OCLN 10-K
Originclear, Inc. (OCLN)
UNITED STATES
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DOCUMENTS
INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
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NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Form 10-K contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:
| ● | business strategy; | |
| ● | financial strategy; | |
| ● | intellectual property; | |
| ● | production; | |
| ● | future operating results; and | |
| ● | plans, objectives, expectations and intentions contained in this report that are not historical. |
All statements, other than statements of historical fact included in this report, regarding our strategy, intellectual property, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” as well as in this report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.
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PART I
ITEM 1. BUSINESS.
Organizational History
OriginClear, Inc., (the “Company”, “OCLN” or “OriginClear”) was incorporated in Nevada on June 1, 2007. Initially focused on research, development, and licensing, the Company transitioned to commercialization in 2015. Our principal offices are located at 13575 58th Street North, Suite 200, Clearwater, FL 33760. Our main telephone number is (727) 440-4603. More information is available on our website, www.OriginClear.com, however, the website content is not incorporated in this report.
Overview of Business
Founded as OriginOil® in 2007, OriginClear rebranded in 2015 to reflect its focus on innovation in the industrial water sector. Operating as the Clean Water Innovation Hub™ (“CWIB”), the Company incubates and launches innovative businesses that create value within the global water industry and beyond. OriginClear is fully dedicated to supporting its subsidiary, Water On Demand, Inc. (“WODI”).
WODI comprises three distinct operating units, Modular Water Systems (“MWS”), Progressive Water Treatment (“PWT”), and Water on Demand (“WOD”), the last being a development-stage business.
| ● | PWT: This unit generates the largest portion of the Company’s revenue by providing engineered water treatment solutions and custom treatment systems. |
| ● | MWS: Holds an exclusive master license which includes three active patents and related intellectual property (“IP”). In April 2023, an independent valuation estimated the nominal value of the IP at between $26.6 million and $53.2 million. MWS’s product offerings are uniquely differentiated by this IP, further enhanced by proprietary knowledge and best-in-class business practices. |
| ● | WOD: Unit in development that aims to offer private business water self-sustainability as a service – allowing them to pay for water treatment and purification services on a per-gallon basis – a model commonly known as Design-Build-Own-Operate (“DBOO”). The Company is currently preparing for a showcase of this model. |
Recent Developments
In 2023, OriginClear consolidated three operating divisions into WODI.
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Water Businesses
As the Clean Water Innovation Hub™ (“CWIH”), the Company develops and incubates businesses to create value within the global water industry and related sectors. The CWIH’s mission is to establish valuable assets, spin them off into independent entities, and thereby contribute to the overall growth of the industry and beyond.
Following the termination of the proposed business combination, the Company continues to focus on its core objectives. It intends to identify, develop and potentially launch new ventures, as it previously did with MWS in 2018 and WODI in 2021. The Company may also pursue strategic acquisitions, building on the experience gained from its 2015 acquisition of PWT, and is open to exploring opportunities outside the water sector.
Water On Demand
Through its subsidiary WODI, the Company is developing an outsourced water treatment business known as WOD, operated through its subsidiary, WODI. The WOD model aims to offer customers water self-sustainability as a service – allowing them to pay on a per-gallon basis for managed wastewater treatment services rather than incurring significant upfront capital equipment acquisition costs. This approach, generally known as DBOO, provides an alternative to conventional on-site wastewater treatment solutions requiring substantial initial investments.
The Company is currently evaluating opportunities for outsourced water treatment as a managed service, featuring pay-by-the-gallon pricing. It announced agreements with Enviromaintenance ®, a water services company, and Klir®, a utility network software provider, to support a WOD pilot program in the mobile home park sector. Under this model, WODI may initially build, maintain, and service the water treatment system it finances. As the program expands, WODI intends to rely on regional water service providers to perform these functions.
WODI intends to delegate the building and operation of WOD-Financed systems to regional water companies under performance contracts, thus creating a network of partners that can enable rapid scaling and establish a competitive barrier to entry. At the time of this filing, WODI made its first acquisition of personnel resources, hiring veteran C-Level Executive, James Woloszyn as its Chief Operating Officer. The Company intends to scale as it expands by acquiring further staff or independent resources. WODI’s other divisions, PWT and MWS together employ 20 people. Otherwise, WODI’s Board of Directors and executive officers are currently the same as those of OriginClear, and WODI obtains administrative support from OriginClear under a management services arrangement.
On February 15, 2024, the Company and Fortune Rise Acquisition Corporation (“FRLA”) filed a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) for a proposed business combination involving WODI. However, on December 12, 2024, WODI and FRLA mutually agreed to terminate the Business Combination Agreement, as described elsewhere in this filing. For the year ending December 31, 2023 WODI and FRLA had an Business Combination Agreement.
On March 26, 2024, the Company announced a Memorandum of Understanding between MWS and Enviromaintenance to collaborate on the planned WOD pilot program in the Greater Central Texas Region. On April 9, 2024, the Company announced that Klir, Inc. had been selected to support the WOD pilot, further bolstering the Company’s efforts to provide decentralized water management solutions on a pay-per-gallon basis. Additional information regarding these developments is available in the Company’s publicly filed materials.
Progressive Water Treatment Inc.
PWT, based in Sherman, Texas, designs, builds, and services a broad range of industrial water treatment solutions. It seeks to provide a comprehensive, end-to-end offer that addresses the increasing corporate demand for outsourced water treatment.
PWT designs and manufactures turnkey water treatment systems for municipal, industrial and pure water applications. Its competitive advantages lie in 25-years’ of experience that enables depth of understanding of each customer’s needs and employing multiple technologies – such as chemical injection, media filtration, membranes, ion exchange, and supervisory control and data acquisition (“SCADA”) systems – to deliver complete, customized solutions.
In addition to system design and manufacturing, PWT offers ongoing services that include maintenance contracts, retrofits, and replacement support. The Company also rents equipment under contracts of varying terms.
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Modular Water Systems
MWS provides a distinctive line of prefabricated water transport and treatment systems. Daniel “Dan” Early P.E. leads the MWS division. On June 25, 2018, Mr. Early granted the Company a worldwide, exclusive, non-transferable license to the underlying MWS technology and know-how. A subsequent ten-year renewal, effective May 2020, added the right to sublicense the technology and form manufacturing joint ventures.
On June 9th, 2023, Daniel M Early executed the same licensing agreement with Water on Demand, Inc. and on June 12, 2023, mutually canceled with OriginClear the May 2020 license.
MWS, supported by PWT and other fabricators, designs, manufactures, and delivers prefabricated water transport products, marketed under the EveraMOD™ brand; and wastewater treatment plant (“WWTP”) solutions, sold under the EveraSKID™ and EveraTREAT™ brands. These systems serve a variety of end users – including schools, small communities, institutional facilities, real estate developments, factories, and industrial parks – that must treat their own wastewater.
On August 12, 2022, the Company announced the delivery and installation of its EveraBOX™ solution for the Beaver Falls Municipal Water Authority in Pennsylvania. EveraBOX, like other MWS products, utilizes High-Density Polyethylene (HDPE) or Polypropylene (PP) – classified as Structural Reinforced Thermoplastic Pipe (SRTP) materials. These materials are resistant to supply chain disruptions affecting metal and fiberglass construction.
On January 10, 2024, OCLN and Plastic Welding and Fabrication, Ltd. (“PWF”), based in Buda, Texas, announced a MOU for a strategic partnership between WODI and PWF. PWF currently serves as a key fabricator of durable, patent-based enclosures used by MWS. This MOU is intended to enhance strategic relationships and enable MWS to build complete water systems at the same location where the enclosures are manufactured, increasing efficiency and speed. The parties also signed a Letter of Intent (“LOI”) setting forth a framework for a potential WODI acquisition of PWF. If executed, such an acquisition would establish WODI’s first in-house manufacturing facility for MWS and is expected to be accretive. Discussions are at an early stage, and there can be no assurance that a definitive agreement will be reached.
On March 26, 2024, OCLN announced an MOU between MWS and Enviromaintenance of Georgetown, TX to collaborate on sales of standardized systems in the Greater Central Texas Region. Enviromaintenance, a provider of on-site wastewater treatment and disposal systems, particularly for the Mobile Home Park (“MHP”) industry, will recommend MWS’s fully integrated, modular wastewater treatment systems. These products are intended to offer MHP owners cost effective, reliable, and efficient means of treating their wastewater. Additional information is available at: https://www.originclear.com/company-news/originclears-modular-water-systems-and-enviromaintenance-partner-for-water-on-demand-pilot-program.
Patents and Intellectual Property
On June 25, 2018, Dan Early granted the Company a worldwide, exclusive, non-transferable license to intellectual property, which includes five issued U.S. patents, as well as design software, CAD files, marketing materials, and design and specification documents (collectively referred to as “Early IP”).
On May 20, 2020, the license was renewed for an additional ten years, with the possibility of three-year extensions. The renewal also granted the Company the rights to sublicense the Early IP, and, with approval, to establish ISO-compliant manufacturing joint ventures.
As part of the sale of MWS assets to WODI on April 14, 2023, the license to the Early IP was included. On 9 June 2023, Early signed a new, ten-year license agreement with WODI which assigned these rights to WODI and updated Early’s terms of compensation. On June 12, 2023, the May 20, 2020 license with OriginClear was cancelled by mutual agreement.
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The Early IP consists of combined protection on the materials and configurations of complete packaged water treatment systems, built into containers. The patents consist of the following:
| # | Description | Patent No. | Date Patent Issued |
Expiration Date | ||||
| 1 | Wastewater System & Method | US 8,372,274 B2 Applications: WIPO, Mexico |
02/12/13 | 07/16/31 | ||||
| 2 | Steel Reinforced HDPE Rainwater Harvesting | US 8,561,633 B2 | 10/22/13 | expired | ||||
| 3 | Wastewater Treatment System CIP | US 8,871,089 B2 | 10/28/14 | expired | ||||
| 4 | Scum Removal System for Liquids | US 9,205,353 B2 | 12/08/15 | 02/19/34 | ||||
| 5 | Portable, Steel Reinforced HDPE Pump Station CIP | US 9,217,244 B2 | 12/22/15 | 10/20/31 |
On May 10, 2021, OCLN announced the filing of a patent application titled “System And Method For Water Treatment Incentive”, which utilizes blockchain technology and non-fungible tokens (NFT) to streamline the distribution of payments for outsourced water treatment and purification services, billed on a pay-per-gallon basis ahead of inflation.
However, as of the latest available information up to this filing date, there have been no further public updates regarding the approval status or implementation of the patent application. The application remains in provisional state, and OriginClear continues to explore blockchain solutions to enhance payment systems in water treatment services.
As demand grows for localized, point-of-use or point-of-discharge water treatment solutions, the MWS licensed IP family has become the foundation for a portable, integrated, transportable, plug-and-play system. Unlike other packaged solutions, these systems can be manufactured in series, having a longer lifespan and are more environmentally friendly.
The common feature of this IP family is the use of Structural Reinforced ThermoPlastic, for the containers, that offers several advantages:
| ● | Durability: An estimated life cycle of 75 to 100-year life years, compared to a few decades for metal and r 40 to 50 years for concrete. | |
| ● | Ease of Manufacture: The manufacturing process for these vessels can be automated. | |
| ● | Reliability: The materials are recyclable and can be made out of biomaterials. |
Patent No. 8,372,274 specifically relates to the use of vessels or containers made from this material, combined with a configuration of functional modules or processes for general water treatment.
Although Patent Nos. 8,561,633 and 8,871,089 have expired, the Company believes they may be reinstated and, in any case, they are not considered core IP:
| ● | Patent No. 8,561,633 is a stormwater filtration patent not directly related to the MWS business model, |
| ● | Patent No. 8,871,089 is a Continuation-in-Part (CIP) of the original Patent No. 8,372,274. |
The original patent, along with Patent No. 9,217,244, forms the basis of the current MWS business, so the status of the CIP is not considered material.
Subsequent patents, which build upon the original claims, focus on more targeted applications. These patents describe specific combinations of modules engineered within the vessel to address specific water treatment challenges.
With the spinoff of WODI and its operating divisions, the Company no longer holds patents directly but retains access to the licensed patents through WODI. The licensed intellectual property includes three issued US patents, and design software, CAD files, marketing materials, and design and specification documents. In addition, a consulting agreement with Early provides for assignment of inventions made since 2018.
The ORIGINCLEAR trademark application was registered as U.S. Trademark Registration 7,296,730, issued on February 6, 2024. Additionally, the ORIGINCLEAR logo trademark application was registered as U.S. Trademark Registration 7,296,731, issued on February 6, 2024.
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Other trademarks in the process of registration include:
| Patents | Entity | Serial Number | Status | ||||||
| $H20 | OriginClear Inc. | 90714035 | Pending | ||||||
| WATERPRNEUR | OriginClear Inc. | 90471071 | Pending | ||||||
| CLEARAQUA | OriginClear Inc. | 90840903 | Pending | ||||||
| THE WATER COIN FOR THE WORLD | OriginClear Inc. | 90840920 | Pending | ||||||
| WATER - THE BLUE GOLD (Int. TM Class 036 - Crowdfunding) | OriginClear Inc. | 97734240 | Pending | ||||||
| THE CLEAN WATER INNOVATION HUB | OriginClear Inc. | 97616504 | Dead | ||||||
| ARMY OF US | OriginClear Inc. | 98450380 | Pending | ||||||
| The Blue Gold (Intl. TM Class 041 - Education, Entertainment and Cultural Services | OriginClear Inc. | 97734240 | Pending | ||||||
| FINTECH FOR CLEAN WATER | Water on Demand, Inc. | 98099593 | Pending | ||||||
| WATER ON DEMAND | Water on Demand, Inc. | 98099605 | Pending | ||||||
| WATER LIKE AN OIL WELL | Water on Demand, Inc. | 97616574 | Pending | ||||||
The Company relies on, and expects to continue relying on, a combination of confidentiality agreements with employees, consultants, and third parties, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect its proprietary rights.
PRODUCTS, TECHNOLOGY AND SERVICES
As deteriorating infrastructure and rising water costs drive businesses toward self-reliance, the Company provides on-site water treatment systems designed to achieve high levels of purification and recycling that centralized utilities cannot deliver. Installed at the point of use, these systems serve as productive business assets, enhancing property values and strengthening environmental, social and governance (“ESG”) profiles.
The Company’s portfolio includes modular, prefabricated, and full-service water, providing scalable and durable solutions that grant greater independence for industrial, commercial and municipal customers.
The company organizes its offerings into three primary categories, aligned with its operating divisions. Water system solution engineering focuses on designing and delivering custom-engineered water treatment systems for industrial, municipal, and commercial applications. These systems utilize technologies such as reverse osmosis, ultrafiltration, media filtration, disinfection, water softening, ion exchange, and electro deionization. They can be skid-mounted, rack-mounted, or containerized, offering adaptable solutions for small to medium-scale projects.
Modular and prefabricated treatment and conveyance systems include prefabricated and prepackaged wastewater treatment and conveyance solutions, such as pump and lift stations, modular storage tanks, and integrated control panels. These systems provide instant infrastructure, reducing installation times and costs while maintaining high-performance standards. Built using structural reinforced thermoplastics like HDPE, they deliver extended service life, lower long-term replacement costs, and maintain superior operational efficiency.
Full-service water systems offer water-as-a-service solutions through design-build-operate models, allowing customers to pay per gallon rather than making upfront capital investments. These solutions provide businesses with access to advanced water treatment without large capital expenditures, ensuring long-term operational efficiency with predictable costs.
By delivering durable, scalable, and cost-effective solutions, the company enables businesses to optimize water management while reducing operating costs and environmental impact. The integration of high-performance materials, automation, and advanced purification technologies ensures that customers achieve superior efficiency, lower upfront costs, and long-term sustainability in their water treatment operations.
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Market Opportunity
Globally, only about 20% of all sewage and 30% of all industrial wastewater undergo treatment or recycling, while approximately 35% of clean water is lost through leakage. Halving this loss could provide clean water for an additional 100 million people. This urgent challenge also presents a significant opportunity.
We believe businesses can no longer depend solely on large, centralized water utilities. Increasingly, commercial and industrial users are taking responsibility for their own water treatment and recycling. By installing on-site systems, these businesses secure a tangible asset that can increase property value, improve water quality, and lower costs – particularly when treated water is reused.
In our view, companies that invest in on-site water treatment are quietly establishing ‘decentralized water wealth’ for themselves while benefiting their communities. Notable, ESG criteria – which guide roughly one-quarter of all professionally managed investments worldwide – specifically consider how effectively corporations manage their water resources.
As aging infrastructure continues to fail and as the cost of new and replacement infrastructure escalates, we believe engineers and end-users will seek methods that make water and wastewater systems less expensive to deploy, own and operate. We expect the industry to place increasing emphasis on materials and delivery models designed for longer intervals between replacements, contributing to more cost-effective and sustainable solutions.
Operations & Markets
The Company’s ongoing investment in sales expansion and strategic partnerships has materially increased revenues across its core operating units. WODI has demonstrated rapid scaling, with both PWT and MWS reporting significant revenue increases. PWT continues to expand its share of the industrial and municipal water treatment markets, achieving a 250% increase in revenue year-over-year in January 2025. Modular Water Systems has demonstrated even stronger performance, with revenue growing by 552% over the same period, driven by an expanded field sales network and strengthened partnerships. These increases reflect the Company’s strategy to scale operations and increase penetration in the decentralized water treatment market.
The Company targets businesses seeking compact, advanced water treatment technologies that can be shipped directly to the point of use. Through both direct and indirect sales channels, the Company manufactures and distributes professional-grade water treatment and conveyance systems to a wide range of commercial and industrial customers. End users include hotels and resorts, real estate housing developments, office buildings, military installations, schools, farms, food and beverage manufacturers, industrial warehouses, oil and gas producers, and medical and pharmaceutical facilities.
Under the MWS brand, the Company designs and prefabricates turnkey, containerized units that support water conveyance, purification, recycling, and wastewater management. Assembly typically takes place at contract manufacturing sites where the high-density HDPE casings are formed.
MWS – Field Network Expansion
MWS continued to expand its market reach in Q42024 with the addition of two new product representatives in the South and Southeast regions of the U.S. This expansion aligns with MWS’s broader marketing strategy, which includes strengthening its sales rep network, enhancing digital marketing efforts, and increasing trade show participation. These initiatives support the Company’s goal of achieving full rep coverage east of the Mississippi by the end of 2025. MWS’s recognized revenue grew 5.5X from 2024 to 2025, supported in part by this strategy.
MWS – Competitive Advantage
MWS stands apart in the wastewater treatment market with a powerful combination of speed, innovation, and cost effectiveness. Unlike competitors that require multiple engineering firms and contractors, MWS delivers a fully engineered, turnkey solution drastically reducing time to market and eliminating inefficiencies. Visionary, patented designs integrate revolutionary materials that exponentially extend product lifespan, providing unmatched durability and reliability. With a standardized and commercialized engineering approach, the business model is highly scalable, ensuring seamless expansion without compromising quality. Even before leveraging vertical integration or strategic partnerships, MWS remains highly price-competitive, proving that cutting-edge technology and affordability go hand in hand.
These on-site modular units enable businesses to achieve water independence by granting them direct ownership and operational control over water quality. As a result, clients can improve productivity while mitigating environmental, health, and safety risks related to pollution, contamination and corrosion. A similar advantage applies to the Company’s pump station products.
Modular water solutions are designed to balance performance and cost-effectiveness, allowing businesses to surpass municipal water quality standards. This approach may increase the underlying value of their real estate. By serving as a foundational capital improvement, the Company’s water treatment equipment can deliver long-term savings and strengthen the bottom line.
Customers
The Company’s customers seek solutions to address aging water and wastewater infrastructure. As traditional, centralized systems become prohibitively expensive to repair and upgrade, there is growing interest in decentralized, high-quality, small-scale treatment near the point of generation. Emerging membrane-based technologies and automated analytics enable improved water reuse and efficiency, reducing both energy consumption and waste. (Source: Lux Research, “The Future of Decentralized Water,” June 28, 2016).
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PWT has over two decades of experience designing and fabricating water treatment systems. Its major customer segments include:
| ● | Municipal and Community Water: Potable water solutions for small communities. |
| ● | Industrial Processes: Recirculated and makeup boiler and cooling tower water treatment. |
| ● | Energy Sector: Treatment of produced water and frac flowback water. |
| ● | Food and Beverage: Management of feedwater and effluent in processing facilities. |
| ● | Mining Operations: Treatment of mining effluent. |
| ● | Groundwater and Agriculture: Groundwater recovery and agricultural effluent treatment. |
| ● | Environmental Applications: Advanced treatment for water reuse and environmental protection. |
Visualizing the market as a pyramid, the largest metropolitan areas occupy the top tier due to their scale and complexity, while medium-size cities form the middle segment. The base of the pyramid – encompassing smaller towns, counties, cities, townships, state agencies, federal agencies, private individuals, commercial entities, and industrial facilities – represents the broadest and most diverse market opportunity for decentralized, cost-effective water treatment solutions.
Sales and Marketing
PWT and MWS employ distinct sale strategies reflecting their respective market approaches. PWT relies primarily on relationships with past end-use customers and certain manufacturers’ representatives who maintain direct connections with regional end users. MWS focuses on developing relationships with consulting engineers and general contractors.
As MWS’s sales strategies evolve, PWT expects to gain greater recognition among consulting engineers and general contractors. Both PWT and MWS are working to establish a stronger, nationwide network of representatives who can leverage their existing relationships with engineers, contractors, and end-use customers.
With extensive experience in the water and wastewater market, PWT and MWS bring an in-depth understanding of conventional technologies and their limitations, new technologies entering the market, and the process by which solutions are specified and implemented. Both divisions maintain a strong customer-centric approach, seeking first to understand and diagnose customer needs and then to design and deliver comprehensive solutions.
Water industry projects typically move slowly. Given that most product lines for both PWT and MWS represent “pipeline” products, the gestation period from initial prospect to final contract can span six months to three years. To accelerate and expand the pipeline, the Company aims to increase the number of sales representatives who have strong relationships with engineers, contractors, and end users, thereby enhancing overall market reach and opportunity generation.
Competition
PWT operates in a market with numerous system integration suppliers offering solutions based on various technologies, including PureAqua in California, Harn RO in Florida, and Membrane Specialists in Illinois. Each of these competitors tends to have unique strategic focuses:
| ● | PureAqua: Over 80% of its business is concentrated in the Middle East |
| ● | Harn RO: Specializes in drinking water systems for medium to large municipalities, primarily in the Southeastern United States. |
| ● | Membrane Specialists: Focuses on tubular membrane technology, carving out a niche in membrane-based solutions. |
These distinctions reflect not only geographic concentration but also technological specialization and customer type. PWT’s share of the market is shaped by its own regional footprint, strong customer loyalty, niche market focus, and limited sales representation, differentiating it from these broader players.
For MWS, a part of PWT’s operations, the competitive landscape is somewhat different. The Company positions itself as a provider of complete water and wastewater treatment systems—alongside pump stations—utilizing SRTP (Structurally Reinforced Thermoplastic) materials. Unlike companies such as AdEdge in Georgia, which offer prepackaged metal systems, MWS provides a broader range of hybrid treatment processes. The main indirect competition comes from traditional, custom-designed onsite facilities built with concrete and steel or, less commonly, fiberglass (all of which have limitations in durability and detail compared to SRTP).
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While SRTP pipe manufacturers could theoretically become competitors by selling complete systems, MWS’s suppliers do not currently compete in that manner. With the brief exception of Contech in the past, these suppliers have focused solely on selling pipe rather than integrated treatment solutions. As a result, MWS enjoys a degree of insulation from direct competitors offering similar SRTP-based, fully integrated system packages.
In preparation for the tariffs announced by the Trump Administration, the Company is planning to ensure that the Progressive Water Systems and Modular Water Systems divisions of Water On Demand, Inc. add appropriate tariff adjustment to riders and current and future contracts.
Growth Opportunities
As part of its ongoing strategy, WODI continues to expand its sales pipeline and optimize operational efficiencies, leading to record growth in early 2025. The January 2025 revenue increase of 417% over January 2024 underscores the effectiveness of recent strategic initiatives. Revenue acceleration has been driven by expanded market reach, an improved sales pipeline, and increased operational efficiencies. Strengthening regional sales and representation has positioned the Company to capture a greater share of the decentralized water treatment market. Standardizing and streamlining modular system designs has improved scalability, allowing for more efficient production. Operational improvements, including increased production capacity and supply chain optimization, have further supported revenue growth. Based on these trends, the Company is well-positioned to continue this momentum, reinforcing its leadership in the water treatment sector.
Domestic versus International
While the United States market presents significant potential, it represents only about 5% of the global population. Vast regions around the world remain underdeveloped, lacking effective water and wastewater treatment infrastructure. By leveraging joint ventures and other strategic partnerships, the Company could export its decentralized treatment technologies internationally. Expanding into these underserved markets can potentially drive substantial revenue growth as global demand for effective and efficient water treatment systems continues to climb.
Standardization
MWS is actively working to standardize designs and commoditize product engineering. Instead of custom-engineering each new project from scratch, MWS aims to create universal technical packages and design templates that can be reused repeatedly. This approach reduces engineering overhead, cuts lead times and lowers overall project costs. The target is to drive engineering expenses down to less than 1% per unit, with a long-term ambition of pushing this figure below 0.1%. By streamlining design work through computer-driven algorithms and robust standardization, MWS intends to enhance profitability and accelerate production scalability.
Sharing Technology & Projects
PWT and MWS each focus on different contaminant classes within the water treatment spectrum. PWT excels at removing suspended solids, oils, metals, and dissolved salts, while MWS specializes in eliminating organic contaminants. Many challenging wastewater streams—such as those from large animal farms—contain both organic and inorganic pollutants. By integrating MWS’s capabilities to remove organic matter with PWT’s expertise in purifying dissolved inorganics, the Company can provide a more comprehensive, end-to-end water treatment solution.
This synergy creates a stronger, more versatile product portfolio. It not only addresses more complex and varied customer needs but also opens the door to new market opportunities. Through leveraging each other’s strengths, both PWT and MWS stand to benefit, ultimately enhancing the Company’s competitive positioning and growth potential.
Facilities and Equipment
Manufacturing Operations
WODI conducts its primary manufacturing operations through its subsidiary, PWT, at a leased facility located at 5225 W. Houston, Sherman, Texas 75092. The approximately 21,300 square-foot facility is leased from NICK & SON’S CONSTRUCTION LLC under a multi-year commercial lease agreement. The lease commenced on July 1, 2024, and extends for 61 months, with an option to renew for an additional 60-month term. The rent schedule and expense reimbursements are detailed in the signed lease documents, which are consistent with standard commercial lease practices.
This facility provides the necessary space for in-house engineering, design, fabrication, assembly, and quality control. PWT’s engineers and designers employ advanced 3D CAD software to create detailed system plans. The team also develops programs control systems, including PLC-based interfaces, enabling efficient remote monitoring and management of the water treatment units. Skilled craftsmen on-site handle metal and plastic machining, welding, and system assembly, ensuring that much of the manufacturing process remains under WODI’s direct control.
Engineering and Design
MWS, another subsidiary of WODI, benefits from both internal and external engineering resources, led by engineer Daniel Early. In addition to leveraging PWT’s internal engineering and fabrication capabilities, MWS supplements its design work with specialized external engineering firms. Outsourced 2D and 3D design services assist in maintaining a library of standardized drawings and proposals. This flexible approach ensures MWS can scale its engineering resources efficiently, matching project demands as needed.
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Contract Manufacturing and Materials
MWS’s specialized manufacturing, including the production of proprietary HDPE enclosures and sub-assemblies (such as membrane modules, equipment skids, and integrated control panels), is partially outsourced. These contract manufacturers, located across North America—including in Roanoke, Virginia; Ontario, Canada; Hopkins, Missouri; Corsicana, Texas; and Vernon Hills, Illinois—support the fabrication of key system components. Standard system parts such as pumps, membranes, and instrumentation are procured from established vendors, ensuring a reliable supply chain and consistent product quality.
The core materials for MWS’s systems are structurally reinforced thermoplastic pipes (“SRTP”), available in diameters up to 11 feet. These pipes, sourced from multiple suppliers, serve as vessels or housings for water treatment systems. Because they are produced for high-volume markets, these pipes are both economical and readily available.
Equipment and Efficiency
WODI continuously seeks to improve its manufacturing efficiency and product quality through the acquisition of specialized equipment. This includes CNC waterjets, large-diameter core drills, fusion welders, and roto-molders. These investments in tooling and machinery allow for accelerated production times, enhanced customization, and improved quality control of the final product.
In summary, WOD’s current leased facility and its integrated network of internal and external engineering, manufacturing, and supply-chain partners provide a robust platform to meet present and future production requirements efficiently and cost-effectively
Advisory Support for OriginClear
The Company receives advisory support from affiliated, experienced business professionals, listed under the Company’s Board of Advisors.
In September 2020, OriginClear entered into a strategic agreement with PhilanthroInvestors® and was subsequently listed in its Water PhilanthroInvestors program. Concurrently, OriginClear appointed PhilanthroInvestors founder, Mr. Ivan Anz, and then-CEO, Mr. Arte Maren, to its Board of Advisors. Recently, PhilanthroInvestors appointed Mr. Skye Dayton as CEO, replacing Mr. Maren. While Mr. Maren no longer serves as CEO, he continues to support PhilanthroInvestors in an advisory capacity.
On January 30, 2025, PhilanthroWealth, the successor organization to PhilanthroInvestors, accepted the cancellation of its Finder and Consulting agreements. The related advisory appointments were also eliminated.
$H2O™
On May 10, 2021, OriginClear filed a patent application for its “System And Method For Water Treatment Incentive”, which integrates blockchain technology and non-fungible tokens (“NFTs”). This system is designed to streamline and simplify the distribution of payments for outsourced water treatment and purification services. The services are billed on a pay-per-gallon basis, providing a hedge against inflation under the WOD program.
On May 16, 2021, the Company applied for a trademark for $H2O (also referred to as H2O) as the blockchain system representing this activity, under an “Intent-to-Use” basis pursuant to Trademark Act Section 1(b).
On June 10, 2021, Ricardo Fabiani Garcia, an investor and experienced technologist, was appointed to the Company’s Board of Advisors to provide guidance on the roadmap and resource planning for the $H2O project.
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On Jan 17, 2022, OriginClear was granted full trademark protection by Australian Intellectual Property Office for use of $H2O in Australia and New Zealand.
On May 3, 2022 Notice of Allowance was granted to OriginClear by USPTO for use of $H2O mark in Intl. Classes 09, 36 and 42 governing blockchain based software, Dapps and digital applications for providing and managing cryptocurrency goods and services such as managing transactions, wallets and smart-contracts based transactions.
On May 6, 2022 OriginClear was granted trademark protection for $H2O by European Union Intellectual Property Office.
On August 16, 2022 OriginClear was granted trademark protection by Great Britain for use of $H2O in the United Kingdom.
On August 25, 2022 OriginClear was granted trademark protection by the Intellectual Property Office of Mexico for $H2O in Mexico.
On September 22, 2022 OriginClear was issued a grant of trademark protection by the Japan Patent for $H2O in Japan.
On February 27, 2023 OriginClear was granted trademark protection by the Korean Intellectual Property Office for $H2O use in Korea.
On July 19, 2023 OriginClear was granted trademark protection by the Canadian Intellectual Property Office for $H2O in Canada.
Note: Neither the Water On Demand™ program nor the Company’s current business operations depend on blockchain technology, operational goals are achievable through traditional financial systems.
New Role of the Company
The Company, in its role as the CWIH, seeks to create, incubate or accelerate businesses in the water industry and potentially other sectors.
The Company intends to achieve growth by partnering with or developing businesses where it may take equity positions in addition to earning management fees.
We believe our primary strength lies in helping such businesses secure capital through retail corporate development, achieve commercial proof of concept, scale operations, and pursue mergers and acquisitions.
Identifying suitable candidates for this strategy may prove challenging. Even if identified, there is no assurance these ventures will achieve commercial success. The Company’s primary focus for the foreseeable future remains the financing, development, and support of its Water On Demand, Inc. subsidiary.
Employees
As of the date of this filing, the Company employs 34 full-time employees.
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ITEM 1A. RISK FACTORS
Risks Relating to Our Business
We have not been profitable.
We were formed in June 2007 and are currently developing Water On Demand, a new business model designed to address identified market demand. As we have not achieved profitability, we face substantial risks, uncertainties, expenses and challenges. To address these risks, we must:
| ● | Successfully execute our business strategy; | |
| ● | Respond effectively to competitive developments; and | |
| ● | Attract, integrate, retain and motivate qualified personnel. |
There is no assurance we will operate profitably or maintain adequate working capital to meet our obligations as they become due. Investors should consider the risks and challenges typically faced by early-stage companies, especially in rapidly evolving markets. If we are unable to successfully execute our strategy or mitigate these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.
We have a history of losses and can provide no assurance of our future operating results.
We have experienced net losses and negative cash flows from operating activities since our inception, and we expect these losses and negative cash flows to continue in the foreseeable future. As of December 31, 2024, and 2023, we had a working capital deficit of $(45,437,508) and $(32,249,892), respectively, and a shareholders’ deficit of $(54,857,588) and $(39,263,958), respectively.
For the years ended December 31, 2024, and 2023, we reported a net loss of $(18,970,789) and $(11,625,783), respectively. Additionally, we recorded a loss from operations of $(7,125,809) for the year ended December 31, 2024.
As of December 31, 2024, we had an aggregate accumulated deficit of $(137,393,744).
We may never achieve profitability.
Our independent registered public accountants’ opinion on our December 31, 2024, audited financial statements includes an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our continued operations depend on our ability to raise capital through financing transactions and generating sufficient future sales.
There can be no assurance that we will successfully achieve these objectives, and failure to do so could materially and adversely impact on our business, financial condition, and operating results.
We will need significant additional capital, which we may be unable to obtain.
Revenues from our operations are not currently sufficient to sustain our business, and we will require significant additional capital to continue operations. There is no assurance that additional financing will be available when needed or on terms acceptable to us. Failure to secure financing may require us to reduce or cease operations entirely.
We may seek capital through debt or equity financing. Equity financing is likely to dilute existing stockholders, and newly issued securities may include preferences, superior voting rights, or other terms favorable to new investors. Additionally, the issuance of warrants, convertible notes, or incentive equity awards may result in further dilution and non-cash expenses that negatively impact our financial condition.
Raising capital can also involve substantial costs, including investment banking, legal, and accounting fees, along with other related expenses. Market conditions, combined with our history of losses, may impair our ability to obtain financing or increase its cost.
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Furthermore, we have outstanding convertible preferred stock with variable conversion prices, and certain prior investors may be entitled to make good shares. The conversion of such preferred stock into common stock will result in additional dilution to existing stockholders. If we are unable to raise sufficient capital or generate adequate revenues, we may be forced to further reduce operations or cease operations entirely.
We have incurred substantial indebtedness.
As of December 31, 2024, we had $23,981,331 in outstanding convertible promissory notes, including $21,363,639 in current secured notes, $597,944 in other current notes, and $2,019,748 in long-term notes. Many of these notes are convertible at a discount, which could dilute stockholders and impact our stock price.
Our debt obligations may strain cash flow, limit funds for operations, and increase default risk if we cannot meet payment terms. High leverage may also reduce financial flexibility, restrict borrowing, and make it harder to compete.
We may incur additional debt, which could worsen these risks and further constrain our financial position.
Our revenues are dependent upon acceptance of our technology and products by the market; the failure of which would cause us to curtail or cease operations.
We expect that a significant portion of our future revenues will come from the sale or license of our technology and systems. Until we can successfully generate such revenues, we will continue to incur operating losses.
There is no assurance that businesses or prospective customers will adopt our technology and systems or agree to pay for the prices or license fees necessary to support our operations. If we fail to develop a sufficient customer base or secure adequate pricing for our products, our financial condition, results of operations, and prospects will be materially and adversely affected.
We will need to increase the size of our organization and may experience difficulties in managing growth.
We operate as a small company with a minimal number of employees. To address potential growth and market opportunities, we anticipate a significant expansion in headcount, facilities, infrastructure, and overhead. This growth will place added responsibilities on management, including identifying, recruiting, integrating and retaining qualified personnel.
Our ability to compete effectively and improve future financial performance will depend, in part, on how successfully we manage this growth. Failure to do so could negatively impact our operations and business prospects.
We may not successfully license our technology or commercialize our products, which could result in continued losses and may require us to curtail or cease operations.
We are currently developing our new business model, Water On Demand. However, we cannot predict when, or if, we will achieve profitability. There is no assurance that we will develop our systems quickly enough to meet market demands or that our systems will gain market acceptance.
If we fail to successfully develop, commercialize, or achieve market adoption for the Water On Demand business model, we will continue to incur losses, which may require us to curtail or cease operations.
If a competitor were to achieve a business breakthrough, our operations and business could be adversely impacted.
Several businesses currently deliver turnkey “water-as-a-service” systems. If a competitor achieves a significant breakthrough, we may face difficulties attracting customers and generating sales. Competitors with greater resources, including capital, technology, or market presence, may gain a significant advantage, negatively impacting our competitive position.
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Additionally, as we are the master licensee of only three current patents, we may not be able to prevent the development of competing technologies that use similar methods, materials, or procedures. These competitive pressures could limit our ability to attract customer licenses or generate royalties and fees, which could materially and adversely affect our business, financial condition, and results of operations.
Our long-term success depends on developing a novel outsourcing model, and we face the risks inherent in a performance-based business model.
While our engineering and technology divisions are profitable, our success relies on the development of Water On Demand, a new business in the Design-Build-Own-Operate sector. There is no assurance that we will generate revenue from the financing and management of these systems.
A significant portion of our revenue depends on the performance and oversight of these systems, as well as the successful operations of our operating partners. This exposes us to risks outside of our control, including:
| ● | Dependence on the management and operational capabilities of our partners; and |
| ● | The cyclicality of supply and demand for end-products ties to this business model. |
If our managed contracts fail to achieve profitability, our payments may decline, adversely impacting our results of operations, cash flows, and financial condition. Such impacts could be material.
We rely on strategic partners.
We depend on strategic partners to manage our planned outsourced systems. If our partners do not view us as significant to their business, they may reduce their commitment to us, terminate their relationship, pursue competing partnerships, or develop or acquire competing processes. Any of these actions could materially and adversely affect our business, operations, and financial condition.
A lack of government subsidies may hinder the usefulness of our technology.
We assemble and sell complete engineered solutions and products utilizing the expertise of PWT and MWS. Government subsidies that benefit in the industries we serve can vary and may be reduced or eliminated, which could materially and adversely impact our business. Similarly, more stringent regulations could increase compliance costs or create additional barriers, further negatively affecting our business operations and financial condition.
The industries in which we operate may endure deflationary cycles, affecting our ability to sell and license our systems.
Deflationary events, including industry sector downturns or economic collapses, could materially and adversely affect demand for our systems, limiting our ability to generate revenue from sales or licenses and negatively impacting our business, financial condition, and results of operations.
If we lose key employees and consultants or are unable to attract or retain qualified personnel, our business could suffer.
Our success relies heavily on attracting and retaining skilled scientific, engineering, and management professionals. We are particularly dependent on T. Riggs Eckelberry, whose contributions have been integral to the development of our technology and business. The loss of Mr. Eckelberry’s services could significantly impact our operations. As Mr. Eckelberry does not have an employment agreement with us, there is no guarantee of his continued association. His leadership remains crucial as we further develop our technology and work toward profitable commercialization. The departure of Mr. Eckelberry or other key personnel could hinder our ability to compete, advance our technology, and execute our business strategies effectively.
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Competition from other companies in our market may affect the market for our technology.
The entry of new companies into our market continues to increase competition. Established domestic and foreign companies with longer experience in prefabricated or modular water systems or DBOO models often have greater financial and operational resources. These competitors may benefit from superior capabilities in employee recruitment and retention, manufacturing, and marketing, providing them with a competitive edge. Additionally, competitors may strengthen their market positions through asset acquisitions and expansions. If we or our customers cannot compete effectively or respond to these competitive pressures, our operational results and financial condition could be materially affected.
Risks Related to Our Intellectual Property
Failure to establish, maintain and enforce intellectual property rights may negatively impact our financial condition, operations and business.
Our ability to protect intellectual property acquired under the master license is crucial to our financial and operating performance. We rely on trade secrets, copyright laws, and external patent licensing, supplemented by confidentiality agreements and restrictions on disclosing proprietary know-how.
Although we protect our technology as trade secrets and technical know-how, these methods offer less legal protection than patents. Only patents can prevent others from using independently developed similar technology. Competitors gaining access to or surpassing our trade secrets through observation or other means could diminish their value.
Despite implementing systems to safeguard confidentiality, these measures may not provide sufficient protection. While we require employees, consultants, advisors, and partners to sign non-disclosure agreements, we cannot guarantee their effectiveness. Additionally, technology deployed at customer sites may be observable by third parties without non-disclosure agreements, limiting its protection as a trade secret.
Enforcing intellectual property rights is challenging and may require costly litigation with uncertain outcomes, diverting resources and management attention.
The perceived strength of our intellectual property is critical to the value of our customer licenses. Failure to secure and enforce intellectual property could hinder customer acquisition and materially impact our business, financial condition, and prospects.
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Although we have filed various patent applications for some of our original technologies, some have been abandoned or transferred. In certain cases, we have opted to protect our intellectual property through a trade secrets policy.
Although we have filed various patent applications for some of our original technologies, some have been abandoned or transferred. In certain cases, we have opted to protect our intellectual property through a trade secrets policy.
We safeguard our intellectual property using a combination of patents and trade secrets. However, trade secrets do not provide the same level of protection as patents, and patents may not guarantee meaningful protection or commercial advantage. In the U.S., patents only offer protection for 20 years from the filing date, and delays in patent issuance reduce the enforcement period. Additionally, the claims in issued patents may not be broad enough to prevent others from developing similar technologies or achieving comparable results.
Our ability to license and exploit technology under our patents may also be constrained by the intellectual property rights of others. Numerous U.S. and foreign-issued patents and pending patent applications in our field may have priority over our applications, potentially leading to invalidation or limitations on our rights. Furthermore, our competitors could challenge the validity or enforceability of any patents that are issued from our applications.
These risks may impact our ability to protect and commercialize our intellectual property effectively, which could have a material adverse effect on our business and operations.
We may face claims that we are violating the intellectual property rights of others.
We may encounter claims from direct competitors, other water companies, scientists, or research institutions asserting that our business models, technology, or the commercial use of such technology infringe on their intellectual property rights. As we have not conducted infringement, freedom-to-operate, or landscape analyses, we cannot be certain that our technologies and processes do not violate the rights of others. These claims may increase as we grow our market profile and begin generating revenue.
We may also face infringement claims from employees, consultants, agents, or outside organizations involved in developing our technology. Although we have sought to protect ourselves through contractual provisions, these may not be sufficient, and these parties may claim full or partial ownership of the intellectual property in the technology they developed for us.
If we are found to infringe on others’ intellectual property rights, we could incur significant costs to implement work-around solutions, which may not be feasible or technically equivalent to our current technology. In such cases, we might need to license third-party intellectual property, which may not be available on acceptable terms or at all. Failure to resolve such issues could result in substantial monetary judgments or injunctions that might force us to cease operations.
Even if we are not infringing on others’ intellectual property rights, we could still incur substantial costs defending ourselves against such claims. Additionally, if our license agreements require us to indemnify our customer licenses for claims related to intellectual property infringement, we may bear significant costs defending and indemnifying them. These disputes, even if meritless, could divert management attention and resources. Parties bringing claims may have greater resources, potentially leading us to settle claims we might otherwise successfully defend.
Any claims alleging intellectual property infringement, whether against us or our customer licenses, could materially and adversely impact our financial condition, business operations, and results.
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Risks Related to Our Common Stock
Our common stock may be diluted through the issuance of additional shares, convertible securities, warrants or options.
To raise capital, we have issued common stocks, convertible securities (such as convertible debentures, convertible preferred stock, and notes), and warrants, some of which include anti-dilution and similar protections. Additionally, we have issued incentive compensation to employees and directors. Shares of common stock are reserved for issuance upon the exercise of these securities, and we may increase the number of reserved shares in the future.
Issuing additional common stock, convertible securities, options, and warrants may reduce the percentage ownership of existing stockholders, apply downward pressure on the market price of our stock, trigger adjustments to the conversion and exercise prices of outstanding notes and warrants, and potentially obligate us to issue additional shares to certain stockholders. These actions could affect the rights of current stockholders and the overall value of our common stock.
Our chief executive officer holds the majority of the voting power of our shareholders.
T. Riggs Eckelberry, as the holder of our Series C Preferred Stock, controls 51% of the voting power of the Company’s shareholders. This gives Mr. Eckelberry the ability to determine the outcome of all shareholder matters, which may result in decisions that differ from the interests of other shareholders.
We have created various series of preferred stock and our articles of incorporation allow for our board to create additional new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.
Our Board of Directors has the authority to determine the rights and preferences of preferred stock and to issue additional shares without requiring approval from stockholders. This includes the creation of new series of preferred stock with preferential rights that could adversely affect the rights of common stockholders.
Our issuance of common stock upon conversion of preferred stock may dilute stockholder ownership.
We currently have an outstanding series of preferred stock convertible into common stock, including a series with variable conversion prices. In some cases, these entitlements include the issuance of make-good shares to certain prior investors (see Note 3 – Preferred Stock). The conversion of these preferred shares into common stock will dilute the holdings of existing common stockholders, which may negatively impact the market price of our common stock.
There is a limited public market for our common stock.
Our common stock is not listed on any national securities exchange, making it more difficult for investors to buy or sell shares compared to stocks traded on an exchange. While our common stock is quoted on the OTC Pink, this inter-dealer, over-the-counter market offers significantly less liquidity than national exchanges like the NASDAQ Capital Market.
The limited liquidity may adversely affect the trading volume and price of our common stock. Additionally, the lack of a national exchange listing may make our stock less appealing for margin loans, institutional investments, and use as consideration in future capital-raising transactions or other purposes.
The price of our common stock is volatile, which may lead to investment losses.
The market for our common stock is highly volatile, with significant fluctuations driven by factors such as quarterly variations in operating and financial results, as well as general economic and market conditions. Additionally, statements or changes in opinions, ratings, or earnings estimates from brokerage firms or industry analysts regarding our industry or company could adversely impact our stock price.
This volatility may result in investment losses for our stockholders. Historically, periods of significant stock price fluctuations have often led to securities class action litigation. If such litigation is brought against us, it could result in substantial legal costs and consume management’s time and resources, potentially impacting our operations.
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Shares eligible for future sale may adversely affect the market.
Certain stockholders may sell their shares of common stock in the open market under Rule 144 of the Securities Act of 1933, as amended, subject to certain limitations. Generally, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months, subject only to the current public information requirement. Affiliates, however, are subjected to additional restrictions, including volume limitations, manner of sale rules, (for equity securities), and notice requirements under Rule 144.
Substantial sales of our common stock under Rule 144 could negatively impact the market price of our shares, potentially causing a material adverse effect.
Our stock is subject to the penny stock rules, which may restrict resale and reduce liquidity.
Our common stock is classified as a “penny stock” under Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended. Generally, a penny stock is any equity security with a market price below $5.00 per share, unless it meets specific exceptions such as being listed on a qualifying national securities exchange, issued by a registered investment company, or meeting SEC exemptions based on price or the issuer’s net tangible assets.
As a penny stock, our shares are subject to SEC rules that impose additional sales practice requirements on broker-dealers. These rules affect transactions involving individuals other than established customers or accredited investors, making it more burdensome for broker-dealers to trade our shares.
These restrictions may reduce the liquidity and trading volume of our common stock, potentially limiting resale opportunities and adversely affecting its market price.
Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our common shares.
In addition to the “penny stock” rules, the Financial Industry Regulatory Authority, Inc. (“FINRA”) has implemented rules requiring broker-dealers to ensure that recommended investments are suitable for their customers. Before recommending speculative, low-priced securities like our common stock to non-institutional customers, broker-dealers must make reasonable efforts to gather information about the customer’s financial status, tax status, investment objectives, and other relevant details.
FINRA has indicated that speculative, low-priced securities are often unsuitable for many customers. These requirements increase the difficulty for broker-dealers to recommend our stock, potentially restricting shareholders’ ability to buy or sell shares and negatively affecting the market for our stock.
If we fail to maintain effective internal controls over financial reporting, our stock price may be negatively impacted.
We are required to establish and maintain effective internal controls over financial reporting. Weaknesses or failures in these controls could adversely affect our ability to provide accurate and reliable public disclosures about our business, financial condition, and results of operations.
Management’s assessment of our internal controls may identify deficiencies that require correction or remediation, potentially raising concerns among investors. Any actual or perceived weaknesses in our internal controls or disclosures regarding their status could adversely affect investor confidence and, consequently, the market price of our common stock.
We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed, and our stock price could decline.
Under Section 404 of the Sarbanes-Oxley Act, we are required to conduct an annual assessment of our internal controls over financial reporting. For certain issuers, this includes an attestation of the assessment by an independent registered public accounting firm. Meeting these evolving and complex standards involves significant documentation, testing, and remediation efforts, resulting in substantial ongoing expenses and resource allocation.
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It is challenging to predict the time and cost required to assess and remediate our internal controls over financial reporting each year. Delays or difficulties in completing this process could prevent timely compliance. Although attestation requirements by our independent registered public accounting firm do not currently apply to us, we may become subject to them in the future, potentially leading to further challenges in implementing necessary changes.
If our Chief Executive Officer or Chief Financial Officer determines that our internal controls are not effective as defined under Section 404, we may face regulatory scrutiny or adverse market reactions. Such outcomes could negatively impact investor confidence and the market value of our stock.
We do not intend to pay dividends on our common stock.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. Even if we have sufficient funds to legally pay dividends, our board of directors may choose, at its discretion, not to declare or pay dividends.
The declaration and amount of any future dividends will depend on various factors, including our operating results, cash flows, financial condition, capital requirements, and other considerations deemed relevant by our board of directors. Additionally, our outstanding series of preferred stock are entitled to dividends before any dividends can be paid to holders of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
Our principal corporate offices are located at 13575 58th Street North, Suite 200, Clearwater, FL 33760.
Our subsidiary, PWT, operates from a 21,300-square-foot facility at 5225 W. Houston Street, Sherman, TX 75092. This facility includes a manufacturing area for water treatment equipment and a warehouse to expand in-stock filtration and pump inventory.
We believe these facilities are suitable and adequate for our current business requirements.
ITEM 3. LEGAL PROCEEDINGS.
On March 5, 2024, Process Solutions, Inc. (“PSI”) filed a lawsuit against PWT in the Court of Common Pleas in Hamilton County, Ohio alleging breach of contract and seeking damages. The matter has since been resolved and closed, with no resulting claims or counterclaims by either party. Otherwise, the Company has no legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is quoted on the OTC Markets Pink Open Market under the symbol “OCLN”.
The market price of our common stock is highly volatile, reflecting trends common to technology companies. It fluctuates in response to variations in operating results, announcements of technological innovations or new products, or other events or factors. Our stock price may be influenced by broader market trends and conditions unrelated to our specific performance.
Holders
As of March 31, 2025, we had approximately 791 holders of record of our common stock. This figure does not include beneficial owners whose shares are held by brokers, dealers, or registered clearing agencies on their behalf.
Dividend Policy
We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. Our intention is to retain future earnings, if any, to support ongoing operations and fund future capital requirements.
Any decision to pay cash dividends in the future will be at the discretion of our board of directors and will depend on factors such as our financial condition, results of operations, capital needs, and other considerations deemed relevant by the board. Additionally, we have various series of preferred stock outstanding that are entitled to receive dividends before any dividends can be paid on our common stock.
Recent Sales of Unregistered Securities
During the fiscal year ended December 31, 2024, there were no sales of unregistered securities except for those previously disclosed in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. Additionally, our subsidiary, Water on Demand Inc., engaged in activities under a Regulation A offering during this period.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. RESERVED.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Critical Accounting Policies
The SEC defines “critical accounting policies” as those requiring management’s most challenging, subjective or complex judgments, often involving estimates of inherently uncertain matters that may change over time.
While not all accounting policies involve such judgements or estimates, the following policies meet the SEC’s definition of critical accounting policy.
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Recently Issued Accounting Pronouncements
Management adopted a recently issued accounting pronouncement during the year ended December 31, 2024, as disclosed in the Notes to the consolidated financial statements included in this report.
Revenue Recognition
We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.
Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined. Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined.
Use of Estimates
The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.
Significant estimates include evaluations of goodwill and long-lived asset impairments, revenue recognition for percentage-of-completion contracts, allowances for uncollectible accounts, inventory valuation, valuations of non-cash capital stock issuances, and valuation allowances on deferred tax assets. These estimates are based on historical experience and other assumptions deemed reasonable under the circumstances. They form the basis for management’s judgments regarding asset and liability carrying values. Changes in assumptions or conditions could result in materially different actual outcomes.
Fair Value of Financial Instruments
The fair value of financial instruments requires disclosure of fair value information, whether or not recognized in the balance sheet, when practicable to estimate.
As of December 31, 2024, the reported amounts for cash, prepaid expenses, accounts payable and accrued expenses approximate their fair value due to their short maturities.
Revenue and Cost of Sales
Revenue for the years ended December 31, 2024, and 2023 was $5,541,635 and $6,708,178, respectively. Cost of goods sold for the same periods was $4,568,923 and $6,081,683, respectively.
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Operating Expenses
Selling and Marketing Expenses
Selling and marketing expenses for the years ended December 31, 2024, and 2023 were $2,834,900 and $2,564,800, respectively. The increase was primarily due to higher marketing and promotional costs.
General and Administrative Expenses
General and administrative expenses for the years ended December 31, 2024, and 2023 were $5,263,621 and $4,684,527, respectively. The increase was due to higher personnel related expenses and outside services, including stock-based compensation.
Depreciation Expense
Depreciation expense for the years ended December 31, 2024, and 2023 was $81,037 and $30,333, respectively.
Other Income and Expense
Other (expense) increased by $6,842,029 to $(11,844,980) for the year ended December 31, 2024, compared to $(5,002,951) for the year ended December 31, 2023. The increase was due to an $8,744,712 increase in loss on net change in derivative liability and conversion of debt, a $746,878 increase in interest and dividend expense, and a $2,350,366 impairment of receivable from SPAC. These were partially offset by a $1,861,728 gain on redemption of stock, a $30,646 gain on write-off of loans payable, and other adjustments related to fair value changes in investment securities and settlements.
Net Loss
Our net loss increased by $7,345,006 to $(18,970,789) for the year ended December 31, 2024, compared to a net loss of $(11,625,783) for the year ended December 31, 2023.
The increase in net loss was primarily due to higher other income and expense items, including the net change in derivative instruments which are remeasured each period.
These estimates are based on multiple inputs, including the market price of our stock, interest rates, stock price volatility, variable conversion prices defined in the respective agreements, and probabilities of certain outcomes based on management’s estimates. Because these inputs are subject to significant fluctuations, the estimated fair value of derivative liabilities will vary from period to period, and the impact may be material.
Liquidity and Capital Resources
Liquidity refers to the ability of a company to generate funds to support current and future operations, meet obligations, and maintain ongoing business operations. Key factors influencing liquidity include funds generated from operations, management of accounts receivable and payable, and capital expenditures.
The accompanying consolidated financial statements have been prepared assuming a going concern, which contemplates the continuity of operations and realization of assets and liabilities in the ordinary course of business. However, substantial doubt exists regarding our ability to continue as a going concern due to significant working capital and shareholders’ deficits.
As of December 31, 2024, we had cash of $550,884 compared to $488,830 as of December 31, 2023.
Our working capital deficit increased to $(45,437,508) from $(32,249,892), primarily due to an increase in convertible promissory notes and accrued expenses.
The shareholders’ deficit was $54,857,588 as of December 31, 2024.
Net cash used in operating activities was $(3,565,872) for the year ended December 31, 2024, compared to $(5,513,658) in 2023. The decrease was primarily due to changes in accrued expenses, contract liabilities, and working capital management.
Net cash used in investing activities was $(2,289,866) in 2024, compared to $(3,746,985) in 2023, primarily reflecting the purchase of SPAC notes payable.
Net cash provided by financing activities was $5,917,792 in 2024, compared to $8,394,659 in 2023, primarily from proceeds of secured promissory notes and preferred stock offerings.
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During 2024, we raised $1,107,000 through preferred stock offerings and $2,767,701 through convertible secured promissory notes. While these funds have supported near-term operations, our ability to continue as a going concern depends on additional capital infusion. Management anticipates obtaining further funding from existing and new investors but cannot guarantee such funds will be available or on favorable terms.
Although proceeds from the issuance of convertible debt and revenue from operations are currently sufficient to fund near-term expenses, we will need to raise additional funds to expand our operations. Future financing may involve equity or debt securities, which could dilute existing stockholders or include senior rights. If we are unable to secure additional financing, we may need to reduce operations, curtail development plans, or cease operations entirely.
While management believes current resources, growing revenues, and the ability to raise funds will support operations in the immediate future, there is no assurance that these assumptions will materialize. Failure to obtain additional funding may limit our ability to sustain operations and meet obligations.
Recent Trends
Known trends, demands, commitments, events, or uncertainties that could reasonably affect the accuracy or reliability of reported financial information as an indicator of future operating results are discussed throughout this report.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act, the Company’s management, including the principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.
As defined by Rules 13a-15(e) and 15d-15(e), “disclosure controls and procedures” refer to controls designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the specified time periods, and that such information is communicated to management to allow timely decisions regarding required disclosures.
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Based on this evaluation, and due to the lack of segregation of duties resulting from our small staff size, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were ineffective as of the period’s end. This deficiency could result in delayed or incomplete recording, processing, or communication of required disclosures.
To mitigate this deficiency, we performed additional analysis and post-closing procedures to ensure that the consolidated financial statements in this report are prepared in accordance with generally accepted accounting principles (GAAP). Management believes that, despite the identified deficiency, the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria established in the Internal Control-Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A significant deficiency is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness but important enough to merit the attention of those overseeing the registrant’s financial reporting.
Management identified deficiencies related to the lack of segregation of duties due to the small size of the Company’s staff and the need for a stronger internal control environment. While these deficiencies do not constitute material weaknesses, they could potentially affect the Company’s ability to maintain effective internal controls. Due to the cost/benefit considerations, the small staff size may continue to limit the implementation of certain controls, such as adequate segregation of duties.
To mitigate the identified deficiency, the Company has implemented additional resources and internal controls to strengthen its control environment. Management will continue to monitor and assess the effectiveness of internal controls as part of ongoing efforts to ensure compliance with financial reporting requirements.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act, during the year ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Internal Controls
Management recognizes that the design and evaluation of disclosure controls and procedures are inherently limited. No control system, no matter how well-designed or operated, can provide absolute assurance of achieving its objectives.
The effectiveness of disclosure controls and procedures is further influenced by resource constraints, requiring management to exercise judgment in balancing the benefits of potential controls against their associated costs. Accordingly, disclosure controls and procedures are designed to provide only reasonable assurance of their effectiveness.
No Attestation Report by Independent Registered Accountant
The effectiveness of our internal control over financial reporting as of December 31, 2024 has not been audited by our independent registered public accounting firm by virtue of our exemption from such requirement as a smaller reporting company.
ITEM 9B. OTHER INFORMATION.
ITEM 9C. DISCLORES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth the names and ages of the members of our board of directors and our executive officers and the positions held by each.
| Name | Age | Position | ||
| T. Riggs Eckelberry | 72 | Chief Executive Officer, Chairman of the Board of Directors, Secretary, Treasurer, and President | ||
| Prasad Tare | 50 | Chief Financial Officer | ||
| James Woloszyn | 49 | Chief Operating Officer | ||
| Stephen Hall | 48 | Director (Audit Committee Chairman) | ||
| Anthony Fidaleo | 66 | Director (Resigned as of January 30, 2025) | ||
| Jean-Louis Kindler | 62 | Director | ||
| Byron Elton | 70 | Director |
T. Riggs Eckelberry - Chief Executive Officer, Chairman of the Board of Directors, Secretary, Treasurer, and President
Mr. Eckelberry has served as Chief Executive Officer, Chairman, Secretary, Treasurer, and President of the Company since its inception in June 2007. As a co-founder, he brings extensive experience in technology management and leadership to the Blue Technology sector.
From 2005 to 2006, as President and COO of CyberDefender Corporation, Mr. Eckelberry was instrumental in developing the Company’s product line, securing initial funding, and achieving a NASDAQ IPO. Between 2001 and 2005, he founded and led TechTransform, a technology consulting firm, where he contributed to the successful launch and turnaround of various technology companies.
In 2004, he was part of the team that commercialized YellowPages.com, culminating in its $100 million sale to SBC/BellSouth. In 2003, as General Manager of Panda Software’s U.S. unit, he established the Company as a significant player in the U.S. market. During the 1990s, Mr. Eckelberry played pivotal roles in the tech industry, contributing to the global success of the software product CleanSweep and overseeing the sale of MicroHouse Technologies to Earthweb as its Chief Operating Officer. He was also a key member of the team that facilitated the sale of venture-backed TriVida to a division of ValueClick (VCLK).
Earlier in his career, Mr. Eckelberry worked in the non-profit sector, earning a master’s license for oceangoing vessels.
As a veteran executive and one of the Company’s founders, Mr. Eckelberry’s extensive experience and strategic insights are invaluable to the board of directors.
Prasad Tare – Chief Financial Officer
Mr. Tare was appointed Chief Financial Officer in June 2021. He brings over 15 years of experience in public accounting, financial reporting, and risk and internal controls advisory services. His expertise includes conducting company-wide risk assessments to enhance focus on critical areas and improving the efficiency and effectiveness of audit activities.
Mr. Tare began his career at PwC India, where he was part of the financial statement assurance teams for various multinational companies. In 2004, he transitioned to the United States, working with top regional and national public accounting and consulting firms. His experience includes leading external audit engagements for prominent public companies such as Steve Madden, The United Retail Group, and Double-Take Software.
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James Woloszyn – Chief Operating Officer
Mr. James is an experienced operations executive with a track record of leading large-scale business transformations across multiple industries. He has held senior leadership roles at global corporations, including Boeing, HP, HPE and Northwestern Mutual, where he specialized in optimizing operations, implementing best practices, and driving financial and strategic growth.
Before joining Water on Demand in January 2025, James served as President and General Manager of Blackbird Vineyards, where he led a successful turnaround, improving profitability, increasing revenue, and restructuring activities for long-term stability. He also held the role of Vice President, HR Strategy, Finance, and Organizational Excellent at Northwestern Mutual, where he developed enterprise-wide strategies and operational frameworks to enhance efficient and performance.
James holds a Bachelor of Science degree in Genetics and Advanced Biology from the University of Witwatersand. He also completed studies in Business Administration at the Segal School of Business, Simon Fraser University from 20025 to 2008 and earned a Diploma in Management in Advanced Technology from Simon Fraser University in 2003.
Anthony Fidaleo – Director
Mr. Fidaleo served as a director from June 2012 through January 30, 2025. He has operated his own accounting and consulting practice since 1992, primarily serving as acting CFO or senior consultant for public companies ranging from startups to Fortune 500s. From 2005 to 2009, he was CFO, COO, Executive VP, and a board member of iMedia International, Inc., a publicly traded interactive content company. Previously, he spent a decade in public accounting (1982–1992), primarily with BDO Seidman, LLP, where he was a senior audit manager. Mr. Fidaleo is a California CPA (inactive) and holds a B.S. in Accounting from California State University, Long Beach. His extensive accounting and financial background supported his role on our board. Mr. Fidaleo was succeeded by Stephen Hall as of January 30, 2025.
Stephen Hall – Director & Audit Committee Chairman
Mr. Hall was appointed as a Director and Chairman of the Audit Committee on January 30, 2025, replacing Anthony Fidaleo. He brings over 30 years of experience from Robert Hall & Associates, a California-based tax accounting firm, where he serves as CEO and Board Member. He has advised more than 2,500 companies and 7,500 families. Mr. Hall also coaches aspiring fund managers through Fund Launch Partners’ Black Card Program.. He has worked with startups in tech, real estate, and food sectors, and sourced early-stage deals with the Pasadena Angels. His expertise spans tax strategy, financial planning, risk management, real estate, private equity, and M&A. He holds a B.S. in Marketing and Management Consulting from USC and has been an IRS Enrolled Agent since 2001.
Jean-Louis Kindler – Director
Mr. (“JL”) Kindler has served as our director since December 2013. As President of OriginClear Technologies, he led the commercialization of OriginClear’s breakthrough water treatment technology. Since 2019, he has been the CEO of Clean Energy Enterprises Inc., established to commercialize the Blue Tower biomass-to-hydrogen system he helped develop two decades ago in Japan. Mr. Kindler is a veteran of 25 years as both a top executive and engineer in environmental technologies. Before OriginClear, JL was co-founder and Chief Technology Officer of Ennesys, the Company’s French joint venture, where he designed its patent-pending waste-to-energy system. Earlier, as founding CEO of MHS Equipment, a French nanotechnologies equipment manufacturing firm (42 M€, 360 employees in 2008), he led the development of a breakthrough fuel cell process. And earlier still, his twenty-year career in Japan gave him unique insight into fast-growing Asian markets. There, as principal of technology incubator Pacific Junction, JL completed various assignments. These included technology sourcing for the French industrial group GEC-Altshom, building the first commercial unit of the Blue Tower (to which he has recently returned in its now-fourth generation), and market development for a fluid mixing technology that helped inspire early OriginClear inventions. Mr. Kindler holds a Master’s in Economics and Public Policy from the Institute of Political Science in Lyon, France, and an MBA in International Management in Paris. Mr. Kindler’s executive and management experience, and past involvement in the Company’s technology and operations, qualifies him to serve as a member of our board of directors.
Byron Elton – Director
Mr. Elton has served as our director since January 2014. Mr. Elton is an experienced media and marketing executive with a proven record in pioneering new business development strategies and building top-flight marketing organizations. Since June 2018, he has been President of Elton Enterprises, Inc., which is involved in the wellness, fitness and health sector. Elton is currently opening six StretchLab Studios in the Los Angeles and Seattle markets (stretchlab.com). He is a co-founder since June 2017 of Pardue Associates, operating monsho, a brand-centric, creative communications agency focused on delivering results. From 2013 to 2017, Mr. Elton was a partner of Clear Search, an executive search firm. Prior to that, from 2009 until 2013, Mr. Elton served as President and Chief Executive Officer of Carbon Sciences, Inc. (“Carbon Sciences”) (OTCBB: CABN) and has served as Chairman of Carbon Sciences since March 2009. Carbon Sciences is an early-stage company developing a technology to convert earth destroying carbon dioxide into a useful form that will not contribute to greenhouse gas. Mr. Elton previously served as Senior Vice President of Sales for Univision Online from 2007 to 2008. Mr. Elton also served for eight years as an executive at AOL Media Networks from 2000 to 2007, where his assignments included Regional Vice President of Sales for AOL and Senior Vice President of E-Commerce for AOL Canada. His broadcast media experience includes leading the ABC affiliate in Santa Barbara, California in 1995 to 2000 and the CBS affiliate in Monterrey, California, from 1998 to 1999, in addition to serving as President of the Alaskan Television Network from 1995 to 1999. Mr. Elton studied Advertising and Marketing Communications at Brigham Young University. Mr. Elton’s executive and management experience qualifies him to serve as a member of our board of directors.
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Family Relationships
There are no family relationships among any of our directors and executive officers.
Legal Proceedings
During the past ten years, none of our directors or executive officers has been:
| ● | the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| ● | convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| ● | subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; |
| ● | found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law; |
| ● | the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Election of Directors
Our directors serve until the expiration of their elected term and until a successor has been duly elected and qualified.
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Board Independence
Our board of directors currently consists of four members. As we are not a listed issuer, we are not subject to specific director independence standards. However, using the definition of “independent director” under Section 5605(a)(2) of the NASDAQ Capital Market rules, Stephen Hall, Jean-Louis Kindler, and Byron Elton qualify as independent directors.
Board of Directors Meetings and Attendance
The Board of Directors held four meetings in 2024 and also took actions through unanimous written consent. All Board members attended each meeting. The Company does not have a formal policy regarding director attendance at the annual meeting of stockholders.
Committees of the Board of Directors
The Company has established an audit committee and a compensation committee; however, no, members have been nominated to these committees at this time. To date, the entire Board of Directors has carried out all duties and responsibilities which might be contemplated by a committee.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics applicable to all our directors, officers, employees. The Code of Ethics is available on our website at https://www.originclear.com/investing#codeofethics.
Board Leadership Structure and Role in Risk Oversight
We have not adopted a formal policy regarding whether the Chairman and Chief Executive Officer positions should be separate or combined. However, we have traditionally determined that combining these roles serves the best interests of the Company and its shareholders. Mr. Eckelberry has served as both Chairman and Chief Executive Officer since our inception in 2007. Given the small size of the Company, we believe this structure is currently the most effective.
Our board of directors regularly receives and reviews reports from management, auditors, legal counsel, and other relevant parties regarding the Company’s assessment of risks. The board focuses on the most significant risks facing the Company, our overall risk management strategy, and ensuring that the risks we undertake align with the Board’s risk appetite.
While the Board provides oversight of risk management, day-to-day risk management processes are the responsibility of management. We believe this division of responsibilities is the most effective approach for addressing the risks facing the Company.
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ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation to our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer for the years ended 2024 and 2023:
| Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Non-qualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||
| T. Riggs Eckelberry, | 2024 | 420,000 | 0 | - | - | 0 | 420,000 | |||||||||||||||||||||||||||
| Chairman of the Board, Secretary & Treasurer, President and CEO | 2023 | 370,000 | 50,000 | - | - | 3,000 | 420,000 | |||||||||||||||||||||||||||
| Prasad Tare, | 2024 | 180,000 | 0 | - | - | 0 | 180,000 | |||||||||||||||||||||||||||
| Chief Financial Officer | 2023 | 180,000 | 18,750 | - | - | 3,000 | 201,750 | |||||||||||||||||||||||||||
Outstanding Equity Awards at 2024 Fiscal Year-End
There were no stock options outstanding as of December 31, 2024.
Employment Agreements
The Company does not currently have an employment agreement with its Chief Executive Officer, who received an annual salary of $420,000. Bonus payments, if any, are determined at the discretion by the Board of Directors. For the year ended 2024, the CEO received a bonus in the amount of $0.
Similarly, the Company does not have an employment agreement with its Chief Financial Officer, who is paid an annual salary of $180,000. For the year ended 2024, the CFO received a bonus in the amount of $0.
Employee Benefit Plans
Beginning on June 1, 2008, we implemented a company health plan for our employees.
Compensation of Directors
Our current directors presently do not receive monetary compensation for their service on the board of directors. Directors may receive compensation for their services in the future and reimbursement for their expenses as shall be determined from time to time by resolution of the board of directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of April 17, 2024, by (i) each director, (ii) each named executive officer, (iii) all directors and executive officers as a group, and (iv) each person who beneficially owns more than five percent of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC. The percentage ownership of each beneficial owner is based on 1,517,699,125 outstanding shares of common stock. Except as indicated, each person listed below has sole voting and investment power with respect to the shares set forth opposite such person’s name.
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| Name and Title of Beneficial Owner (1) | Number of Shares Beneficially Owned | Percentage of Shares | ||||||
| T. Riggs Eckelberry, Chief Executive Officer, Chairman, Secretary, Treasurer, President (2) | 3 | * | ||||||
| Prasad Tare, Chief Financial Officer | 1,903,439 | * | ||||||
| Anthony Fidaleo, Director | 168 | * | ||||||
| Byron Elton, Director | 166 | * | ||||||
| Jean-Louis Kindler, Director | 1 | * | ||||||
| Directors and executive officers as a group (5 persons) | 1,903,777 | * | ||||||
| Ronald Von Soosten | 131,760,346 | 7.88 | % | |||||
| Marc Stevens | 156,455,264 | 9.35 | % | |||||
| * | Less than 1% |
| (1) | The address of each director and named executive officer listed above is c/o OriginClear, Inc., 13575 58th Street North, Suite 200, Clearwater, FL 33760. |
| (2) | Mr. Eckelberry also owns all the 1,000 outstanding shares of our Series C preferred stock which entitles Mr. Eckelberry to 51% of the total voting power on all shareholder matters of the Company. The ownership of these shares is conditioned on the holder’s continued position as CEO. |
On March 15, 2017, the Company filed a Certificate of Designation with the Secretary of State of Nevada for its Series C preferred stock, designating 1,000 shares of authorized preferred stock as Series C preferred stock. Each share of Series C preferred stock has a par value of $0.0001 per share. The Series C preferred shares do not carry a dividend rate, have no liquidation preference, and are not convertible into common stock.
For as long as any Series C preferred stock remains issued and outstanding, the holders of these shares, voting as a separate class, possess voting power equal to 51% of the total voting rights of the Company. This supermajority voting power is determined by the majority of the issued and outstanding shares of Series C preferred stock.
The Series C preferred shares are subject to automatic redemption by the Company at their par value upon the occurrence of either of the following events: (i) the date on which Mr. Eckelberry ceases, for any reason, to serve as an officer, director, or consultant of the Company; or (ii) the date on which the Company’s common stock begins trading on a national securities exchange, provided that such exchange’s listing rules prohibit preferential voting rights for a class of securities or condition listing upon the elimination of the preferential voting rights of the Series C preferred stock as outlined in the Certificate of Designation.
Equity Compensation Plan Information
There were no stock option incentive plans outstanding as of December 31, 2024.
29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Except as set forth in Item 11 under “Executive Compensation”, since January 1, 2020, there has not been, nor is there any proposed transaction where we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
The following table shows fees that were billed by our independent registered public accounting firm for professional services rendered, including services rendered for Company subsidiaries, in 2024 and 2023. Audit fees represent fees for professional services performed by M&K CPAS, PLLC (“M&K”) for the audit of our financial statements and the review of our quarterly financial statements, as well as services that are normally provided in connection with statutory and regulatory filings or engagements. We engaged M&K as our independent registered public accounting firm on September 30, 2019.
| Fiscal Year | Audit Fees | Audit- Related Fees | Tax Fees | All Other Fees | ||||||||||||
| 2024 – M&K CPAS, PLLC | $ | 119,920 | $ | - | $ | - | $ | 24,775 | ||||||||
| 2023 – M&K CPAS, PLLC | $ | 113,250 | $ | - | $ | - | $ | |||||||||
Audit-Related Fees
We did not incur assurance or audit-related fees during 2024 and 2023, except for fees related to the Company’s Regulation A offering, which are included under Audit Fees. Additionally, no fees were incurred in connection with the audit of our financial statements, the review of registration statements, the issuance of related consents, or assistance with SEC comment letters.
Tax Fees
We did not incur fees for tax compliance, tax advice, or tax planning for the fiscal years ended December 31, 2024, and 2023, respectively.
All Other Fees
There were no fees billed to us by M&K CPAS, as applicable, for services rendered to us during the fiscal years ended December 31, 2024 and 2023, respectively, other than the services described above under “Audit Fees” and “Audit-Related Fees.”
As of the date of this filing, our current policy is to not engage our independent registered public accounting firm to provide, among other things, bookkeeping services, appraisal or valuation services, or international audit services. The policy provides that we engage our independent registered public accounting firm to provide audit and other assurance services, such as review of SEC reports or filings, as set forth above.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
31
| * | Filed herewith |
| ** | Furnished herewith
Exhibits incorporated by reference are hyperlinked to their respective filings on the SEC’s EDGAR database. |
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| ORIGINCLEAR, INC. | ||
| By: | /s/ T Riggs Eckelberry | |
| T Riggs Eckelberry | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| By: | /s/ Prasad Tare | |
| Prasad Tare | ||
| Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
| Date: March 31, 2025 | By: | /s/ T Riggs Eckelberry |
| T Riggs Eckelberry | ||
| Director and Chief Executive Officer |
| Date: March 31, 2025 | By: | /s/ Prasad Tare |
| Prasad Tare | ||
| Chief Financial Officer |
| Date: March 31, 2025 | By: | /s/ Anthony Fidaleo |
| Anthony Fidaleo | ||
| Director |
| Date: March 31, 2025 | By: | /s/ Jean-Louis Kindler |
| Jean-Louis Kindler | ||
| Director |
| Date: March 31, 2025 | By: | /s/ Byron Elton |
| Byron Elton | ||
| Director |
33
INDEX TO FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of OriginClear, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of OriginClear, Inc. (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related consolidated notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company suffered a net loss from operations and used cash in operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As discussed in Note 2, the Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.
Auditing management’s evaluation of agreements with customers involves significant judgment, given the fact that some agreements require management’s evaluation and allocation of the standalone transaction prices to the performance obligations.
To evaluate the appropriateness and accuracy of the assessment by management, we evaluated management’s assessment in relationship to the relevant agreements.
/s/
We have served as the Company’s auditor since 2019.
March 31, 2025
F-2
ORIGINCLEAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Audited)
| December 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Contracts receivable, net | ||||||||
| Fair value investment in securities | ||||||||
| Contract assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Net property and equipment | ||||||||
| NET PROPERTY AND EQUIPMENT | ||||||||
| OTHER ASSETS | ||||||||
| Security deposit | ||||||||
| Investment in SPAC Common Stock | ||||||||
| Receivable on sale of asset | ||||||||
| ROU asset, net | ||||||||
| Fair value investment-securities | ||||||||
| Trademark | ||||||||
| TOTAL OTHER ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and other payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Cumulative preferred stock dividends payable | ||||||||
| Contract liabilities | ||||||||
| Lease liability | ||||||||
| Customer deposit | ||||||||
| Warranty reserve | ||||||||
| Line of credit | ||||||||
| Secured loans payable | ||||||||
| Loans payable, current | ||||||||
| Related party loan | ||||||||
| Tax liability 83 (b) | ||||||||
| Derivative liabilities | ||||||||
| Series F 8% Preferred Stock, | ||||||||
| Series G 8% Preferred Stock, | ||||||||
| Series I 8% Preferred Stock, | ||||||||
| Series K 8% Preferred Stock, | ||||||||
| Convertible secured promissory notes (Note 6) | ||||||||
| Convertible promissory notes, net of discount of $ | ||||||||
| TOTAL CURRENT LIABILTIES | ||||||||
| Long Term Liabilities | ||||||||
| Convertible promissory notes, net of discount of $ | ||||||||
| Lease liability, non-current | ||||||||
| TOTAL LONG TERM LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 13) | ||||||||
| Series J Convertible Preferred Stock, | ||||||||
| Series L Convertible Preferred Stock, | ||||||||
| Series M Preferred Stock, | ||||||||
| Series O 8% Convertible Preferred Stock, | ||||||||
| Series P Convertible Preferred Stock, | ||||||||
| Series Q 12% Convertible Preferred Stock, | ||||||||
| Series R 12% Convertible Preferred Stock, | ||||||||
| Series S 12% Convertible Preferred Stock, | ||||||||
| Series U Convertible Preferred Stock, | ||||||||
| Series W 12% Convertible Preferred Stock, | ||||||||
| Series Y Convertible Preferred Stock, | ||||||||
| SHAREHOLDERS’ DEFICIT | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Subscription payable for purchase of equipment | ||||||||
| Additional paid in capital - common stock | ||||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-3
ORIGINCLEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Audited)
| Twelve Months Ended | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Total Operating expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Other income | ||||||||
| Impairment of receivable from SPAC | ( | ) | ( | ) | ||||
| Gain on write off of loans payable | ||||||||
| Unrealized loss on investment securities | ( | ) | ||||||
| Preferred stock incentive compensation | ( | ) | ||||||
| Conversion and settlement value added to note purchase agreements | ( | ) | ( | ) | ||||
| Gain on redemption of common stock | ||||||||
| (Loss) gain on net change in derivative liability and conversion of debt | ( | ) | ||||||
| Interest and dividend expense | ( | ) | ( | ) | ||||
| TOTAL OTHER (EXPENSE) | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| BASIC AND DILUTED loss per share from continuing operations | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
ORIGINCLEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(Audited)
| TWELVE MONTHS ENDED DECEMBER 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||||||||||||||
| Preferred stock | Mezzanine | Common stock | Paid-in- | Subscription | Comprehensive | Noncontrolling | Accumulated | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Equity | Shares | Amount | Capital | Payable | loss | Interest | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Rounding | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash per equity financing agreement | - | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued upon conversion of convertible promissory note | - | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued at fair value for services | - | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series O Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Q Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series R Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series S Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series U Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series W Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Y Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Z Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series O Preferred stock dividends | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of settlement agreements | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for alternative vesting | - | |||||||||||||||||||||||||||||||||||||||||||
| Redemption of common stock for note purchase agreements | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Issuance of Series A and B Preferred stock granted to Series Y investors at fair value | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Reg A for cash | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series Y Preferred stock through a private placement | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series K Preferred stock for Series W Preferred stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series R Preferred stock for WODI secured convertible note | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Exchange of Series X Preferred stock for WODI secured convertible note | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Return of investment for Series Y Preferred stock | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
F-5
| TWELVE MONTHS ENDED DECEMBER 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock | Mezzanine | Common stock | Additional Paid-in- | Subscription | Other Comprehensive | Noncontrolling | Accumulated | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Equity | Shares | Amount | Capital | Payable | loss | Interest | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Rounding | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Shares redeemed/cancelled for Note Purchase Agreement | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Common stock issued for alternative vesting | - | |||||||||||||||||||||||||||||||||||||||||||
Common stock issued for preferred stock conversion incentive | - | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series O Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Q Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series R Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series S Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series W Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Y Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued at fair value for services | - | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series O Preferred stock dividends | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued through a Reg A to investors for cash | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuances of Series Y Preferred stock through private placement | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series F Preferred stock for Series Q preferred stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series K Preferred Stock for Series W Preferred stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Cancellation of subscription payable | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued through a Reg D to investors for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | - | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompany notes are an integral part of these unaudited consolidated financial statements
F-6
ORIGINCLEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Audited)
| Year Ended | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Common and preferred stock issued for services | ||||||||
| Common and preferred stock issued , related party | ||||||||
| Loss (gain) on net change in valuation of derivative liability | ( | ) | ||||||
| Impairment of SPAC common stock | ||||||||
| Stock based compensation expense, related party | ||||||||
| Stock-based compensation expense | ||||||||
| Loss on write off of investment | ||||||||
| Preferred stock incentive compensation expense | ||||||||
| Debt discount recognized as interest expense | ||||||||
| Net unrealized (gain) loss on fair value of securities | ( | ) | ||||||
| Impairment of receivable from SPAC | ||||||||
| Conversion and settlement value loss on WODI | ||||||||
| Gain on redemption of common stock | ( | ) | ( | ) | ||||
| Gain on write off of payable | ( | ) | ( | ) | ||||
| Loss on sale of asset | ||||||||
| Impairment of asset | ||||||||
| Change in Assets (Increase) Decrease in: | ||||||||
| Contracts receivable | ( | ) | ||||||
| Contract asset | ( | ) | ||||||
| Right of use asset | ||||||||
| Prepaid expenses and other assets | ||||||||
| Security deposit | ( | ) | ||||||
| Change in Liabilities Increase (Decrease) in: | ||||||||
| Accounts payable | ( | ) | ||||||
| Lease liability | ( | ) | ||||||
| Accrued expenses | ||||||||
| Contract liabilities | ||||||||
| Customer deposit | ( | ) | ||||||
| Warranty reserve | ||||||||
| Tax liability 83(b) | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||
| Purchase of SPAC notes payable | ( | ) | ( | ) | ||||
| Paid for investments | ( | ) | ||||||
| Payments received on long term asset | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments on loan payable, SBA | ( | ) | ( | ) | ||||
| Proceeds from line of credit | ||||||||
| Payments on line of credit | ( | ) | ( | ) | ||||
| Proceeds from loans, merchant cash advance | ||||||||
| Payments on loans, merchant cash advance | ( | ) | ( | ) | ||||
| Proceeds from loans, related party | ||||||||
| Payments on loans, related party | ( | ) | ||||||
| Equity financing through the purchase of common shares | ||||||||
| Net payments on cumulative preferred stock dividends | ||||||||
| Proceeds from convertible secured promissory notes | ||||||||
| Common stock issued for Reg A cash | ||||||||
| Common stock issued for Reg D cash | ||||||||
| Proceeds from issuance of warrants | ||||||||
| Net proceeds for issuance of preferred stock for cash - mezzanine classification | ||||||||
| Net cash provided by financing activities | ||||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALAENTS END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Interest and dividends paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS | ||||||||
| Common stock issued at fair value for conversion of debt, plus accrued interest, and other fees | $ | $ | ||||||
| Issuance of Series O dividends | $ | $ | ||||||
| Preferred stock converted to common stock - mezzanine | $ | $ | ||||||
| Exchange of Series R Preferred Stock for WODI secured convertible note | $ | $ | ||||||
| Exchange from liability to mezzanine | $ | $ | ||||||
| Common stock issued as settlement | $ | $ | ||||||
| Exchange of Series X Preferred Stock for WODI secured convertible note | $ | $ | ||||||
| Cancellation of stock payable | $ | $ | ||||||
| Adoption of ASC 842 | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-7
ORIGINCLEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
(Audited)
| 1. | Organization and line of business |
Organization
OriginClear, Inc. (the “Company”), incorporated in Nevada on June 1, 2007, focuses on developing innovative solutions in the water industry. The Company’s principal office is located at 13575 58th Street North, Suite 200, Clearwater, FL 33760.
Subsidiaries and Key Developments
Progressive Water Treatment, Inc. (“PWT”), acquired on October 1, 2015, specializes in engineered water treatment solutions and is a key revenue contributor. Modular Water Systems (“MWS”), launched in 2018, designs modular water wastewater treatment systems for decentralized applications and holds exclusive rights to five patents. Water on Demand, Inc. (“WODI”) formed in 2022, integrates multiple divisions to offer Design-Build-Own-Operate (DBOO) water services, focusing on pay-per-gallon water treatment solutions.
Line of Business
OriginClear’s mission is to develop businesses that address industrial water challenges. As the Clean Water Innovation Hub ™, we operate through: PWT, which provides custom-engineered water treatment solutions. MWS, which develops proprietary modular water treatment solutions. WODI, a development-stage business offering outsourced water treatment services under a DBOO model.
On April 13, 2022, the Board of Directors approved the spin off its WOD business into a wholly owned subsidiary, WODI. WODI manages project selection, qualification, financing and long-term management of DBOO service contracts, including assets, contracts, clients, investors, and strategic partners.
Going Concern
The consolidated financial statements are prepared on a going concern assuming continuing operations. However, due to recurring losses and limited cash resources, the Company’s auditors have expressed substantial doubt about its ability to continue as a going concern.
To address this, management is actively seeking funding through convertible notes and preferred stock offerings while leveraging revenues from existing purchase orders and outstanding invoices. While management believes these efforts will support operations, there is no assurance that financing will be available or sufficient. Future financing may involve restrictive covenants or result in shareholder dilution.
| 2. | Summary of significant accounting policies |
This summary provides clarity on the preparation and presentation of the Company’s consolidated financial statements. Management is responsible for their accuracy, integrity, and objectivity. The accounting policies comply with generally accepted accounting principles in the United States of America (“GAAP”) and are applied consistently.
Principles of consolidation
The consolidated financial statements include the accounts of OriginClear, Inc. and its subsidiaries: WODI, PWT, MWS, Water on Demand #1., and OriginClear Technologies, Ltd. All material intercompany transactions and balances are eliminated in consolidation.
F-8
Cash and cash equivalents
The Company classifies all highly liquid investments with original maturities of three months or less as cash equivalents.
Concentration risk
Cash balances may, at times, exceed Federal Deposit Insurance Company
(FDIC) limits. As of December 31, 2024, the Company held a cash balance of $
Use of estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities. Significant estimates include impairment and valuation of long-lived assets, revenue recognition on percentage-of-completion contracts, allowances for uncollectible accounts, warranty reserves, inventory valuation, derivative liabilities and conversion features, fair value of investments, non-cash stock issuances, and valuation allowances on deferred tax assets. These estimates are based on historical data and reasonable assumptions. Actual results may differ under different conditions.
Net earnings (loss) per share
Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share adjusts the denominator to include the effect of potentially dilutive securities such as stock options, warrants, or convertible instruments, if their inclusion is dilutive.
For the years ended December 31, 2024, and 2023, diluted earnings per share was the same as basic loss per share, as the inclusion of potential common shares would have been anti-dilutive due to the Company’s net loss.
Loss per share
| For the Twelve Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Loss to common shareholders (Numerator)- continuing operations | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average number of common shares outstanding (Denominator) | ||||||||
The Company excludes issuable shares from warrants, convertible notes and preferred stock, if their impact on the loss per share is anti-dilutive and includes the issuable shares if their impact is dilutive.
| Anti-dilutive shares | Dilutive shares | |||||||
| December 31, 2024 | ||||||||
| Warrant shares | ||||||||
| Convertible Preferred Stock | ||||||||
| Convertible Notes | ||||||||
| December 31, 2023 | ||||||||
| Warrant shares | ||||||||
| Convertible Preferred Stock | ||||||||
| Convertible Notes | ||||||||
F-9
Revenue recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when control of the promised goods or services is transferred to the customer, which occurs either at a point in time or over time, depending on the nature of the performance obligations in the contract. For product sales, revenue is recognized at the time of shipment, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. For construction contracts, revenues and related costs are recognized as performance obligations are satisfied over time. Under ASC 606, revenue and associated profit are recognized as the customer obtains control of the goods and services promised in the contract.
All un-allocable indirect costs and corporate general and administrative expenses are charged to operations as incurred. If a loss on a contract is anticipated, it is recognized immediately in the period when the loss is determined. Revisions to cost and profit estimates during the course of a contract are reflected in the accounting period in which the facts supporting such revisions become known. These adjustments may arise from changes in job performance, job conditions, estimated profitability, contract penalty provisions, or final contract settlements.
Contract receivables are recorded for amounts currently due based on progress billings, as well as retention amounts collectible upon completion of the contract. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based on work completed or materials received, including retention amounts payable upon contract completion. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs.
Contract receivables
The Company bills customers progressively as work is completed per contractual agreements. Credit is extended based on financial evaluations, with no collateral required. The Company maintains an allowance for doubtful accounts based on past-due receivables reviewed monthly. An allowance is recorded when collection is unlikely.
As of December 31, 2024, and 2023, the allowance for doubtful accounts
was $
Indefinite lived intangibles and goodwill
The Company accounts for business combinations under ASC 805, Business Combinations, using the acquisition method. The purchase price is allocated to tangible and identified intangible assets and liabilities based on estimated fair values. Adjustments to these allocations may occur within one year of acquisition if new information arises. Goodwill is recorded for any excess purchase price over the fair value of net assets acquired.
Indefinite-lived intangibles and goodwill
are tested for impairment annually in Q4 or whenever indicators suggest the carrying amount
may not be recoverable. During 2024, the Company determined that the OriginOil
Trademark, initially recorded as an indefinite-lived intangible, was no longer in use and had been formally abandoned. As a result,
a full impairment charge of $
As of December 31, 2024, and 2023, after considering the impairment of the OriginOil Trademark, the Company performed a qualitative assessment of remaining indefinite-lived intangibles and goodwill and concluded no further impairment was necessary for either year.
F-10
Prepaid expenses
The Company records advance payments
for goods and services as prepaid expenses, initially recognizing them as assets with future
economic benefits. These amounts are expensed when the benefits are realized. As of December 31, 2024,
and 2023, the prepaid expenses balance was $
Advertising costs
Advertising and promotional expenses
are recognized as incurred. Advertising costs for the years ended December 31, 2024, and 2023,
were $
Property and Equipment
Property and equipment are recorded
at cost. Gains or losses on disposals are recognized upon removal of the asset and its accumulated depreciation. Maintenance and repair
costs are expensed as incurred, while additions and improvements are capitalized.
| Estimated Life | ||
| Machinery and equipment | ||
| Furniture, fixtures and computer equipment | ||
| Computer software | ||
| Vehicles | ||
| Leasehold improvements |
| December 31, 2024 | December 31, 2023 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Computer equipment and software | ||||||||
| Vehicles | ||||||||
| Demo Units | ||||||||
| Furniture and fixtures | ||||||||
| Gross property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | $ | $ | ||||||
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If impairment indicators are present, recovery is assessed in accordance with GAAP.
Depreciation is recorded using the
straight-line method over the asset’s estimated useful life. Depreciation expense for the years ended December 31, 2024, and 2023,
was $
Leases
The Company accounts for leases in accordance with ASC 842, Leases. At lease inception, the Company determines whether an arrangement contains a lease. Operating leases are recorded as Right-of-Use (ROU) assets, current lease liabilities, and non-current lease liabilities on the balance sheet.
ROU assets represent the Company’s right to use an asset for the lease term, while lease liabilities reflect the obligation to make lease payments. These amounts are recognized at lease commencement, measured at the present value of lease payments using the incremental borrowing rate, as the implicit rate is not readily determinable.
F-11
Lease expense is recognized on a straight-line basis over the lease term. Short-term leases (12 months or less) are not recorded as ROU assets or lease liabilities, provided no purchase option is reasonably certain to be exercised. Certain leases contain variable payments (e.g., inflation adjustments, usage-based costs), which are expensed as incurred and not included in the initial lease liability measurement.
Further details on leases, including future payments, and liabilities, are provided in Footnote 3 - Leases.
Assets Held for Sale
As of December 31, 2022, the Company
held real property for sale, initially recorded at $
In January 2023, the Company accepted
a $
As of June 30, 2023, a receivable
of $
Stock-Based Compensation
The Company issues stock options and warrants to employees and non-employees as compensation for services and financing costs.
For employees, stock-based compensation is recognized in accordance with FASB guidance, measured on the grant date and expensed over the vesting period.
For non-employees, stock-based compensation follows FASB guidance, with valuation determined on the measurement date, which is either when a performance commitment is reached or when performance is completed. Non-employee stock-based compensation is generally amortized on a straight-line basis over the vesting period. If no future performance is required, the option grants vest immediately, and the full expense is recorded in the period of measurement.
Commitments and Contingencies
During the current fiscal year, the Company identified a customer deposit
liability of $
Additionally, the Company identified
a misstatement in fixed assets related to Machinery and Equipment
sold to Dwight Barber, later resold to Ryan Kooistra,
but still reflected on the balance sheet. After review, the asset was derecognized, and a $
Furthermore, the Company identified
an unlocated fixed asset under a capital lease with LEAF,
initially recorded on January 1, 2018. After an asset verification process, the equipment was
determined to be no longer in possession or use. As a result, the Company derecognized the asset,
removing the $
F-12
Accounting for Derivatives
The Company evaluates all financial instruments for derivative features. Derivative liabilities are initially recorded at fair value and revalued at each reporting date, with changes recognized in the statements of operations.
For stock-based derivatives, the Company uses a probability-weighted binomial lattice option pricing model to determine fair value at inception and subsequent valuation dates.
Classification as liability or equity is reassessed at each reporting period, with liabilities classified as current or non-current based on expected settlement within 12 months.
Fair Value of Financial Instruments
The Company discloses fair values of financial instruments where practicable. As of December 31, 2024, the reported balances for cash, contract receivables, costs in excess of billings, prepaid expenses, accounts payable, billings in excess of costs, and accrued expenses approximate fair value due to their short maturities.
The Company applies ASC Topic 820, Fair Value Measurement, which defines fair value as the price in an orderly transaction between market participants at the measurement date. ASC 820 establishes a hierarchy prioritizing valuation inputs:
| ● | Level 1, Observable inputs such as quoted prices for identical instruments in active markets. | |
| ● | Level 2, Inputs other than quoted prices in active markets, including quoted prices for similar assets in less active markets. | |
| ● | Level 3, Unobservable inputs requiring significant assumptions. |
As of December 31, 2024, the Company
held an investment in Water Technologies International Inc. (“”), classified as a Level 1 equity security measured at
fair value. The fair value of the investment was $
Although classified as Level 1, the Company notes that WTII shares trade at a sub-penny level with low market capitalization and thin trading volume, which may limit liquidity and increase price volatility. Additionally, while WTII has made recent SEC filings, prior delays in regulatory compliance could impact market confidence and trading activity.
The Company monitors the fair value classification and will reassess if circumstances warrant a change in classification or impairment recognition. As of December 31, 2024, no impairment was recorded, as the investment remains actively traded with a quoted market price.
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis and their classification within the fair value hierarchy as of December 31, 2024, and 2023.
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Investment at fair value-securities, December 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Investment at fair value-securities, December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Derivative Liability, December 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Derivative Liability, December 31, 2023 | $ | $ | $ | $ | ||||||||||||
As of December 31, 2024, the derivative liabilities on the Company’s
balance sheet consist of $
F-13
The following table presents the reconciliation of the measured at fair value using level 3 inputs for the year ended December 31, 2024:
| Balance as of January 1, 2024 | $ | |||
| Net gain on conversion of debt and change in derivative liabilities | ||||
| Balance as of December 31, 2024 | $ |
For purpose of determining the fair market value of the derivative liability, the Company used Binomial lattice formula valuation model. The significant assumptions used in the Binomial lattice formula valuation of the derivative are as follows:
| 12/31/2024 | 12/31/2023 | |||
| Risk free interest rate | ||||
| Stock volatility factor | ||||
| Weighted average expected option life | . | .5 – | ||
| Expected dividend yield |
Segment Reporting
The Company has determined that it operates as a single reporting unit under ASC 280, Segment Reporting.While the Company the monitors the performance of three distinct operating segments– PWT, MWS and WODI – these segments share common economic characteristics, products and services, and customers. As a result, they are aggregated into a single reportable unit for financial purposes.
The Company’s CEO serves as the Chief Operating Decision Maker (“CODM”) and regularly reviews financial results to assess performance and allocate resources across the operating segments.
Marketable Securities
The Company follows ASU 2016-01, Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities. Under this standard, investments not accounted for under the equity method or resulting in consolidation are measured at fair value, with changes recognized in net income.
The standard requires the use of the exit price notion for fair value measurements and mandates separate presentation of financial assets and liabilities by measurement category and form. It also eliminates the requirement to disclose methods and significant assumptions used for financial instruments measured at amortized cost.
The Company classifies its investment in Water Technologies International, Inc. as available-for-sale securities, with unrealized gains recognized in net income.
Licensing agreement
The Company evaluated its licensing agreement under ASU 606 to determine revenue recognition timing. The licensing of intellectual property (IP) is distinct from non-license goods or services, possessing significant standalone functionality that provides value to a customer. Since this functionality will not change due to the licensor’s activities during the license period, revenue is generally recognized upon delivery of the license.
Reclassification
Certain prior period amounts have been reclassified to conform to the current period presentation due to the removal of discontinued operations. These reclassifications ensure consistency and comparability across periods. Importantly, these adjustments had no material effect on the previously reported financial position, results of operations, or cash flows.
This update aligns with the changes in financial statement presentation resulting from exclusion of discontinued operations in the current year’s reporting.
F-14
Work-in-Process
The Company records work-in-process as an asset, representing accumulated costs for ongoing projects expected to be delivered to customers. These costs include materials and direct labor associated with the construction of equipment intended for sale.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 820); which enhances annual and interim segment disclosures. The Company adopted ASU 2023-07 for the year ended December 31, 2024. The Company has disclosed the title and role of the CODM, the nature of financial information reviewed by the CODM, and the basis for aggregating operating segments into a single reporting segment. See Footnote 14 – Segment Reporting, for further information.
| 3. | Leases |
The Company leases a production facility at 5225 W Houston Sherman, Texas, under a non-cancelable operating lease classified in accordance with ASC 842, Leases. The lease commenced on July 1, 2024, with a 61-month term. Under a Triple Net (NNN) arrangement, the Company is responsible for property taxes, insurance and maintenance costs.
Right-of-Use (ROU) Asset and Lease Liability
At lease commencement, the Company
recorded a ROU asset and corresponding lease liability, both measured at the present value of lease payments over the lease term, discounted
at an incremental borrowing rate of
The ROU asset is amortized on a straight-line basis over the lease term, while the lease liability is reduced using the effective interest method, with each lease payment allocated between interest expense and principal reduction.
Lease balances as of December 31, 2024
The components of lease-related assets and liabilities as of December 31, 2024:
| Description | Amount | |||
| Right of Use Asset, net | $ | |||
| Lease liability - current portion | ||||
| Lease liability - non-current portion | ||||
| Total lease liability | $ | |||
Lease Expense
For the year ended December 31, 2024, the Company recognized lease-related expenses in COGS, as the leased facility is directly related to production:
| ● | Amortization of ROU Asset $ |
| ● | Interest expense on Lease Liability $ |
F-15
Future Minimum Lease Payments
Future minimum lease payments as of December 31, 2024, are as follows:
| Period | Amount | |||
| Year 1 | $ | |||
| Year 2 | ||||
| Year 3 | ||||
| Year 4 | ||||
| Year 5 and thereafter | ||||
| Total Lease Payments | $ | |||
| Less: Present Value Discount | ( | ) | ||
| Total Lease Liability | $ | |||
Other Lease Disclosures
The Company has no significant options to extend or terminate the lease beyond its contractual terms. The lease agreement does not include any purchase options or residual value guarantees.
| 4. | Equity |
OriginClear, Inc. Preferred Stock
Series C
On March 14, 2017, the Board of Directors
authorized the issuance of
Series D-1
On April 13, 2018, the Company designated
As of December 31, 2024,
Series F
On August 14, 2018, the Company designated
During the year ending December 31, 2024, the Company exchanged
As of December 31, 2024,
Series G
On January 16, 2019, the Company designated
As of December 31, 2024,