UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended February 29, 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: 000-27587

IOTA COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware		22-3586087
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

600 Hamilton Street, Suite 1010 Allentown, PA		18101
(Address of principal executive offices)		(Zip Code)

(855) 743-6478

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) 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), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

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 [ ] No [X]

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	[X]	Smaller reporting company	[X]
		Emerging growth company	[ ]

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]

As of April 29, 2021, there were 373,533,863 shares of the registrant’s common stock outstanding.

IOTA COMMUNICATIONS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2020

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets as of February 29, 2020 and May 31, 2019 (As revised)	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 29, 2020 and February 28, 2019 (As revised)	4

	Condensed Consolidated Statement of Changes in Deficit for the Three and Nine Months Ended February 29, 2020 (As revised)	5

	Condensed Consolidated Statement of Changes in Deficit for the Three and Nine Months Ended February 28, 2019 (As revised)	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 29, 2020 and February 28, 2019 (As revised)	7

	Notes to Condensed Consolidated Financial Statements (As revised)	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (As revised)	74

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	90

ITEM 4.	Controls and Procedures	90

PART II. OTHER INFORMATION		92

ITEM 1.	Legal Proceedings	92

ITEM 1A.	Risk Factors	94

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	94

ITEM 3.	Defaults Upon Senior Securities	98

ITEM 4.	Mine Safety Disclosures	98

ITEM 5.	Other Information	98

ITEM 6.	Exhibits	103

SIGNATURES		108

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	February 29, 2020	May 31, 2019 (As revised)

ASSETS

Current Assets:
Cash	$40,981	$788,502
Accounts receivable, net of allowances for doubtful accounts of $939,474 and $810,132, respectively	68,146	507,345
Contract assets	120,297	435,788
Other current assets	608,139	635,746

Total Current Assets	837,563	2,367,381

Property and equipment, net of accumulated depreciation of $4,271,733 and $3,759,229, respectively	7,937,658	10,124,763
Right of use assets	11,112,099	-
Intangible assets, net of accumulated amortization of $248,551 and $90,750, respectively	11,981,037	286,538
Other assets	18,451	198,946

Total Assets	$31,886,808	$12,977,628

LIABILITIES AND DEFICIT

Current Liabilities:
Accounts payable and accrued expenses	$10,112,568	$19,499,592
Payroll liability	3,770,582	1,276,333
Current portion of lease liabilities	2,120,632	-
Service obligations	161,467	331,280
Contract liabilities	497,736	417,631
Warranty reserve	106,600	313,881
Convertible notes payable, net of debt discount of $551,060 and $495,959, respectively	1,766,186	4,450,296
Notes payable – related parties	304,223	-
Notes payable – officers and directors	956,671	173,769
Notes payable, net of debt discount of $1,450,712 and $0, respectively	3,733,098	479,102
Total Current Liabilities	23,529,763	26,941,884

Deferred rent liability	-	1,975,815
Lease liabilities, net of current portion	19,390,471	-
Revenue-based notes, net of financing costs of $30,734 and $914,408, respectively	62,088,603	76,489,220
Long-term notes payable – related parties	666,154	666,154
Long-term notes payable – officers and directors	-	827,348
Long-term note payable, net of debt discount of $92,611 and $0, respectively	3,807,389	-
Asset retirement obligations	1,602,924	1,771,227

Total Liabilities	111,085,304	108,671,648

Commitments and Contingencies

Deficit:
Convertible preferred stock, $.0001 par value; 5,000,000 shares authorized, no shares issued and outstanding	-	-
Common stock, $.0001 par value; 600,000,000 shares authorized; 278,559,653 and 219,205,439 shares issued and outstanding, respectively	27,856	21,921
Additional paid-in capital	63,284,925	25,673,796
Accumulated deficit	(150,746,628)	(121,389,737)

Total Iota Communications, Inc. Deficit	(87,433,847)	(95,694,020)

Non-controlling Interest in Variable Interest Entity	8,235,351	-

Total Deficit	(79,198,496)	(95,694,020)

Total Liabilities and Deficit	$31,886,808	$12,977,628

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended		For the Nine Months Ended
	29-Feb-20	28-Feb-19	29-Feb-20	28-Feb-19
		(As revised)		(As revised)

Net sales	$690,949	$552,739	$1,596,433	$1,429,647

Cost of sales	728,673	842,962	1,688,349	1,651,459

Gross loss	(37,724)	(290,223)	(91,916)	(221,812)

Operating expenses:
Network site expenses	632,260	1,605,319	2,911,307	4,433,000
Research and development	1,138	280,130	4,426	2,344,364
Selling, general and administrative	6,021,766	3,560,087	12,774,877	12,980,119
Depreciation and amortization	650,978	414,704	2,273,249	969,102
Stock-based compensation	(62,273)	6,386,862	671,597	16,908,344
Gain on settlement of past due lease obligations	-	-	(11,167,962)	-
(Gain) loss on extinguishment of debt	(256,448)	-	5,601,212	-
Impairment of long-lived assets	1,320,509	-	12,093,872	-
Total operating expenses	8,307,930	12,247,102	25,162,578	37,634,929

Loss from operations	(8,345,654)	(12,537,325)	(25,254,494)	(37,856,741)

Interest expense, net	(1,883,175)	(1,547,005)	(4,725,046)	(1,889,593)

Loss before provision for income taxes	(10,228,829)	(14,084,330)	(29,979,540)	(39,746,334)

Provision for income taxes	-	-	-	-

Net loss	(10,228,829)	(14,084,330)	(29,979,540)	(39,746,334)

Net loss attributable to non-controlling interest	(133,743)	-	(622,649)	-

Net loss attributable to Iota Communications, Inc.	$(10,095,086)	$(14,084,330)	$(29,356,891)	$(39,746,334)


Net loss per common share – basic and diluted	$(0.04)	$(0.07)	$(0.12)	$(0.24)


Weighted average shares outstanding – basic and diluted	273,869,195	201,848,961	245,588,363	163,991,096

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT

FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2020

							Total Iota
					Additional		Communications,	Non-
	Preferred Stock		Common Stock		Paid-in	Accumulated	Inc.	Controlling	Total
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit	Interest	Deficit
Balance at June 1, 2019 (As revised)	-	$-	219,205,439	$21,921	$25,673,796	$(121,389,737)	$(95,694,020)	$-	$(95,694,020)

Stock-based compensation – stock options	-	-	-	-	202,782	-	202,782	-	202,782
Stock-based compensation – common stock	-	-	445,000	45	189,506	-	189,551	-	189,551
Common stock issued for the settlement of liabilities	-	-	300,000	30	188,970	-	189,000	-	189,000
Common stock issued for exercise of warrants	-	-	408,736	40	807	-	847	-	847
Common stock issued for inducement and issuances
of convertible note holders	-	-	2,100,000	210	315,385	-	315,595	-	315,595
Common stock issued for services	-	-	1,133,334	113	759,887	-	760,000	-	760,000
Net loss (As revised)	-	-	-	-	-	(7,153,329)	(7,153,329)	-	(7,153,329)

Balance as of August 31, 2019 (As revised)	-	$-	223,592,509	$22,359	$27,331,133	$(128,543,066)	$(101,189,574)	$-	$(101,189,574)

Stock-based compensation – stock options	-	-	-	-	94,937	-	94,937	-	94,937
Warrants issued to investors	-	-	-	-	246,600	-	246,600	-	246,600
Common stock and warrants issued for settlement of
liabilities	-	-	22,043,405	2,204	9,419,729	-	9,421,933	-	9,421,933
Common stock issued for inducement and issuances
of convertible note holders	-	-	1,816,364	182	577,819	-	578,001	-	578,001
Common stock issued for services	-	-	947,499	95	277,027	-	277,122	-	277,122
Common stock and warrants issued in connection
with private placement	-	-	6,919,782	692	2,051,790	-	2,052,482	-	2,052,482
Common stock issued for purchase of Link Labs
assets	-	-	12,146,241	1,215	3,098,785	-	3,100,000	-	3,100,000
Beneficial conversion feature on convertible notes
and warrants	-	-	-	-	879,661	-	879,661	-	879,661
Extinguishment of revenue-based notes	-	-	-	-	3,733,667	-	3,733,667	-	3,733,667
Iota Spectrum Partners, LP limited partnership
interests issued for contributed assets	-	-	-	-	-	-	-	3,430,000	3,430,000
Iota Spectrum Partners, LP limited partnership
interests issued for cash	-	-	-	-	-	-	-	100,000	100,000
Net loss	-	-	-	-	-	(12,108,476)	(12,108,476)	(488,906)	(12,597,382)

Balance as of November 30, 2019 (As revised)	-	$-	267,465,800	$26,747	$47,711,148	$(140,651,542)	$(92,913,647)	$3,041,094	$(89,872,553)

Stock-based compensation – stock options	-	-	-	-	(62,273)	-	(62,273)	-	(62,273)
Common stock and warrants issued for settlement	-	-	-	-	(256,448)	-	(256,448)	-	(256,448)
of liabilities
Common stock issued for exercise of warrants	-	-	447,455	44	4,090	-	4,134	-	4,134
Common stock issued for inducement and issuances
of convertible note holders	-	-	2,113,759	211	407,193	-	407,404	-	407,404
Common stock issued for services	-	-	1,055,000	106	291,655	-	291,761	-	291,761
Common stock and warrants issued in connection
with private placement	-	-	7,477,639	748	2,219,973	-	2,220,721	-	2,220,721
Beneficial conversion feature on convertible notes	-	-	-	-	1,890,151	-	1,890,151	-	1,890,151
and warrants
Extinguishment of revenue-based notes	-	-	-	-	11,079,436	-	11,079,436	-	11,079,436
Iota Spectrum Partners, LP limited partnership
interests issued for contributed assets	-	-	-	-	-	-	-	5,328,000	5,328,000
Net loss	-	-	-	-	-	(10,095,086)	(10,095,086)	(133,743)	(10,228,829)
Balance as of February 29, 2020	-	$-	$278,559,653	$27,856	$63,284,925	$(150,746,628)	$(87,433,847)	$8,235,351	$(79,198,496)

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT

FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2019

							Total Iota
					Additional		Communications,	Non-
	Preferred Stock		Common Stock		Paid-in	Accumulated	Inc.	Controlling	Total
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit	Interest	Deficit

Balance at June 1, 2018	-	$-	129,671,679	$12,967	$-	$(62,541,502)	$(62,528,535)	$-	(62,528,535)

Net loss	-	-	-	-	-	(8,543,107)	(8,543,107)	-	(8,543,107)

Balance as of August 31, 2018	-	$-	129,671,679	$12,967	$-	$(71,084,609)	$(71,071,642)	$-	$(71,071,642)

Stock-based compensation – stock options	-	-	-	-	202,782	-	202,782	-	202,782
Common stock issued for inducement and issuances
of convertible note holders	-	-	300,000	30	277,170	-	277,200	-	277,200
Common stock issued for services	-	-	250,000	25	82,475	-	82,500	-	82,500
Advance payments converted to members equity
prior to merger	-	-	7,266,499	727	2,391,714	-	2,392,441	-	2,392,441
Distribution to M2M’s former parent company	-	-	-	-	(5,061,334)	-	(5,061,334)	-	(5,061,334)
Recapitalization under reverse merger on September 1, 2018	-	-	43,434,034	4,343	876,259	-	880,602	-	880,602
Warrants issued in connection with reverse merger	-	-	-	-	3,992,000	-	3,992,000	-	3,992,000
Common stock issued for PPUs in connection with
reverse merger	-	-	15,824,972	1,583	5,965,417	-	5,967,000	-	5,967,000
Beneficial conversion feature on convertible notes
and warrants (As revised)	-	-	-	-	400,000	-	400,000	-	400,000
Net loss (As revised)	-	-	-	-	-	(17,118,897)	(17,118,897)	-	(17,118,897)

Balance as of November 30, 2018 (As revised)	-	$-	196,747,184	$19,675	$9,126,483	$(88,203,506)	$(79,057,348)	$-	$(79,057,348)

Stock-based compensation – stock options	-	-	-	-	202,782	-	202,782	-	202,782
Common stock issued for inducement and issuances
of convertible note holders	-	-	1,400,000	140	619,860	-	620,000	-	620,000
Common stock issued in connection with Tender
Offer (As revised)	-	-	14,708,125	1,471	4,088,498	-	4,089,969	-	4,089,969
Value of MHz-Pops licenses issued in connection
with Tender Offer	-	-	-	-	4,735,846	-	4,735,846	-	4,735,846
Warrants issued in connection with Tender Offer as
Inducement	-	-	-	-	821,348	-	821,348	-	821,348
Warrants issued in connection with Backstop
Agreement	-	-	-	-	256,556	-	256,556	-	256,556
Warrants issued to investors	-	-	-	-	213,281		213,281		213,281
Net loss (As revised)	-	-	-	-	-	(14,084,330)	(14,084,330)	-	(14,084,330)
Balance as of February 28, 2019 (As revised)	-	$-	212,855,309	$21,286	$20,064,654	$(102,287,836)	$(82,201,896)	$-	$(82,201,896)

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended
	February 29, 2020	February 28, 2019
		(As revised)

Cash flows from operating activities:
Net loss	$(29,979,540)	$(39,746,334)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts	688,956	-
Loss on disposal of property and equipment	1,093,789	58,495
Impairment of long-lived assets	12,093,872	-
Depreciation and amortization	2,273,249	970,206
Amortization of right of use assets and accretion of lease liabilities, net	363,228	-
Provision for warranty claims	(207,281)	40,197
Gain on settlement of past due lease obligations	(11,167,962)	-
Loss on settlement of liabilities	263,326	-
Loss on extinguishment of debt	5,601,212	-
Gain on lease modifications and decommissioning of towers	(1,359,554)	-
Amortization of debt discount and deferred finance costs
and debt inducement expenses	2,825,968	1,539,262
Accretion of asset retirement obligations	77,199	41,595
Warrants issued in connection with reverse merger	-	3,992,000
Common stock issued for PPUs in connection with reverse merger	-	5,967,000
Warrants issued in connection with Tender Offer	-	821,348
Warrants issued in connection with Backstop Agreement	-	256,556
Warrants issued to investors	246,600	213,281
MHz-POPs licenses issued in connection with Tender Offer	-	4,735,846
Common stock issued in connection with Backstop Agreement	-	468,000
Stock-based compensation – stock options	235,446	405,564
Stock-based compensation – common stock	189,551	-
Issuance of common stock for services	1,328,883	82,500
Issuance of common stock for the exercise of warrants	4,981	-

Changes in operating assets and liabilities:
Accounts receivable, net	181,625	(314,499)
Contract assets	315,491	189,505
Other assets	334,572	(942,662)
Due from related party	-	(42,315)
Accounts payable and accrued expenses	2,150,233	2,720,391
Payroll liability	2,494,250	1,030,536
Contract liabilities	80,105	41,642
Deferred rent	-	198,175
Service obligations	(169,813)	-
Accrued interest on revenue-based notes	138,488	97,584

Net cash used in operating activities	(9,903,126)	(17,176,127)

Cash flows from investing activities:
Purchases of property and equipment	(122,335)	(89,392)
Security deposit	(29,870)	172,326
Purchase of note receivable – Solbright	-	(5,038,712)
Advances to Solbright	-	(827,700)
Cash acquired in merger	-	72,059

IOTA COMMUNICATIONS, INC. 10-Q