announce that we kept our revenue promise… third quarter revenue exceeded that in second quarter… We also received interest earned on the Promissory Note to Aretas during the quarter.” — CEO Cliff Emmons (business update) .
“We believe the underlying strengths of the Company are gathering momentum for expected growth… strong execution on contracts to date… and a steady focus on prospecting, submitting proposals, and securing Proof of Concepts (POCs).” — MD&A .

Company hosted an Investor Conference Call on November 30, 2022 and posted an audio recording; no live questions were taken and questions were solicited by email in advance .
Recording posted at SmallCapVoice (company 8-K reference) .

Wall Street consensus estimates (EPS, revenue, EBITDA, target price, recommendation) via S&P Global were unavailable for Q3 2022 and FY 2022 at the time of this analysis due to lack of coverage/technical access. As a result, comparison to consensus cannot be made, and no estimate-related beats/misses are reported.

Revenue inflection confirmed: two consecutive revenue quarters with Q3 up 39% QoQ and 336% YoY; focus near-term on sustaining Q4 momentum and converting pilots to recurring contracts .
SHM contract now a tangible revenue stream through mid-2023, offering visibility; monitor execution and potential expansion to additional structures/regions .
AI/ML and IAQ partnerships (Aretas) broaden pipeline; co-marketing/co-selling may add incremental revenue via commissions beginning Q4 .
Balance sheet constraints remain: working capital deficit $(1.474)M, notes payable and derivative liabilities are material; ongoing financing likely required until scale achieved .
Profitability remains a medium-term objective; gross margin variability and negative net margin underscore need for scale and mix optimization .
Guidance moderated for FY relative to Q2 commentary (from “exceed 2019” to “approaching 2019”), but H2>H1 trajectory intact; watch Q4 delivery vs. stated momentum .
With no consensus estimates, stock narrative will be driven by contract wins, execution milestones, and financing terms rather than “beat/miss” optics; catalysts include new customer adds and segment expansion .