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spk01: Welcome everybody to the IIOT Auxis Incorporated 2023 second quarter financial filing of the Form 10-Q. The discussion today with Cliff Emmons, CEO and Acting CTO of IIOT Auxis and Karen McNamara, Chief Operating Officer Auxis. an acting CFO. The company is traded on the OTC under the ticker symbol ITOX. Before we get this call started, please listen to the following safe harbor statements. This call may contain forward-looking statements that reflects management's current views about future events and financial performance. Forward-looking statements often contains words such as expects, anticipate, intends, or believes the company's forward-looking statements are subject to a number of risks and uncertainties that may cause actual results and events to differ materially from those projected in the forward-looking statements risks and uncertainties that could adversely affect the company include without limitation the loss of major customers their failure to obtain new contracts their inability to patent products or processes Thank you for watching. to update their forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I'd like to welcome to the show Cliff Emmons. As stated, he is the CEO and acting CTO. Cliff, congratulations on the success and continued momentum here in 2023. Please share your opening thoughts and comments with your listeners and shareholders today.
spk02: Thanks, Stuart. We're very pleased with our results today in 2023, as reported in our recent 10Q. Our first half year of revenue in 2023 was significant improvement over the same period in 2022, an increase of 376%. And we sustained the revenue momentum we achieved throughout 2022. We expect this momentum achieved in the first half of 2023 will continue through the remainder of 2023, as long as adequate funding is secured to fuel sales and marketing efforts. Our strong six-month revenue and our confidence this momentum will continue through 2023 and beyond are based on the following factors. Our current DOT bridge monitoring contract, and overall structural health monitoring, SHM, vertical is the foundation of our revenue momentum. The current monitoring revenue will continue through the second half of 2023 with our previously approved expansion to continue beyond June. We believe our discussions with our main contractor, the DOT, for extensions and expansions have been favorable. We also believe that prospects with our current DOT state, DOT contracts in two other Northeast states, as well as all other U.S. state DOTs, bode well for our future business in mid-2024. Also, there's potential for local municipalities in our current Northeast state to contribute to revenue in the second half of 2023 and into 2024. Our smart manufacturing vertical is benefiting from the progress of our CNC proof of concept POC that was successfully concluded in May 2023 and has resulted in a signed software as a service SAS contract in June 2023. Public endorsements and promotional videos have begun and more are forthcoming. featuring our smart manufacturing customer, Precision Metal Products Incorporated. We believe these endorsements and promotional videos will lead to other paid POCs as well as additional SAS contracts, which would contribute to revenue in the second half of 2023 and beyond. It's expected these endorsements will also strengthen our position to secure additional POCs for other discrete manufacturing processes, such as metal stamping, plastic injection molding, plastic extrusion, and automated assembly and test. Our strategic partnership development continues to be a force multiplier for us. The strength of our Angura IIoT partnership provides supplemental expertise, equipment, and software, which ensures we continue to bring value to our customers. We also continue to develop some of our other previously announced partnerships. So all this momentum is pointing toward finishing the second half of 2023 with great results.
spk01: Very good. Thank you, Cliff. Karen, likewise, congratulations. And please share your opening comments with our listeners today.
spk00: Great. Thank you, Stuart. And thanks, Cliff, for a great overview to date. And I'd like to just jump right into our expenses here. and our operational results. So we continue to be responsible with our funding and we always work to minimize our monthly expenses. And we continue to do that through the first half of 2023. Similarly to what we reported in 2022, we have been able to continue to decrease our operational expenses. In fact, the first half of this year are down a little over $100,000 from where we were last year, or 24% in overall operating expenses. We haven't been able to get additional funding via a put from GHS to support our operations since February of this year. which is very important to note. Obviously, we need to get continued funding. From a shareholder perspective, this may be reviewed as a positive, as this means no dilution. However, we need funds beyond revenues to run this company. On a personal level, the results of no funding for the company has resulted in myself and the CEO not receiving compensation since mid-April. lack of funds has also significantly limited sales and marketing efforts as for q3 it's critical to stay a fully reporting company we've been able to secure the sales of some preferred shares to ensure we stay current on our sec filings which is extremely important to the company
spk01: All right, Karen, thank you so much for your opening comments. Now, Cliff, we're going to move into the Q&A section. And the first question is for you. Cliff, in this latest PR, management states they're considering pursuing suitable companies to merge with or acquire Auxis. What does Auxis have to offer a potential acquirer?
spk02: Thanks, Stuart. The answer to this question is simple and a topic we've discussed with our shareholders on previous calls. Valuation. It is the foundational elements of Oxus's valuation that make it an attractive target to companies interested in mergers and acquisitions. Over the past six years, we've built up significant valuation from these elements, which, in my opinion, is far greater than the current market cap of the company. Here are some of the specifics of those valuable elements. First, repeat customers in two verticals. Customers that give you repeat business are the core of the company's value. Our structural health monitoring customer has been with us since before I became CEO six years ago. Our work with them has earned us two major contracts, a current project extension, and we're in discussions of expansion projects for the 2024 fiscal year. Our new smart manufacturing customer, Precision Metal Products, has been with us since January. They've completed a POC proof of concept with us, and now they're in a SAS contract with us. They've publicly endorsed our products and services, and details of our work with them will be highlighted in several promotional videos that are currently being produced for distribution in the coming weeks. Second, for a SaaS company like Oxus, software is the lifeblood of the company. We've deployed three versions of our industrial Internet of Things IIoT platform software over the past six years for both our smart manufacturing and structural health customers, both past and present. In each case, the software has data visualization features that allow our customers to understand the insights our AI and machine learning algorithms are providing. Third, data is the new oil or new gold of the new era of artificial intelligence and machine learning. And we have lots of it. More than two years of structural health data and more than two years of smart manufacturing data. This data is extremely valuable to other companies and their customers. last and not least is our algorithms these are the crown jewels of an artificial intelligence and machine learning company and typically they are well-kept trade secrets which is the intellectual property strategy strategy we've employed today but i've continued to research and learn about ip strategies for algorithms and therefore we plan to file patent applications related to our algorithms, products, and services to bolster the valuation of boxes. So the bottom line is strong valuation will attract strong partners.
spk01: Very good. Thank you for that, Cliff. Karen, here's your first question. Can you provide some details on the recent 8K regarding the company's senior secure note?
spk00: Yes, absolutely. So as a reminder, our senior secure note was initially written for $500,000. And we recently extended the maturity date on that note. As a reminder to everyone, we always need to balance reducing our debt with the effect on shareholders. And that's something that we always consider. So when we were extending the maturity on this note, we wanted to make sure that it allowed the note holder to convert, therefore reducing debt. But we wanted to make sure that we're also protecting shareholders. So there are incentives for fully converting and eliminating this debt. However, we were able to balance this by including leak-out clauses to help protect the shareholders.
spk01: All right, very good. Thank you for that, Karen. Cliff, I have another question for you here. Shareholders are interested in getting an update on new business and how the company is leveraging the craze in AI and SaaS trends, which is service as a software, which you pointed out earlier. Please share some details with us, Cliff.
spk02: Absolutely, Stuart. There is no doubt the recent interest in artificial intelligence and machine learning technology and companies is fueling investor behavior. And we believe we are and will continue to benefit from this trend. A real benefit to our customers is that our type of AI is free from hallucinations. that large language models or LLMs like ChatGBT are subject to because we use traditional machine learning techniques to analyze time series data in real time. The key is translating the excellent work we've done with our current customers into effective sales and marketing collateral to secure new business. The good news is that we've made significant bootstrapped efforts to create an excellent baseline of material for both of our two key verticals, structural health monitoring and smart manufacturing. We've made recent changes to our website to highlight our structural health monitoring products and services. Our bridge monitoring system product and services are now easily accessed online, including links to promotional videos on our YouTube video channel. Our smart manufacturing products and services are also now highlighted on our website. But the big news is, as I mentioned before, how our key customer and partner, Precision Metal Products, has agreed to publicly endorse us in our services. We recently completed on-site video recordings that we're now translating into several short promotional videos. And more comprehensive use cases will also be created from this successful POC, which we completed earlier this year. And more will follow as we continue to execute our SAS contract with PMP. Finally, I'll be leveraging past sales prospect information we gathered from our engagement with IIoT World into a road trip sales effort along the East Coast all the way from Massachusetts to Florida, beginning the fourth quarter of 2023. Combining this effort with other speaking engagements in the month of September and continuing into fourth quarter, we're confident this will lead to additional new business.
spk01: All right. Thank you so much for that, Cliff. Karen, a final question for you. A shareholder has voiced their concerns with working with J.H. Darby. Does the company have any concerns in working with them?
spk00: Thank you. So there's three comments that I wanted to make on this one. So first of all, when we have an investor such as GHS, the SEC wants to see that we have a broker dealer involved. J.H. Darby does that for us. Two, we've been with J.H. Darby since before GHS, and this recent agreement was just a renewal of a previous agreement that had expired. And lastly, we do appreciate our shareholders' concern. However, everyone should feel confident knowing that we have a very thorough SEC attorney that ensures we have fair and equitable agreements.
spk01: Well, very good. I want to open up the call now for closing comments from each of you. And Karen, since the last question was with you, I'll open up the floor for your final comments first.
spk00: Okay. So our shareholders can feel confident that we'll continue to be fiscally responsible with our funding. My quarterly reminder to current and potential shareholders, check out our SEC filings, especially the latest 10Q for additional details, overall information that wasn't covered in this call. For reference, you can find the SEC filings at sec.gov and search for IIoT OXIS, Inc. Thank you, Stuart, and to the shareholders that sent in questions. We want to continue to be transparent with our shareholders through our filings and these calls. And lastly, I want to thank our shareholders that have reached out to discuss potential investment or merger and or acquisitions. We are always open to suggestions or referrals from our shareholders. Thank you.
spk01: Thank you, Karen. Cliff, any final comments from you?
spk02: Yes, we believe business opportunities in our two key industries have high potential for success due to the strength and their size and growth. The global smart manufacturing, also known as Industry 4.0 industry, was $97.6 billion in 2022. and it will reach 228.3 billion by 2027 with a CAGR of 18.5%. And the world structural health monitoring industry was 2 billion in 2021 and will reach 4 billion by 2027 with a CAGR of 14.6%. However, among our many tailwinds, we do have some headwinds. First, We have decided to discontinue our efforts with Aerotas sensor networks in the indoor air quality or IAQ vertical and redirect those resources to our better performing verticals, structural health monitoring and smart manufacturing. The second headwind, which Karen discussed, is the difficulty raising funds, but As we explained, we have secured additional funding from our lead investor to pay for our recent SEC filings. Furthermore, we're considering and exploring the options such as a potential merger and acquisition partners. So to sum things up, we anticipate that revenue momentum will continue through the second quarter of 2023, and that overall total revenue for 2023 will exceed that of 2022. revenue in Q3 2023 may be less than in the same period of 2022 due to reduced available funds for sales and marketing efforts. However, given the valuable real-world data we've collected, our AI machine learning algorithms we've developed, and compelling use cases and marketing collateral developed from our data and algorithms, combined with our experienced leadership, savvy technological talent, and operational excellence, we truly believe these goals are achievable. Thank you for your time today, and we appreciate the time that our shareholders and investors are taking to listen to this broadcast today.
spk01: Very good. Thank you, Cliff and Karen. And thank you, investors and listeners, to this investor conference call covering the 2023 Form 10Q filed for the second quarter for IIOT Auxis. Once again, traded on the OTC under the ticker symbol ITOX. Thank you all for your participation today.
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