RAKR 10-K
Rainmaker Worldwide Inc. (RAKR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| (Mark One) |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended |
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from [—Date—] to [—Date—] |
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
☐
As
of June 30, 2021, the aggregate market value of the voting common equity held by non-affiliates was approximately $
The registrant had shares of common stock, par value $0.001 per share, outstanding as of March 31, 2022.
DOCUMENTS INCORPORATED BY REFERENCE
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
This annual report on Form 10-K (“Form 10-K”) of Rainmaker Worldwide Inc. (the “Company”) includes statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, these forward-looking statements can be identified by the use of such terms as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or the negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Form 10-K and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned discovery and development of drug candidates, the strength and breadth of our intellectual property, our ongoing and planned preclinical studies and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, the degree of clinical utility of our product candidates, particularly in specific patient populations, expectations regarding clinical trial data, our results of operations, financial condition, our available cash, liquidity, prospects, growth and strategies, impacts of the ongoing coronavirus (COVID-19) pandemic, the length of time that we will be able to continue to fund our operating expenses and capital expenditures, our expected financing needs and sources of financing, the industry in which we operate and the trends that may affect our industry or us.
By their nature, forward-looking statements involve risks and uncertainties because they relate to the occurrence and timing of events or circumstances, many of which are beyond the control of the Company As a result of these, we cannot assure you that the forward-looking statements in this Form 10-K will prove to be accurate. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-K, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Form 10-K. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Form 10-K, they may not be predictive of results or developments in future periods.
Some of the material factors that we believe could cause actual results to differ from those anticipated or predicted include:
| ● | potential effects of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations, and our ability to continue operations in the same manner as previously conducted prior to the macroeconomic effects of the COVID-19 pandemic; |
| ● | the successful development and implementation of our sales and marketing campaigns; |
| ● | the size and growth of the potential markets for our product candidates and our ability to serve those markets; |
| ● | regulatory developments in the United States and other countries; |
| ● | our available cash; |
| ● | the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; |
| ● | our ability to obtain additional funding; |
| ● | our ability to manufacture and the performance of third-party manufacturers; |
| ● | our ability to identify license and collaboration partners and to maintain existing relationships; and |
| ● | our ability to successfully implement our strategy. |
You should also read carefully the factors described in the “Risk Factors” section of the Form 10-12GA. Any forward-looking statements that we make in this Form 10-K speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Form 10-K except as required by the federal securities laws.
This Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.
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PART I
| Item 1. | Business |
Background
Rainmaker Worldwide Inc. (“RAKR”, the “Company”, “we”, “us” or “our”) is a Nevada corporation originally formed on February 27, 1998. The corporation became RAKR on July 3, 2017 in a reverse merger. We are currently developing Water-as-a-Service (“WaaS”) projects in various locations around the globe. We are implementing these projects using proprietary technology of our former subsidiary based in the Netherlands, Rainmaker Holland B.V. (“RHBV”). The Company retains a 12% ownership stake in RHBV. RAKR retains access to the technology based on a cost-plus formula, which was negotiated in an exclusive WaaS Distribution Agreement with RHBV.
Rainmaker Worldwide Inc. (Ontario) (“RWI”), an Ontario Corporation, was formed in Peterborough, Ontario, Canada on July 21, 2014, under the Ontario Business Corporations Act to finance and commercialize patented technology and to consolidate the assets, intellectual property, and executive management expertise of Dutch Rainmaker B.V. (“DRM”). RWI is a wholly owned subsidiary of the Company. DRM was originally started by Piet Oosterling as a technology company focused on delivering decentralized water solutions to water scarce regions in the world. In his lifetime, Mr. Oosterling wrote and commercialized over 400 patents. His wealth of knowledge and expertise continues to inspire and guide the Company’s executive management team and policy, our distribution partners, and RHBV.
On July 3, 2017, RWI shareholders completed a share exchange with the Company (the “Merger”) pursuant to a share exchange agreement dated June 28, 2017 (the “Share Exchange Agreement”) among the Company, RWI and RWI’s 45 shareholders at the time. Upon completion of the Merger, and in accordance with the terms and provisions of the Share Exchange Agreement, the Company acquired an aggregate of 9,029,562 common shares of stock in the capital of RWI from the RWI Shareholders (being all of the issued and outstanding shares of RWI) in exchange for an aggregate of 66,818,759 restricted shares of the Company’s common stock, or 7.4 shares for each share of RWI. Therefore, RWI became a wholly owned subsidiary of the Company effective July 3, 2017. The Company’s former name, Gold and Silver Mining of Nevada, Inc. (“CJT”) was changed on April 24, 2017, in expectation of and conditional upon completion of the Merger. The Merger was accounted for as a reverse acquisition with RWI considered the accounting acquirer since the former RWI shareholders remained in control of the combined entity after the consummation of the transaction. As part of the Merger, net liabilities of $235,495 were recognized on the Company’s balance sheet. As a result of the Merger, the Company traded on the OTC Pink, but as of March 17, 2022 the Company now trades on the OTCQB continuing to trade under the symbol, RAKR.
On July 15, 2020, Sphere 3D Corp. (NASDAQ: ANY) announced that it entered into a definitive merger agreement pursuant to which it would have acquired all the outstanding securities of Rainmaker Worldwide Inc. Upon closing, Sphere 3D’s name would have changed to Rainmaker Worldwide Inc., and its business model would focus on WaaS. Rainmaker management would have assumed operational leadership of the combined entity. The transaction was subject to completion of an equity financing, or series of financings, for a minimum of US$15 million at a share price to be mutually agreed prior to closing and such other customary regulatory and shareholder approvals, including the approval of NASDAQ. Closing was originally expected to occur prior to December 31, 2020, but was subject to extension to February 28, 2021, under certain circumstances if mutually agreed by the parties. As part of this process, Sphere 3D agreed to advance US$1.85 million to Rainmaker by way of a secured convertible note for Rainmaker to sustain multiple growth initiatives. The funds were used to fulfill recent contracts and expand its equipment production capacity. This note remains payable and is presented in RAKR’s financial statements. Due to various transactional and regulatory complications the agreement was ultimately terminated on February 12, 2021 and was subsequently announced publicly.
As a result of the incomplete Sphere 3D transaction, on March 31, 2021, the Company, including RWI, entered into a business agreement with RHBV, DRM and Wind en Water Technologie Holding B.V. (“WWT”). These companies were considered related parties on that date by virtue of stock ownership exceeding 10%. The parties agreed to an exchange of contractual obligations, debt owed, and shares of common stock in full settlement of all obligations among the parties. The resultant Financial Statements, in accordance with ASC 205-20-45-1E, reflect the impact of these exchanges to the Company. The Company and RHBV decided to restructure in order to optimize business operations and broaden access to the capital markets. The Company and RHBV, as mutual shareholders in each other’s company, continue to pursue the mission and objective of providing low-cost water to communities and commercial entities in need of water solutions.
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The Company operates out of its head office based in Peterborough, Ontario, Canada. In support of its WaaS project implementation strategy, the Company will utilize two main types of energy-efficient, fresh water-producing/purification technologies: (1) Air-to-Water (“AW”), which harvests fresh water from humidity and heat in the atmosphere, and (2) Water-to-Water (“WW”), which transforms seawater or polluted water into drinking water. The technologies can be wind driven, solar based, or can use conventional power sources, such as grid or generator. It is deployable anywhere and leaves no carbon trace if renewable resources are deployed.
The Company’s current and ongoing focus is to deliver WaaS, i.e., selling water directly to the customer on a per liter basis, using the two Rainmaker technologies discussed above or other complementary technologies acquired or licensed by the Company. This focus shall be administered by forming local joint venture partnerships (“JV”) where demand exists with profitable pricing scenarios. The JVs will in turn own the water delivery system and related equipment. In most if not all cases, RAKR expects to have ownership stakes in JVs. Ownership percentages will typically be determined by the relative contribution of the stakeholders.
The Company has concurrently planned various WaaS projects in Turks and Caicos and other Caribbean countries. Moreover, although there can be no assurance, our business development activities are expected to yield more commercial contracts in 2022. The implementation dates have continuously shifted due to logistical and supply chain issues related to Covid-19. Principally, WaaS involves the selling of produced (AW) or purified water (WW) on a per liter basis either in a bottle for drinking or in bulk for industrial and commercial services. This commercial activity requires the Company to deliver operational, maintenance, marketing and sales expertise in combination with local partners in most dealings. Usually, projects often require working with complementary technology for post treatment of water and mineralization in tandem with bottling plants and renewable energy businesses. Additional commercial activities include but are not limited to the integration of the foregoing technologies and post implementation operation and maintenance-based functions.
In the Caribbean, locations have been identified and operating plans defined. We have an AW machine being tested in the Netherlands and expect delivery by Q3 2022. Specifically, locations have been identified and operating plans defined for Turks and Caicos.
The Company has generated limited revenue up until the present time, and its operations for the past three years have been typically focused on business development, market research, technology research and development activities. The Company, on a consolidated basis, had total assets of $2,558,279, as of December 31, 2020. As of December 31, 2021, net assets were $344,341, reflecting the impact of restructuring in connection with the previously held RHBV. The ultimate effect of the restructuring has eliminated $2,958,497 in debt, which we believe will aid us in facilitating the future expected financing needs of the Company. Furthermore, 20,238,606 shares of common stock were returned to the corporate treasury in exchange for the cancelation of royalty agreements and all obligations therein.
At present, the Company executes consulting agreements with experienced executive personnel and senior advisors. Sales are heavily driven by independent distributors and project developers. The Company had no revenue for the years ending December 31, 2021 and 2020 and had net losses of $2,725,465 and $22,645,796 for the years ended December 31, 2021 and 2020, respectively. A large proportion of the 2021 losses relate to uncustomary expenses associated with the restructuring ($467,118 amortization of debt discount and non-recurring consultancy expenses of $587,500 as well as losses from equity investments ($112,000) and write-down of inventory ($219,701)). The losses associated with discontinued operations ($333,733) are not expected to reoccur in future years. The total of these expense categories is $1,720,052 or 63.1% of the net loss. The Company has suffered recurring losses from operations, negative cash flows from operating activities and has limited resources or revenues to cover its operating costs. The Company’s auditor’s report for 2021 stated that there was substantial doubt about the Company’s ability to continue as a going concern.
Impact of COVID-19
On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic.
As a global corporation the economic effects within the Company’s environment have been substantial. In global markets, disruptions in supply chains and increases in related costs have had a real impact on our ability to deliver WaaS projects. Measures being introduced at various levels of government to curtail the spread of the virus (such as travel restrictions, closures of non-essential municipal and private operations, imposition of quarantines and social distancing) have had a material impact on the Company’s operations. The extent of the impact of this outbreak and related containment measures on the Company’s operations cannot be reliably estimated at this time but at the same time the impact has been significant since the declaration of the pandemic two years ago. For the Company, it is particularly disruptive because of limitations on our business development and engineering experts to travel and implement projects. As global operations open, we expect that we will begin to track according to the original business plan.
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Products and Services
Overview
Across the world, fresh water is unevenly distributed. Many regions are desperately under-served, including North Africa, the Middle East, India, Mexico, large portions of South America, and various island geographies.
Fundamentally, the WaaS solutions are based on deploying technology with the following attributes to ensure low-cost delivery and Company profitability:
| ● | Versatile | |
| ● | Scalable & Cost-effective | |
| ● | Environmentally & Socially Sustainable | |
| ● | Applying Proprietary Technology through partners and affiliates |
Air-to-Water (AW) – Harvests fresh water from airborne humidity by using advanced heating and cooling technologies
Water-to-Water (WW) – Transforms contaminated water (saltwater, sewage, polluted) into safe, clean water by using an environmentally sustainable process called Multi-Effect Membrane Distillation.
The operating efficiency of these technologies allows us to provide customers with clean water at a price that is highly competitive relative to traditional alternatives. We substantially out-perform peer competitors because we can deploy remotely where the water is consumed and using up to 50% less power than those same competitors. The compact and scalable systems for AW and WW enable decentralized deployment, in which water is distributed directly to the consumption site with no expensive piping or truck transport. AW and WW are both cost-effective technology solutions and can be powered by solar, wind, or grid electricity, or a combination of power sources. They can produce roughly 5,000 to 150,000 liters of water per unit, per day, depending on the local conditions and the type of unit deployed.
Cost Information
With the core focus on WaaS delivered on a per liter basis, the relevant Cost Information is the cost per liter of alternative suppliers. Currently in remote locations, the principal source of supply is bottled water. Accordingly, our solutions are optimally profitable when we compete head-to-head with bottled water that is transported or bulk water that is transported by truck to local communities. In most remote communities where this water is imported, the minimum cost per liter is US$0.30 reaching as high as US$2.00, according to our market research. The Company’s fully amortized cost of water per liter through our distributed WaaS model and distribution agreement with RHBV, bottling, operating and maintenance, distribution and other costs allows us to compete profitably to generate corporate value beneficial to our shareholders. The market for distilled water supported in part by WW-based technology, which is essential to more specialized industrial or commercial activities, is expected to increase margins significantly.
Regulatory Information
The global nature of our approach means that regulatory conditions vary by jurisdiction. We believe that the ultimate test of profitability in this complex, cross-jurisdictional environment will be the quality of the water that is bottled and tested. The Company seeks to adhere to World Health Organization standards for clean water using the technologies that are authorized in a particular sovereign jurisdiction.
WaaS Recurring Revenue Model
The RAKR business model begins with the identification of a trusted local partner. The next step is to enter into JV structures, which maximize value to all stakeholder-parties.
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The Rainmaker delivery systems are to be installed by entering contracts with local third-party experts that are typically Heating, Ventilation and Air Conditioning (“HVAC”) experts.
The RAKR model charges a market determined price per liter of bottled water or similarly treated water. Revenue sources include bottled water, bulk water, and industrial water. A representative project in the Caribbean currently under development is expected to generate $110,000 dollars in revenue per month once seven allocated machines are operational. The capital expenses for the project are roughly $650,000 and the payback is less than one year. This representative project reflects the project profile that we will be seeking in the future.
We believe the value we will offer through our WaaS projects is based on the following factors:
| (1) | There are no upfront costs to the customer. | |
| (2) | Capital costs are borne through the JVs and other partnerships. Only end-consumers of the water pay on a per liter basis. | |
| (3) | The combination of (1) and (2) above make it economically viable to deploy in communities that do not have the resources or network infrastructure to independently finance projects that require high amounts of financial capital. |
Potential Improvements
Potential improvements and related applications that we are pursuing or plan to pursue include the following:
| (1) | Seek more strategic and technology-based partnerships with complementary technology and business development companies to expand our global reach and service offering. | |
| (2) | Work with RHBV to identify relevant technological advances based on lessons learned from previously implemented projects to reduce total costs and enhance net profits. |
Market Opportunity
In the past ten years, there has been a growing awareness of the shortage of fresh water—and the associated economic and social effects the problem magnifies in impoverished and underdeveloped communities. Entities ranging from Water.Org to the United Nations (access to safe drinking water represents #6 of the 17 Sustainable Development Goals articulated by the United Nations) are at the forefront of driving international policy momentum and prospects for multilateral cooperation in the realms of global governance and public-private co-regulation. Common to these efforts is the search for scalable and practical solutions that possess applications uniquely suited to the problem of shortage.
The metrics that underpin the international need for ingenuity and action are the same as those that animate and sustain the market opportunity for our Company:
| (1) | Less than 3% of the world’s water is fresh – the rest is seawater and undrinkable in its current state. | |
| (2) | Of this 3%, over 2.5% is frozen and locked up in Antarctica, the Arctic and glaciers. | |
| (3) | People and animals rely on 0.5% of the world’s water. (Source: Unwater.org - Facts and Trends: Water) |
Moreover, at any moment, the atmosphere contains approximately 37.5 million billion gallons of water. This potential is not currently harvested by the means of private organizations or government institutions and thus presents a significant opportunity for AW technology to satisfy worldwide demand for water.
The World Health Organization estimates that 50 liters of water per day is required per individual to meet basic needs. It is estimated by the OECD that by 2030 nearly half of humanity will be living in a condition of severe water stress. Currently, according to UNICEF, 2.2 billion people around the globe lack safe drinking water. While high-income countries only treat 70% of wastewater, low-income countries treat 8%. With the world’s population expected to reach 9 billion by 2038, the global need is indisputably high. Much of the population expansion is or will be in the very areas that are already suffering from the problem of water scarcity.
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The above analysis points to a global market for water that is extraordinarily immense. Today, the annual global water market for all purposes and uses is $650 billion and is expected to expand to $1 trillion by 2025. (Source: RobecoSAM Study (2015, June). Water: the market of the future). Applying RAKR’s approach against the purposes and uses defined above, our solutions are tailored to meet roughly 70% of that global level of demand.
Current Projects
Representative existing projects reside within the Caribbean and specifically Turks and Caicos.
Suppliers
As stated previously, our principal supplier for the core technologies to be deployed is RHBV. RHBV in turn has built a global supply chain for its components. Should RHBV not supply the appropriate scale of technology required by a project, RAKR has identified multiple technologies of different sizes and types.
Supplemental technology (i.e., bottling, pre-post wastewater treatment, mineralization solutions, and renewable energy) – suppliers are global, abundant, and highly competitive so as to ensure the lowest cost per liter for any given WaaS project planned implemented by the Company.
Competition
The Rainmaker WaaS-focused business model that will deliver potable water at the source of demand is uniquely positioned to address alternative competitive models. We believe that competitive models, while relevant and plausible alternatives, will not ultimately fully support the global level of demand for water at a reasonable price per liter. In virtue of our current affiliations, we believe we have a cost per liter competitive advantage. Accordingly, on a global basis, we do not believe competitive conditions will thwart our ability to produce long-term, corporate value or significantly diminish our financial results in the near term. However, other companies with sufficiently greater resources may develop competing products and have an advantage over us based on the relative size.
Government Subsidies and Incentives
While RAKR is not currently pursuing subsidies and incentives, we believe that over time such programs will be applicable to the Company, and we will pursue them in due course.
Over time, RAKR will seek subsidies and incentives through its deployment of WaaS in underserved countries and particular communities within countries. One example is First Nations in Canada where there is an ongoing and desperate shortage of safe drinkable and general-purpose water.
Intellectual Property
We have indirect access to considerable intellectual property assets as a consequence of our partial ownership of and various partnerships with RHBV. We believe that this allows us to maintain an edge in the competitive process from a technology and economic cost perspective.
Company Executive and Consulting Resources
The direct Executives of RAKR are represented by Michael O’Connor, Director, Executive Chairman and CEO and Kelly White, VP of Finance. These resources are sourced through consulting agreements.
We have an extended sales force through our distribution partners. Currently we have distribution partners with global reach.
Legal services are provided by Sichenzia Ross Ference LLP since November 2017.
M&K CPAS PLLC has served as the Company’s auditor since 2020.
| Item 1A. | Risk Factors |
Investing in our common stock involves risks. Each of these risks as well as other risks and uncertainties not presently known to us or that we currently deem immaterial could adversely affect our business, results of operations, cash flows and financial condition and cause the value of our common shares to decline, which may result in the loss of part or all of your investment.
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Risks Related to our Business
RAKR has a limited commercial operating history, which makes the evaluation of its future business prospects difficult.
The Company has only recently commercialized its business to deploy its WaaS service model using AW and WW technologies. Consequently, the Company has limited operating history and an unproven marketing and sales strategy. Our primary activities to date, prior to restructuring in Q1 2021, have been the research and development of intellectual property and technology assets and identifying prospective global clients that management believes would operationalize our WaaS delivery model. As such, we may not be able to achieve positive cash flows and our lack of operating history makes evaluation of our future business and investment prospects difficult. Moreover, the Company has generated only limited revenues to date. The Company’s success is dependent upon the successful development and implementation of suitable water projects and establishing its water production technology capabilities in a variety of complex environmental crises worldwide. Any future success that we might achieve will depend upon various factors, including factors beyond our control that cannot be predicted at this time. These factors may include but are not limited to:
| ● | weather conditions in the areas we serve; | |
| ● | the economies of the countries in which we conduct business; | |
| ● | our relationships with the governments, water utility, and/or companies we serve; | |
| ● | water regulatory matters of the countries in which we conduct business; | |
| ● | our ability to successfully enter new markets; | |
| ● | changes in or increased levels of competition in the water sector; and | |
| ● | the market price of and the uses for water in an international landscape. |
Our independent registered public accounting firm has issued an unqualified opinion on our financial statements with a “going concern” paragraph.
Our independent registered public accounting firm’s opinion on our Fiscal 2021 financial statements has a “going concern” explanatory paragraph. Such an opinion may make parties reluctant to extend trade credit to us or raise capital and thereby make it more difficult for us to conduct our business operations. In addition, such an opinion from the independent registered public accounting firm may also make third parties reluctant to do business with us or to invest funds in our company, thereby raising difficulties for us in the conduct of our business.
Relatively new to commercialization, the Company is unable to predict future revenues which makes an evaluation of its business speculative.
Because of the Company’s current business focus, lack of operating history, the introduction of its new WaaS approach using technology with limited deployments, and early-stage marketing strategy, its ability to accurately forecast revenues is difficult. Future variables to the WaaS strategy are related to the market for water itself; the price of water in international markets; and the creation and maintenance of a significant and reliable customer base. To the extent we are unsuccessful in establishing our business strategy and generating revenues from our WaaS projects, we may be unable to appropriately adjust spending in a timely manner to compensate for any unexpected revenue shortfall or will have to reduce our operating expenses, causing us to forego potential revenue-generating activities, either of which could have a material adverse effect in our business, results of operations, and overall financial condition.
RAKR expects its operating expenses to increase in the future with no assurance that revenues will be sufficient to cover those expenses, which could delay or prevent RAKR from achieving profitability.
As our business grows and expands, RAKR expects to have substantial planned capital expenditures in order to facilitate and maintain strategic distribution channels and key relationships. We expect our cost of revenues, business development, marketing, sales, operational, general, and administrative expenses to continue to increase. If revenues do not increase to correspond with these increased expenses or if outside capital is not secured, there may be a material adverse effect on our business, cash flow, and overall financial condition.
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If the Company fails to raise additional external capital to fund its business growth and project development, the Company’s business could fail.
We anticipate the need for significant amounts of financial capital to meet our anticipated costs to satisfy other near-term cash requirements so as to commercially deliver our WaaS projects, and to finance the purchase of equipment and related (long-term) assets. The Company will attempt to raise such funds through the future issuance of stock or debt instruments in the capital markets. However, there is no assurance that we will be successful in raising sufficient additional capital, and there can be no assurance that external financing will be available to us. If adequate funds are unavailable or unavailable on acceptable terms, our ability to fund the Company’s marketing and sales efforts, global projects, potential expenditures in relation to strategic opportunities, and possible corporate responses to existing or unexpected competitive pressures would be significantly limited. Such limitation could have a material adverse effect on our business and overall financial condition.
Raising funds through debt or equity financings in the future, would dilute the ownership of our existing stockholders and possibly subordinate certain rights to the rights of new investors or creditors.
We expect to raise additional funds by engaging in equity and/or debt financing transactions if capital providers supply the desired amount of financial capital on the basis of terms we believe reasonable to provide for working capital needs, finance the acquisition of capital assets, and carry out business development efforts in the best interest of existing shareholders. Any sales of additional equity and/or convertible debt securities would result in dilution of the equity interests of our existing stockholders, which could be substantial. Additionally, if we issue shares of preferred stock or convertible debt to raise funds, the holders of those securities might be entitled to various preferential rights over the holders of our Common Stock, including repayment of their investment, and possibly additional amounts, before any payments could be made to holders of our Common Stock in connection with an acquisition of the Company. Incurring additional debt, if authorized, would create rights and preferences that would be senior to, or otherwise adversely affect, the rights and the value of our Common Stock and would have to be repaid from future cash flow before there would be any return to investors. Since 2017, no stock issuances have held such preferential rights.
Our business will depend on certain key RAKR personnel and suppliers, the loss of which would adversely affect our chances of financial success.
The Company’s success depends to a significant extent upon the continued service of its senior management, key executives and consultants. We do not have “key person” life insurance policies on any of our officers or other employees. The loss of the services of any key members of senior management, and other key personnel, or our inability to retain high quality subcontractors and/or suppliers would have a material adverse effect on our business and operating results.
Management may be unable to implement our Business Strategy.
The Company’s business strategy is to commercialize our WaaS projects that management believes may have significant humanitarian and commercial application, thereby effecting corporate value for the benefit of equity holders. The Company’s business strategy includes developing a global marketing and sales network, and there is no assurance that we will be able to successfully identify and/or develop commercial partners for our products. In addition, even if we identify and/or develop commercial partners, distributors, and/or JVs, the time and cost of developing these relationships or otherwise obtaining local permits and guidelines, may exceed our expectations, or, when developed, the amount of water available may fall significantly short of expectations, which may provide a lower return on investment or a loss to the Company.
We have a limited customer base and network of distribution partners.
During the past year we have entered into various discussions with international partners, distributors, and agents that are prepared to deploy WaaS projects. Nonetheless, we have not yet established a significant customer base. While we believe our projects will have a significant impact on global water markets, and, as a result, reflect positively on the Company’s performance, an inability to attract customers and/or an incapacity to deliver our projects in a timely and cost-effective manner would have an adverse effect on our potential revenues from and growth of our business.
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Water is a highly regulated industry.
Water is subject to extensive regulation by country, state and municipal regulatory authorities. Federal and state statutes regulate quality standards, safety, handling procedures, and other environmental protection controls as well as the rights of end users. We will strive to verify that our water quality will comply with all known safety and environmental standards and regulations applicable to such countries in which we are conducting business. We have extensive in-house knowledge of World Health Organization water quality standards, and we will seek local partners who we believe are operating in best-efforts compliance with all safety and environmental standards and regulations applicable to delivering water to the end consumers. However, there can be no assurance that our compliance efforts could be challenged or that future changes in federal, state and/or municipal laws, regulations or interpretations thereof will not have a material adverse effect on our ability to establish and sustain operations or adversely affect the operations of our partners.
The technology we decide to deploy in the delivery of WaaS projects may require certifications before being deployed in certain global territories.
The technology we use to deploy our WaaS projects may require certain certifications before being implemented in certain international territories. For example, in the case of the United States our deployed technology must be certified by the United States Environmental Protection Agency, under the Safe Drinking Water Act (“SDWA”) to meet certain standards in order to be certified for use in large government projects. While the RHBV technology expected to be deployed by the Company is certified in certain territories, there is no assurance as to if and/or when such certifications will be obtained in new territories we are expecting to enter and sell into. Supplemental technologies – bottling, mineralization and pre-post treatment — will be chosen only if they have already been certified.
We are exposed to risks in connection with legal liability claims associated with water quality in the event that the water delivered results in injury or damage.
If a consumer of our produced or purified water was ill affected from a health perspective by the water quality the Company could be exposed to legal liability. The Company in all cases will use every tool necessary and practically available to limit any such risk.
We face competition in our market space.
The competition in the WaaS space using AW and WW technology is limited. WaaS is usually developed at much larger scale through municipalities. Until recently, smaller remote on-site solutions have not been cost-competitive compared to alternatives, but that has changed. At the present time, we are aware of other companies that produce AW and/or WW technologies. We will face competition, but, at this moment, we are confident that, as we deliver WaaS services, we will possess a competitive advantage. To the extent that future technological advance in the market results in pricing pressures, and the possibility that that will affect the Company’s ability to increase its WaaS market share, we may face an adverse effect on our business, operating results, and overall financial condition. At such time, the Company will consider its technological options accordingly.
We will incur increased costs and may have difficulty attracting and retaining qualified directors and executive officers as a result of becoming a public company.
RAKR has become a public “reporting company” with the US Securities and Exchange Commission (“SEC”). As a public reporting company, we will incur significant legal, accounting, reporting and other expenses not generally applicable to a private company. We also will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 as well as other rules implemented by the SEC. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage. As a result, we may experience difficulty attracting and retaining qualified individuals to serve on our board of directors or as executive officers.
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A significant number of the Company’s outstanding shares remain with resale restrictions however we have 74,011,927 (51.3%) shares in the public float.
The shares of the Company’s common stock issued in the 2017 were issued and designated as “restricted” or “control” shares as defined in Rule 144 under the Securities Act and are subject to resale restrictions. Consequently, these shares were not able to be freely sold at the time unless registered under the Securities Act of 1933 or sold pursuant to an available exemption under Rule 144. Approximately 74,011,927 shares of the Company’s common stock, held by non-affiliate stockholders are eligible for resale pursuant to Rule 144 without resale restrictions. This represents approximately 51.3% of the total issued and outstanding shares of stock. While this remains a risk factor the number of shareholders and the percent of tradeable shares suggest a functioning market for the Company’s shares.
Inadequate market liquidity may make it difficult to sell our stock.
There is currently a public market for our common stock with volumes that have been variable over time, and we can give no assurance that there will always be a market with substantial liquidity, nor can we give assurance that the market for our stock will develop sufficiently to create significant market liquidity and/or stable market prices in the future. A stockholder may find it difficult or impossible to sell shares of our common stock in the public market because of the limited number of potential buyers at any time and/or because of fluctuations in our market price. In addition, the shares of our common stock are not eligible as a margin security, and lending institutions may not accept our common stock as collateral for a loan.
We do not anticipate paying any dividends in the foreseeable future, which may reduce the return on your investment in our common stock.
To date, the Company has not paid any cash dividends on its common stock and does not anticipate paying any such dividends in the foreseeable future. Payment of future dividends will depend on earnings and our capital requirements and our debt facilities and other factors considered appropriate by our Executive Officers and Directors. There is no assurance that we will, at any time, generate sufficient profits or surplus cash that would be available for distribution as a dividend to the holders of our common stock. Our current plans are to use any profits that we may generate to fund our ongoing marketing, sales, and operations. Therefore, any return on your investment would be derived from an increase in the price of our stock, which may or may not occur.
There is an active but variable trading market for our common stock making our stock vulnerable to significant price and volume fluctuations.
There is currently an active trading market for our common stock, which is quoted and traded on the OTCQB. The OTC is not a listing service or exchange but is instead a dealer quotation service for subscribing members. Consequently, the market for our common stock will depend to a certain extent on the number of market makers trading in our stock. The market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operating results, the activities of our market makers, general market conditions, and other factors. In addition, stock markets have from time-to-time experienced significant price and volume fluctuations that have particularly affected the market prices of the shares of development stage companies such as Rainmaker, which may adversely affect the market price of our common stock in a material manner.
In addition, the financial markets have experienced price and volume fluctuations from time to time in the recent past. The market prices of securities in the water industry have been relatively stable compared to other sectors. The sale or attempted sale of a large amount of common stock into the market may also have a significant impact on the trading price of our common stock. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance.
| Item 1B. | Unresolved Staff Comments |
Not applicable to smaller companies.
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| Item 2. | Properties |
The Company maintains its corporate offices at 271 Brock Street, Peterborough, Ontario Canada K9H 2P8 and its main corporate telephone number is (877) 334-3820. At this point, given the nature of Covid restrictions Rainmaker reserves the right to use the facility as needed. In the previous two quarters we have operated from home offices.
| Item 3. | Legal Proceedings |
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
| Item 4. | Mine Safety Disclosures |
Not applicable to smaller companies.
PART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
| (a) | Market Information |
Our common stock is quoted on the OTCQB under the symbol “RAKR”. The high and low bid prices of our common stock for the periods indicated below are as follows:
| OTCQB | ||||||||
| Quarter Ended | High* | Low* | ||||||
| December 31, 2021 | $ | 0.0483 | $ | 0.0149 | ||||
| September 30, 2021 | $ | 0.07 | $ | 0.0323 | ||||
| June 30, 2021 | $ | 0.089 | $ | 0.0331 | ||||
| March 31, 2021 | $ | 0.128 | $ | 0.0551 | ||||
| December 31, 2020 | $ | 0.135 | $ | 0.071 | ||||
| September 30, 2020 | $ | 0.7411 | $ | 0.1202 | ||||
| June 30, 2020 | $ | 0.20 | $ | 0.125 | ||||
| March 31, 2020 | $ | 0.4851 | $ | 0.091 | ||||
| *Source: yahoo!finance Historical Data | ||||||||
Quotations reflect inter dealer prices, without retail mark up, markdown or commissions and may not represent actual transactions.
| (b) | Holders |
The number of holders of record of RAKR common stock at the time of filing was approximately 4,326. Many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, so we are unable to estimate the number stockholders represented by the record holders.
The transfer agent for RAKR common stock is Pacific Stock Transfer, 6725 Via Austi Pkwy, Suite 300 Las Vegas, NV 89119.
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| (c) | Dividends |
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the business.
| (d) | Securities Authorized for Issuance Under Equity Compensation Plans |
Commencing July 3, 2017 through year ending 2020, in fulfillment of conditions contained in the 2017 share exchange agreement and other contracts, the Board authorized a number of options to executives, consultants and other third parties that have since been cancelled.
On January 22, 2020, the Company entered into a three-year consulting agreement with a third party for consulting and business development services. The contract included warrants of which 25,000,000 remain in effect exercisable at $0.20 and expire January 21, 2023.
On January 21, 2020, the Company entered into a three-year consulting agreement with a company controlled by its new CEO. The contract included 3,600,000 warrants with an exercise price of $0.20 vesting in equal amounts commencing the effective date of the contract. On December 31, 2020, this contract was terminated. The warrants vested immediately, and the exercise price was amended to $0.10. As well, the Company granted an additional 500,000 warrants which vested immediately at an exercise price is $0.10. All expire December 31, 2025.
On October 1, 2020, the Company entered into a consulting agreement with an Advisor which granted warrants in full compensation for services. It included 13,500,000 warrants at an exercise price of $0.30 expiring October 1, 2023 and of 15,000,000 warrants at an exercise price of $0.15 expiring October 1, 2025.
On April 1, 2021, the Company granted 4,100,000 options as part of an amendment to an Executive Consultant’s contract; 125,000 options vest per month commencing April 1, 2021 with a term of 5 years and exercisable at a price of $0.10 per Share.
On December 21, 2021, the Company granted 500,000 options to each of the two new Directors; for each, 100,000 options vested immediately and the balance vests over the remaining term of their appointment; each with a term of 5 years and exercisable at $0.10 per share or with a 20% discount to market based on a 30-day VWAP if it falls below $0.10, not to go below $0.07.
| Item 6. | Selected Financial Data |
Not applicable.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis contain forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results indicated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in Item 1A. “Risk Factors” in our on Form 10-12GA below in Part II Item 1A. “Risk Factors” of this Form 10-K and in the “Cautionary Note Regarding Forward-Looking Statements” set forth at the beginning of this report.
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You should read the following discussion and analysis in conjunction with the audited financial statements, and the related footnotes thereto, appearing elsewhere in this Form 10-K, and in conjunction with management’s discussion and analysis and the audited financial statements included in our Form 10-12GA. In addition, we intend to use our media and investor section on our website (www.rainmakerww.com/category/investor-updates/), SEC filings and press releases to communicate with the public about Rainmaker, its services and other issues.
Overview
Rainmaker Worldwide Inc. (“RAKR”, the “Company”, “we”, “us” or “our”) is a Nevada corporation originally formed on February 27, 1998. The corporation became RAKR on July 3, 2017 in a reverse merger. We are currently developing Water-as-a-Service (“WaaS”) projects in various locations around the globe. We are implementing these projects using proprietary technology of our former subsidiary based in the Netherlands, Rainmaker Holland B.V. (“RHBV”). The Company retains a 12% ownership stake in RHBV. RAKR retains access to the technology based on a cost-plus formula, which was negotiated in an exclusive WaaS Distribution Agreement with RHBV.
Rainmaker Worldwide Inc. (Ontario) (“RWI”), an Ontario Corporation, was formed in Peterborough, Ontario, Canada on July 21, 2014, under the Ontario Business Corporations Act to finance and commercialize patented technology and to consolidate the assets, intellectual property, and executive management expertise of Dutch Rainmaker B.V. (“DRM”). RWI is a wholly owned subsidiary of the Company. DRM was originally started by Piet Oosterling as a technology company focused on delivering decentralized water solutions to water scarce regions in the world. In his lifetime, Mr. Oosterling wrote and commercialized over 400 patents. His wealth of knowledge and expertise continues to inspire and guide the Company’s executive management team and policy, our distribution partners, and RHBV.
On July 3, 2017, RWI shareholders completed a share exchange with the Company (the “Merger”) pursuant to a share exchange agreement dated June 28, 2017 (the “Share Exchange Agreement”) among the Company, RWI and RWI’s 45 shareholders at the time. Upon completion of the Merger, and in accordance with the terms and provisions of the Share Exchange Agreement, the Company acquired an aggregate of 9,029,562 common shares of stock in the capital of RWI from the RWI Shareholders (being all the issued and outstanding shares of RWI) in exchange for an aggregate of 66,818,759 restricted shares of the Company’s common stock, or 7.4 shares for each share of RWI. Therefore, RWI became a wholly owned subsidiary of the Company effective July 3, 2017. The Company’s former name, Gold and Silver Mining of Nevada, Inc. (“CJT”) was changed on April 24, 2017, in expectation of and conditional upon completion of the Merger. The Merger was accounted for as a reverse acquisition with RWI considered the accounting acquirer since the former RWI shareholders remained in control of the combined entity after the consummation of the transaction. As part of the Merger, net liabilities of $235,495 were recognized on the Company’s balance sheet. As a result of the Merger, the Company traded on the OTC Pink, but as of March 17, 2022 the Company now trades on the OTCQB continuing to trade under the symbol, RAKR.
On July 15, 2020, Sphere 3D Corp. (NASDAQ: ANY) announced that it entered into a definitive merger agreement pursuant to which it would have acquired all the outstanding securities of Rainmaker Worldwide Inc. Upon closing, Sphere 3D’s name would have changed to Rainmaker Worldwide Inc., and its business model would focus on WaaS. Rainmaker management would have assumed operational leadership of the combined entity. The transaction was subject to completion of an equity financing, or series of financings, for a minimum of US$15 million at a share price to be mutually agreed prior to closing and such other customary regulatory and shareholder approvals, including the approval of NASDAQ. Closing was originally expected to occur prior to December 31, 2020, but was subject to extension to February 28, 2021, under certain circumstances if mutually agreed by the parties. As part of this process, Sphere 3D agreed to advance US$1.85 million to Rainmaker by way of a secured convertible note for Rainmaker to sustain multiple growth initiatives. The funds were used to fulfill recent contracts and expand its equipment production capacity. This note remains payable and is presented in RAKR’s financial statements. Due to various transactional and regulatory complications the agreement was ultimately terminated on February 12, 2021 and was subsequently announced publicly.
As a result of the incomplete Sphere 3D transaction, on March 31, 2021, the Company, including RWI, entered a business agreement with RHBV, DRM and Wind en Water Technologie Holding B.V. (“WWT”). These companies were considered related parties on that date by virtue of stock ownership exceeding 10%. The parties agreed to an exchange of contractual obligations, debt owed, and shares of common stock in full settlement of all obligations among the parties. The resultant Financial Statements, in accordance with ASC 205-20-45-1E, reflect the impact of these exchanges to the Company. The Company and RHBV decided to restructure in order to optimize business operations and broaden access to the capital markets. The Company and RHBV, as mutual shareholders in each other’s company, continue to pursue the mission and objective of providing low-cost water to communities and commercial entities in need of water solutions.
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The Company operates out of its head office based in Peterborough, Ontario, Canada. In support of its WaaS project implementation strategy, the Company will utilize two main types of energy-efficient, fresh water-producing/purification technologies: (1) Air-to-Water (“AW”), which harvests fresh water from humidity and heat in the atmosphere, and (2) Water-to-Water (“WW”), which transforms seawater or polluted water into drinking water. The technologies can be wind driven, solar based, or can use conventional power sources, such as grid or generator. It is deployable anywhere and leaves no carbon trace if renewable resources are deployed.
The Company’s current and ongoing focus is to deliver WaaS, i.e., selling water directly to the customer on a per liter basis, using the two Rainmaker technologies discussed above or other complementary technologies acquired or licensed by the Company. This focus shall be administered by forming local joint venture partnerships (“JV”) where demand exists with profitable pricing scenarios. The JVs will in turn own the water delivery system and related equipment. In most if not all cases, RAKR expects to have ownership stakes in JVs. Ownership percentages will typically be determined by the relative contribution of the stakeholders.
The Company has concurrently planned various WaaS projects in Turks and Caicos and other Caribbean countries. Moreover, although there can be no assurance, our business development activities are expected to yield more commercial contracts in 2022. The implementation dates have continuously shifted due to logistical and supply chain issues related to Covid-19. Principally, WaaS involves the selling of produced (AW) or purified water (WW) on a per liter basis either in a bottle for drinking or in bulk for industrial and commercial services. This commercial activity requires the Company to deliver operational, maintenance, marketing and sales expertise in combination with local partners in most dealings. Usually, projects often require working with complementary technology for post treatment of water and mineralization in tandem with bottling plants and renewable energy businesses. Additional commercial activities include but are not limited to the integration of the foregoing technologies and post implementation operation and maintenance-based functions.
In the Caribbean, locations have been identified and operating plans defined. We have an AW machine being tested in the Netherlands and expect delivery by Q3 2022. Specifically, locations have been identified and operating plans defined for Turks and Caicos.
The Company has generated limited revenue up until the present time, and its operations for the past three years have been typically focused on business development, market research, technology research and development activities. The Company, on a consolidated basis, had total assets of $2,558,279, as of December 31, 2020. As of December 31, 2021, net assets were $344,341, reflecting the impact of restructuring in connection with the previously held RHBV. The ultimate effect of the restructuring has eliminated $2,958,497 in debt, which we believe will aid us in facilitating the future expected financing needs of the Company. Furthermore, 20,238,606 shares of common stock were returned to the corporate treasury in exchange for the cancelation of royalty agreements and all obligations therein.
At present, the Company executes consulting agreements with experienced executive personnel and senior advisors. Sales are heavily driven by independent distributors and project developers. The Company had no revenue for the years ending December 31, 2021 and 2020 and had net losses of $2,725,465 and $22,645,796 for the years ended December 31, 2021 and 2020, respectively. A large proportion of the 2021 losses relate to uncustomary expenses associated with the restructuring ($467,118 amortization of debt discount and non-recurring consultancy expenses of $587,500) as well as losses from equity investments ($112,000) and write-down of inventory ($219,701)). The losses associated with discontinued operations ($333,733) are not expected to reoccur in future years. The total of these expense categories is $1,720,052 or 63.1%. of the net loss. The Company has suffered recurring losses from operations, negative cash flows from operating activities and has limited resources or revenues to cover its operating costs. The Company’s auditor’s report for 2021 stated that there was substantial doubt about the Company’s ability to continue as a going concern.
Impact of COVID-19
On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic.
As a global corporation the economic effects within the Company’s environment have been substantial. In global markets, disruptions in supply chains and increases in related costs have had a real impact on our ability to deliver WaaS projects. Measures being introduced at various levels of government to curtail the spread of the virus (such as travel restrictions, closures of non-essential municipal and private operations, imposition of quarantines and social distancing) have had a material impact on the Company’s operations. The extent of the impact of this outbreak and related containment measures on the Company’s operations cannot be reliably estimated at this time but at the same time the impact has been significant since the declaration of the pandemic two years ago. For the Company, it is particularly disruptive because of limitations on our business development and engineering experts to travel and implement projects. As global operations open, we expect that we will begin to track according to the original business plan.
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Products and Services
Overview
Across the world, fresh water is unevenly distributed. Many regions are desperately under-served, including North Africa, the Middle East, India, Mexico, large portions of South America, and various island geographies.
Fundamentally, the WaaS solutions are based on deploying technology with the following attributes to ensure low-cost delivery and Company profitability:
| ● | Versatile | |
| ● | Scalable & Cost-effective | |
| ● | Environmentally & Socially Sustainable | |
| ● | Applying Proprietary Technology through partners and affiliates |
Air-to-Water (AW) – Harvests fresh water from airborne humidity by using advanced heating and cooling technologies
Water-to-Water (WW) – Transforms contaminated water (saltwater, sewage, polluted) into safe, clean water by using an environmentally sustainable process called Multi-Effect Membrane Distillation.
The operating efficiency of these technologies allows us to provide customers with clean water at a price that is highly competitive relative to traditional alternatives. We substantially out-perform peer competitors because we can deploy remotely where the water is consumed where the water is consumed and using up to 50% less power than those same competitors. The compact and scalable systems for AW and WW enable decentralized deployment, in which water is distributed directly to the consumption site with no expensive piping or truck transport. AW and WW are both cost-effective technology solutions and can be powered by solar, wind, or grid electricity, or a combination of power sources. They can produce roughly 5,000 to 150,000 liters of water per unit, per day, depending on the local conditions and the type of unit deployed.
Cost Information
With the core focus on WaaS delivered on a per liter basis, the relevant Cost Information is the cost per liter of alternative suppliers. Currently in remote locations, the principal source of supply is bottled water. Accordingly, our solutions are optimally profitable when we compete head-to-head with bottled water that is transported or bulk water that is transported by truck to local communities. In most remote communities where this water is imported, the minimum cost per liter is US$0.30 reaching as high as US$2.00, according to our market research. The Company’s fully amortized cost of water per liter through our distributed WaaS model and distribution agreement with RHBV, bottling, operating and maintenance, distribution and other costs allows us to compete profitably to generate corporate value beneficial to our shareholders. The market for distilled water supported in part by WW-based technology, which is essential to more specialized industrial or commercial activities, is expected to increase margins significantly.
Regulatory Information
The global nature of our approach means that regulatory conditions vary by jurisdiction. We believe that the ultimate test of profitability in this complex, cross-jurisdictional environment will be the quality of the water that is bottled and tested. The Company seeks to adhere to World Health Organization standards for clean water using the technologies that are authorized in a particular sovereign jurisdiction.
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WaaS Recurring Revenue Model
The RAKR business model begins with the identification of a trusted local partner. The next step is to enter into JV structures, which maximize value to all stakeholder-parties.
The Rainmaker delivery systems are to be installed by entering into contracts with local third-party experts that are typically Heating, Ventilation and Air Conditioning (“HVAC”) experts.
The RAKR model charges a market determined price per liter of bottled water or similarly treated water. Revenue sources include bottled water, bulk water, and industrial water. A representative project in the Caribbean currently under development is expected to generate $110,000 dollars in revenue per month once seven allocated machines are operational. The capital expenses for the project are roughly $650,000 and the payback is less than one year. This representative project reflects the project profile that we will be seeking in the future.
We believe the value we will offer through our WaaS projects is based on the following factors:
| (1) | There are no upfront costs to the customer. | |
| (2) | Capital costs are borne through the JVs and other partnerships. Only end-consumers of the water pay on a per liter basis. | |
| (3) | The combination of (1) and (2) above make it economically viable to deploy in communities that do not have the resources or network infrastructure to independently finance projects that require high amounts of financial capital. |
Potential Improvements
Potential improvements and related applications that we are pursuing or plan to pursue include the following:
| (1) | Seek more strategic and technology-based partnerships with complementary technology and business development companies to expand our global reach and service offering. | |
| (2) | Work with RHBV to identify relevant technological advances based on lessons learned from previously implemented projects to reduce total costs and enhance net profits. |
Market Opportunity
In the past ten years, there has been a growing awareness of the shortage of fresh water—and the associated economic and social effects the problem magnifies in impoverished and underdeveloped communities. Entities ranging from Water.Org to the United Nations (access to safe drinking water represents #6 of the 17 Sustainable Development Goals articulated by the United Nations) are at the forefront of driving international policy momentum and prospects for multilateral cooperation in the realms of global governance and public-private co-regulation. Common to these efforts is the search for scalable and practical solutions that possess applications uniquely suited to the problem of shortage.
The metrics that underpin the international need for ingenuity and action are the same as those that animate and sustain the market opportunity for our Company:
| (1) | Less than 3% of the world’s water is fresh – the rest is seawater and undrinkable in its current state. | |
| (2) | Of this 3%, over 2.5% is frozen and locked up in Antarctica, the Arctic and glaciers. | |
| (3) | People and animals rely on 0.5% of the world’s water. (Source: Unwater.org - Facts and Trends: Water) |
Moreover, at any moment, the atmosphere contains approximately 37.5 million billion gallons of water. This potential is not currently harvested by the means of private organizations or government institutions and thus presents a significant opportunity for AW technology to satisfy worldwide demand for water.
The World Health Organization estimates that 50 liters of water per day is required per individual to meet basic needs. It is estimated by the OECD that by 2030 nearly half of humanity will be living in a condition of severe water stress. Currently, according to UNICEF, 2.2 billion people around the globe lack safe drinking water. While high-income countries only treat 70% of wastewater, low-income countries treat 8%. With the world’s population expected to reach 9 billion by 2038, the global need is indisputably high. Much of the population expansion is or will be in the very areas that are already suffering from the problem of water scarcity.
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The above analysis points to a global market for water that is extraordinarily immense. Today, the annual global water market for all purposes and uses is $650 billion and is expected to expand to $1 trillion by 2025. (Source: RobecoSAM Study (2015, June). Water: the market of the future). Applying RAKR’s approach against the purposes and uses defined above, our solutions are tailored to meet roughly 70% of that global level of demand.
Current Projects
Representative existing projects reside within the Caribbean and specifically Turks and Caicos and Europe.
Suppliers
As stated previously, our principal supplier for the core technologies to be deployed is RHBV. RHBV in turn has built a global supply chain for its components. Should RHBV not supply the appropriate scale of technology required by a project, RAKR has identified multiple technologies of different sizes and types.
Supplemental technology (i.e., bottling, pre-post wastewater treatment, mineralization solutions, and renewable energy) – suppliers are global, abundant, and highly competitive so as to ensure the lowest cost per liter for any given WaaS project planned implemented by the Company.
Competition
The Rainmaker WaaS-focused business model that will deliver potable water at the source of demand is uniquely positioned to address alternative competitive models. We believe that competitive models, while relevant and plausible alternatives, will not ultimately fully support the global level of demand for water at a reasonable price per liter. By virtue of our current affiliations, we believe we have a cost per liter competitive advantage. Accordingly, on a global basis, we do not believe competitive conditions will thwart our ability to produce long-term, corporate value or significantly diminish our financial results in the near term. However, other companies with sufficiently greater resources may develop competing products and have an advantage over us based on the relative size.
Government Subsidies and Incentives
While RAKR is not currently pursuing subsidies and incentives, we believe that over time such programs will be applicable to the Company, and we will pursue them in due course.
Over time, RAKR will seek subsidies and incentives through its deployment of WaaS in underserved countries and particular communities within countries. One example is First Nations in Canada where there is an ongoing and desperate shortage of safe drinkable and general-purpose water.
Intellectual Property
We have indirect access to considerable intellectual property assets as a consequence of our partial ownership of and various partnerships with RHBV. We believe that this allows us to maintain an edge in the competitive process from a technology and economic cost perspective.
Results of Operations for the Years ended December 31, 2021 and 2020
Revenue
Revenue was $0 for the years ended December 31, 2021 and December 31, 2020.
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General and Administrative Expenses
General and administrative expenses primarily include consultant expenses and benefit costs and stock-based compensation expense for executive consultants, outside legal and professional services, marketing and advertising, and facilities costs. General and administrative expenses for the years ended December 31, 2021 and December 31, 2020 were as follows (in thousands):
| Years Ended December 31, | Increase (Decrease) | |||||||||||||||
| 2021 | 2020 | $ | % | |||||||||||||
| General and administrative expense | $ | 1,454 | $ | 5,034 | $ | (3,580 | ) | (71.1 | )% | |||||||
| Stock-based compensation expense included in general and administrative expense | $ | 62 | $ | 10,893 | $ | (10,831 | ) | (99.4 | )% | |||||||
General and administrative expenses, including stock-based compensation, for the year ended December 31, 2021 decreased approximately $14.4 million, or 90.5%, compared to the same period in 2020. This decrease primarily relates to (1) a decrease of $10.83 million in stock-based compensation, (2) general and administrative expenses decreased by $1.59 million, (3) marketing and advertising decreased $1.17 million, (4) depreciation expense reduced by approximately $0.52 million and (5) consulting fees decreased by $.27 million, and, (6) rent expense reduced by $32,109 due to the reduction in our commitment of our office lease. Excluding stock-based compensation, general and administrative expenses decreased $3.58 million.
Liquidity and Capital Resources
Management’s Plans
Similar to other development stage companies, our products have yet to generate significant revenue. As a result, we have historically suffered recurring losses and we do not have required cash resources to fully execute our business plans. However, we have approximately $175,000 in inventory we believe can be converted into revenue once logistics bottlenecks are opened up that may provide sufficient interim cash resources until such time as we may arrange a larger financing. Furthermore, once this inventory is delivered to the ultimate destination it should start to generate recurring revenue.
Historically, the Company’s major sources of cash have comprised proceeds from various private offerings of its securities (including common stock) and debt financings. From 2015 through to the date of this filing, the Company raised approximately $7.7 million in gross proceeds from various private offerings of our common stock and convertible debt. These funds were raised during various stages of the company and allowed us first to develop a commercial ready product and as soon as logistics and supply chains allow, deliver these products into identified projects and begin to generate revenue. The Company has sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the indefinite future. As of December 31, 2021 and December 31, 2020, the Company had an accumulated deficit of approximately $71 million and $68.3 million, respectively, and stockholders’ equity of approximately $(8.9) million and $(14.4) million, respectively. As of December 31, 2021, the Company had approximately $4 thousand in cash.
The Company recognizes the need to raise additional capital in order to continue to execute its business plan in the future. There is no assurance that additional financing will be available when needed or that the Company will be able to obtain financing on terms acceptable to it or whether the Company will become profitable and generate positive operating cash flow.
Off-Balance Sheet Arrangements
As of December 31, 2021, the Company had no off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:
| ● | it requires assumptions to be made that were uncertain at the time the estimate was made, and | |
| ● | changes in the estimate or different estimates that could have been selected could have material impact in our results of operations or financial condition. |
| 19 |
While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates and the differences could be material. The most significant estimates impact the following transactions or account balances: stock compensation.
See Note 2 to our condensed consolidated financial statements for a discussion of our significant accounting policies.
Recently Issued Accounting Standards Not Yet Effective or Adopted
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
| Item 8. | Financial Statements and Supplementary Data |
The information required by this Item 8 is incorporated by reference to our financial statements and the related notes and the report of our independent registered public accounting firm beginning at page F-1 of this report.
| 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
Based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of December 31, 2021, our Chief Executive Officer and Acting Chief Financial Officer has concluded that our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Our Chief Executive Officer and Acting Chief Financial Officer also concluded that, as of December 31, 2021, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Acting Chief Financial Officer, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Exchange Act Rule 13a-15. With the participation of our Chief Executive Officer and Acting Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2021, based on those criteria. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
| 20 |
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:
| 1. | As of December 31, 2021, due to the inherent issue of segregation of duties in a small company, we have relied heavily on entity or management review controls. Accordingly, management has determined that this control deficiency constitutes a material weakness. | |
| 2. | As of December 31, 2021, we did not establish a formal written policy for the approval, identification, and authorization of related party transactions. | |
| 3. | During the 2021 audit, it was necessary to record adjusting journal entries. Management has determined that the effects of the corrected misstatements are material, both individually and in the aggregate, to the financial statements as a whole. The corrected misstatements or the matters underlying them could potentially cause future period financial statements to be materially misstated, even though, in the judgment of our auditor previously, such corrected misstatements are material to the financial statements under audit.
Professional standards define an audit adjustment as a proposed correction of the financial statements that, in the judgment of our auditor previously, may not have been detected except through the auditing procedures. An audit adjustment may or may not indicate matters that could have a significant effect on the Company’s financial reporting process (that is, cause future financial statements to be materially misstated). In the judgment of our auditor previously, the adjustments proposed indicate matters that could have a significant effect on the Company’s financial reporting process. |
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2021, based on the criteria established in “Internal Control-Integrated Framework” issued by the COSO.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2021, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls
Our management, including our CEO and VP Finance, do not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
| Item 9B. | Other Information |
On December 21, 2021, the Board of Directors (the “Board”) of Rainmaker Worldwide Inc., a Nevada corporation (the “Company”), appointed James Ross and Dr. Mamdouh Shoukri to serve on the Company’s Board. This information is consistent with the 8-K filing from December 28, 2021. Mr. Ross has held senior management positions in Renewable and Technology companies. During this period, he has invested in, developed, financed, divested and acquired numerous energy projects in hydro, biomass, wind, co gen, fuel cell and gas firming. He has also been actively involved and invested in numerous technology companies, including Telecommunications, Renewable, Information Technology, Blockchain and GIS companies. He has been a Director and Financial Manager of both public and private companies. Mr. Ross has also served as the President of JSR Capital Inc., an investment fund and corporate finance firm focused on funding and consulting well-managed emerging renewable, independent power and technology companies since September 1991.
Dr. Shoukri serves on the Board of Directors of Canada Foundation for Innovation, an independent not-for-profit organization that invests in research facilities and equipment in Canada’s universities, colleges, research hospitals, and non-profit research institutions. Dr. Shoukri was the seventh President and Vice-Chancellor of York University from July 1, 2007 to June 30, 2017. Dr. Shoukri began his career in academia at McMaster University in Hamilton, Ontario, leading major research programs in support of the power and process industries and serving in administrative leadership positions at all levels of the academy, including as department chair, dean and vice-president.
There is no arrangement or understanding between Mr. Ross, Dr. Shoukri, and any other persons, pursuant to which they were selected to the Board. Mr. Ross and Dr. Shoukri have not engaged in any transaction, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. There are no family relationships between Mr. Ross, Dr. Shoukri and any Director or executive officer of the Company.
| 21 |
PART III
| Item 10. | Directors, Executive Officers and Corporate Governance |
The following individuals serve as the directors and executive officers of our company as of the date of this annual report. All directors of our company hold office until they either resign or the term of their engagement expires whichever comes first. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.
| Name | Position Held with the Company | Age | Date First Elected or Appointed | |||
| Michael O’Connor | CEO* and Executive Chairman | 55 | July 21, 2014 | |||
| James Ross | Non-Executive Director | 64 | December 20, 2021 | |||
| Dr. Mamdouh Shoukri | Non-Executive Director | 74 | December 20, 2021 |
*Mr. O’Connor maintained the Executive Chairman role since 2014 and for a short period of time he hired a CEO to assist him in negotiations for the Sphere 3D merger. When that merger agreement was terminated, Mr. O’Connor resumed his role as CEO.
Business Experience
The following is a brief account of the education and business experience of the directors.
Michael O’Connor – CEO and Executive Chairman
Michael O’Connor has more than 30 years of operational, corporate finance, business development and corporate governance experience. He began his career at the Economic Council of Canada before becoming a Director of the Centre for Economic and Financial Analysis at one of the largest international consulting companies in the U.S – Science Applications International Corporation. In 1998, Mr. O’Connor joined Orascom Telecom (“OT”) in Egypt as a founding executive, leading all business development and Mergers and Acquisitions activities throughout Africa, the Middle East, Europe and Asia. During his time with OT he led more than $35 billion in transactions. During his tenure, OT grew from 100,000 subscribers to more than 125 million across 10 countries and from 6 to 100,000 employees by 2008. Michael returned to Canada as one of the founders of Wind Mobile (now Freedom Mobile). Wind Mobile was acquired by Shaw Communications Inc. in March 2016 for $1.6 billion. Shaw Communications has since been acquired by Rogers Communications. Michael has extensive international corporate governance experience for both private and publicly traded companies as well as not-for-profit organizations including Hutchison Telecommunications in Hong Kong, nine Telecel subsidiaries, Wind Mobile, Ontario Shores and Trent University. Mr. O’Connor is currently the Executive Chairman of Rainmaker Worldwide Inc., Rainmaker’s purpose is to produce safe drinking water for communities in need. The revolutionary approach to building water infrastructure supports the development of sustainable communities around the world, creating a positive impact environmentally, socially and economically.
| 22 |
James Ross – Non-Executive Director (Chair of Audit Committee)
Mr. Ross has held senior executive management positions in Renewable and Technology companies. During this period, he has invested in, developed, financed, divested and acquired numerous energy projects in hydro, biomass, wind, co gen, fuel cell and gas firming. He has also been actively involved and invested in numerous technology companies, including Telecommunications, Renewable, Information Technology, Blockchain and GIS companies. He has been a Director and Financial Manager of both public and private companies. Mr. Ross has also served as the President of JSR Capital Inc., an investment fund and corporate finance firm focused on funding and consulting well-managed emerging renewable, independent power and technology companies since September 1991.
Dr. Mamdouh Shoukri – Non-Executive Director (Chair of Compensation Committee)
Dr. Shoukri serves on the Board of Directors of Canada Foundation for Innovation, an independent not-for-profit organization that invests in research facilities and equipment in Canada’s universities, colleges, research hospitals, and non-profit research institutions. Dr. Shoukri was the seventh President and Vice-Chancellor of York University, Ontario, Canada from July 1, 2007 to June 30, 2017. Dr. Shoukri began his career in academia at McMaster University in Hamilton, Ontario, Canada. McMaster’s leading research programs, in support of the power and process industries, were directed by Dr. Shoukri as he served in administration leadership positions including as Department Chair, Dean and Vice-President. As an academic leader, he guided York’s transformation into a comprehensive research-intensive university as well as spearheading hundreds of millions of dollars of capital development projects. In 2013, for his contributions to the flourishing of Ontario’s academic institutions as both an engineer and an administrator, Dr. Shoukri was named a Member of the Order of Canada, the Order of Ontario, and awarded the Queen Elizabeth II Diamond Jubilee medal.
Family Relationships
There are currently no family relationships among our Directors and Executive Officers.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our officers and directors, and stockholders owning more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. The Company is not aware of any persons who failed to timely file reports under this section.
Involvement in Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to our directors or executive officers:
| (1) | any bankruptcy petition filed by or against any business of which one of them was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
| (2) | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| (3) | being subject to any order, judgment or decree of any court of competent jurisdiction, permanently or temporarily inquiring, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activities; and | |
| (4) | being found by a court of competent jurisdiction, the SEC or the CFTC to have violated Federal or state securities or commodities laws. |
Audit Committee
In December 2021, the Board created an Audit Committee, in conjunction with nominating two new independent directors to the Company’s Board. Its first formal meeting will be in the second quarter of 2022 but the group has convened informally to discuss the contents of this document and the financial statements. The meeting will set out the Committee’s charter and will provide the framework for additional governance and oversight of the internal control over finance reporting. It will work alongside the board of directors as a whole which participates in the review of financial statements and disclosure. The audit committee members are James Ross (chair), Dr. Mamdouh Shoukri and Michael O’Connor. James Ross qualifies as an audit committee financial expert and is independent under applicable SEC standards.
| 23 |
Code of Ethics
We are in the process of developing a Code of Business Conduct and Ethics that applies to, among other persons, members of our board of directors, our company’s officers including our chief executive officer and chief financial officer, employees, consultants and advisors. Once formulated, our Code of Business Conduct and Ethics will set follow the following guiding principles:
| 1. | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; | |
| 2. | full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us; | |
| 3. | compliance with applicable governmental laws, rules and regulations; | |
| 4. | the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and | |
| 5. | accountability for adherence to the Code of Business Conduct and Ethics. |
| Item 11. | Executive Compensation |
The Company has a newly formed compensation committee with two independent board members. Any future changes to compensation will be reviewed and implemented by the committee.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to, or accrued for, each of our current executive officers or officers who were in place over the last two fiscal years.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards | Option Awards (A) | All Other Compensation | Total | |||||||||||||||||||||
| Michael O’Connor(1) | 2021 | $ | 210,000 | - | - | - | - | $ | 210,000 | |||||||||||||||||||
| 2020 | $ | 198,500 | - | - | - | - | $ | 198,500 | ||||||||||||||||||||
| Michael Skinner(2) | 2021 | $ | 275,000 | - | - | - | - | $ | 275,000 | |||||||||||||||||||
| Chief Executive Officer | 2020 | $ | 226,000 | - | - | $ | 779,771 | - | $ | 1,005,771 | ||||||||||||||||||
| Michael Dohaney(3) | 2021 | $ | - | - | - | - | - | $ | - | |||||||||||||||||||
| Chief Financial Officer | 2020 | $ | 226,800 | - | - | - | - | $ | 226,800 | |||||||||||||||||||
| (A) | Reflects the dollar amount expensed by the Company during the applicable fiscal year for financial statement reporting purposes pursuant to ASC 718 | |
| 1 | Michael O’Connor was appointed as the Company’s Chief Executive Officer and Executive Chairman July 2017 for Rainmaker Worldwide Inc. post RTO. | |
| 2 | Michael Skinner was appointed as the Company’s Chief Executive Officer January 21, 2020-January 20, 2021. The fair market value of the options awarded to Mr. Skinner was $779,771. | |
| 3 | Michael Dohaney was appointed as the Company’s Chief Financial Officer October, 2017 until October, 2020. |
Other Agreements
None.
| 24 |
Outstanding Equity Awards at Fiscal Year End
The following table sets forth the number of shares of common stock covered by outstanding stock option awards that are exercisable and unexercisable, and the number of shares of common stock covered by unvested restricted stock awards for each of our named executive officers as of December 31, 2021.
| Outstanding Equity Awards at Fiscal Year-End For Each Named Officer | ||||||||||||||||||||
| Option Awards | ||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options(#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||
| Michael O’Connor | - | - | - | - | - | |||||||||||||||
| Michael Skinner | 4,100,000 | - | - | 0.10 | 2025 | |||||||||||||||
| Michael Dohaney | - | - | - | - | - | |||||||||||||||
Equity Awards
None.
Director Compensation
The only director compensation for 2021 was allocated to the two newly appointed directors. Of the 500,000 options that each director received, 1,000,000 in total, 202,885 of their options vested in December of 2021. Mr. O’Connor did not receive any compensation for services as director for the year ended December 31, 2021. The independent members of the Compensation Committee will determine his director’s compensation for 2022 and beyond. There was no compensation to directors in 2020.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
As of February 28, 2022, the Registrant had 144,354,957 shares of common stock issued.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of February 28, 2022:
● each person that is known by us to beneficially own more than 5% of our common stock;
● each of our directors;
● each of our executive officers and significant employees; and
● all our executive officers, directors and significant employees as a group.
| 25 |
Under the rules of the Securities and Exchange Commission, beneficial ownership includes voting or investment power with respect to securities and includes the shares issuable under stock options, warrants and convertible securities that are exercisable/convertible within sixty (60) days of February 28, 2022. Those shares issuable under stock options, warrants and/or convertible securities are deemed outstanding for computing the percentage of each person holding options, warrants and/or convertible securities but are not deemed outstanding for computing the percentage of any other person. The percentage of beneficial ownership schedule is based upon 144,354,957 shares outstanding as of February 28, 2022. The address for those individuals for which an address is not otherwise provided is c/o Rainmaker Worldwide Inc., 271 Brock Street, Peterborough, ON K9H 2P8 Canada. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting power and investment power with respect to all shares of common stock listed as owned by them.
| Name and Address of Beneficial Owner | Number | Percent of Class Outstanding | ||||||
| Kawartha Entertainment Group Inc., Michael Skinner | 7,389,749 | 5.12 | % | |||||
| James Ross, Director | 433,335 | 0.30 | % | |||||
| Dr. Mamdouh Shoukri, Director | 183,335 | 0.13 | % | |||||
| Michael O’Connor, CEO and Executive Chairman (1) | 7,132,139 | 4.94 | % | |||||
| Kelly White, VP Finance (2) | 5,188,801 | 3.55 | % | |||||
| Executive officers, directors and significant employees as a group (4 persons directly above) | 20,327,359 | 13.87 | % | |||||
| (1)(2) Shares and options held by individual and respective corporations in each case. |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Other than the compensation described above in Item 11 Executive Compensation, there are no related party transactions.
Director Independence
We currently act with three directors, Michael O’Connor, James Ross and Dr. Mamdouh Shoukri. Mr. Ross and Dr. Shoukri both qualify as an “independent director”.
| Item 14. | Principal Accounting Fees and Services |
The aggregate fees billed for the most recently completed fiscal year ended December 31, 2021 and for fiscal year ended December 31, 2020 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Audit Fees | 16,000 | 16,000 | ||||||
| Audit Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | 16,250 | 10,500 | ||||||
| Total | 32,250 | 26,500 | ||||||
Fees for the year ended December 31, 2021 and 2020 relate to M&K CPAS, PLLC.
| 26 |
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
PART IV
| Item 15. | Exhibits, Financial Statement Schedules |
| (a) Exhibits |
| Exhibit Number | Description | |
| (3) | Articles of Incorporation and Bylaws | |
| 3.1 | Articles of Incorporation, dated February 27, 1998 | |
| 3.2 | By-Laws of Rainmaker Worldwide Inc. | |
| (10) | Material Contracts | |
| 10.1 | RAKR-RHBV Distributor Agreement | |
| 10.2 | RAKR-Carlaw Joint Venture Agreement | |
| 10.3 | RAKR-RWSRI Joint Venture Agreement | |
| 10.4 | Professional Services Contract-Marketing | |
| 10.5 | Consulting Contract-CEO | |
| 10.6 | Consulting Contract-VP Finance | |
| 23.1 | Auditor’s Consent | |
| (31) | Rule 13a-14 (d)/15d-14d) Certifications | |
| 31.1 | Section 302 Certification by the Principal Executive Officer | |
| 31.2 | Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| (32) | Section 1350 Certifications | |
| 32.1 | Section 906 Certification by the Principal Executive Officer | |
| 32.2 | Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer |
(b) Financial Statement Schedules
Our consolidated financial statements being filed as part of this Form 10-K are filed in Item 8 of this Form 10-K. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
| 27 |
RAINMAKER WORLDWIDE INC.
FINANCIAL STATEMENTS
INDEX
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Rainmaker Worldwide Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Rainmaker Worldwide Inc. (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered net losses from operations, has a net capital deficiency, and has negative cash flow from operations which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Going Concern
As discussed in Note 1 to the financial statements, the Company had a going concern due to a working capital deficiency, stockholders’ deficiency, and negative cash flows from operations. Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses, which are not able to be substantiated. To evaluate the appropriateness of the going concern, we examined and evaluated the financial information that was the initial cause along with management’s plans to mitigate the going concern and management’s disclosure on going concern.
| /s/
| |
| We have served as the Company’s auditor since 2020. | |
March 31, 2022 |
|
| F-2 |
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Balance Sheets
| December 31 | December 31 | |||||||
| 2021 | 2020 | |||||||
| (Audited) | (Audited) | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Inventory | ||||||||
| Investments | - | |||||||
| Prepaid expenses | ||||||||
| Prepaid expenses – related parties | - | |||||||
| Current assets of discontinued operations | - | |||||||
| Total Current Assets | ||||||||
| Net Operating Lease Right-of-Use Asset | - | |||||||
| Assets of discontinued operations | - | |||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party payables | ||||||||
| Accrued liabilities | ||||||||
| Operating lease liabilities | - | |||||||
| Customer deposits | ||||||||
| Contingent liability | ||||||||
| Convertible notes payable | ||||||||
| Convertible notes payable-related parties | - | |||||||
| Notes payable - related parties | ||||||||
| Other loans payable | - | |||||||
| Current liabilities of discontinued operations | - | |||||||
| Total Current Liabilities | ||||||||
| Long Term Payables | ||||||||
| Convertible notes payable | ||||||||
| LT Liabilities of discontinued operations | - | |||||||
| Total Long Term Payables | ||||||||
| Total Liabilities | $ | $ | ||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Common stock - $ par value; authorized; and outstanding at December 31, 2021 and December 31, 2020, respectively | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Stock payable | - | |||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Equity (Deficit) | $ | ( | ) | $ | ( | ) | ||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Statements of Operations and Comprehensive Loss
| Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (Audited) | (Audited) | |||||||
| Revenue | $ | $ | ||||||
| Cost of Goods Sold | - | - | ||||||
| Gross Margin | - | - | ||||||
| Expenses | ||||||||
| General and administrative expense | ||||||||
| Total Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Gain on retirement of ARO | - | |||||||
| Other income | - | |||||||
| Loss on impairment of IP | - | ( | ) | |||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Loss from equity investments | ( | ) | - | |||||
| Discontinued operations: | ||||||||
| Loss from operations of discontinued operations | ( | ) | ( | ) | ||||
| Total discontinued operations | ( | ) | ( | ) | ||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss) | ||||||||
| Foreign exchange translation gain (loss) | ( | ) | ||||||
| Discontinued operations foreign exchange gain (loss) | - | - | ||||||
| Net income (loss) and comprehensive income (loss) | $ | ( | ) | $ | ( | ) | ||
| Net loss per share: | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding: | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Statements of Stockholders’ Equity (deficit) (Audited)
| Number of stock | Amount ($) | Additional paid-in capital ($) | Stock Payable | Deficit ($) | Accumulated other comprehensive income ($) | Total | ||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
| Shares issued for debt | - | - | - | |||||||||||||||||||||||||
| Private placements | - | - | - | |||||||||||||||||||||||||
| Shares issued for services | - | - | - | |||||||||||||||||||||||||
| Conversion of convertible promissory notes | - | - | - | - | ||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | |||||||||||||||||||||||
| Stock Payable | - | - | - | - | - | |||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Net gain (loss) for the year | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
| Private placements | ( | ) | - | - | ||||||||||||||||||||||||
| Conversion of convertible promissory notes | - | - | - | |||||||||||||||||||||||||
| Shares cancelled | ( | ) | ( | ) | ( | ) | - | - | - | ( | ) | |||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Disposition of discontinued operations | - | - | - | - | - | |||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | |||||||||||||||||||||||
| Net gain (loss) for the quarter | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Statements of Cash Flows (Audited)
| Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net gain (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash used for operating activities: | ||||||||
| Depreciation expense | - | - | ||||||
| Loss on impairment | - | |||||||
| Stock-based compensation | ||||||||
| Loss from equity investments | - | |||||||
| Other income | - | |||||||
| Shares issued for services | - | |||||||
| Discount amortization | - | - | ||||||
| IP amortization | - | |||||||
| Provision for ARO obligation | - | ( | ) | |||||
| Non-cash Lease expense | - | - | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses, prepaid expenses related parties | ( | ) | ||||||
| Accounts payable, related party payables and accrued liabilities | ||||||||
| Customer deposits | ( | ) | ( | ) | ||||
| - | - | |||||||
| Provision for ARO obligation | - | ( | ) | |||||
| Lease liabilities | - | - | ||||||
| Discontinued operations | ||||||||
| CASH USED FOR OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for investment in JV | - | ( | ) | |||||
| Cash paid for purchase of fixed assets | - | - | ||||||
| Discontinued operations | - | |||||||
| CASH USED FOR INVESTING ACTIVITIES | - | |||||||
| - | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from sale of stock | ||||||||
| Borrowed on convertible debt | - | |||||||
| Borrowed on debt | ( | ) | ||||||
| Borrowed on debt related party | - | |||||||
| Repayments on other loans payable | ( | ) | - | |||||
| CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Effect on Foreign Currency Exchange | ( | ) | ( | ) | ||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF YEAR | ||||||||
| CASH AT PERIOD END | $ | $ | ||||||
| NON-CASH TRANSACTIONS | ||||||||
| Shares issued for conversion | ||||||||
| Lease modification | - | - | ||||||
| Shares issued from stock payable | ||||||||
| Conversion of AP to convertible notes payable | - | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
Note 1: Nature of Operations, Reverse Merger and Going Concern
Nature of Operations
Rainmaker Worldwide Inc. (“Rainmaker” or the “Company” or “RAKR”) is a Nevada company which operates Rainmaker Worldwide Inc. (Ontario) (“RWI”) with its head office in Peterborough, Ontario, Canada. The Company distributes two main types of energy-efficient, fresh water-producing technologies: (1) Air-to-Water (“AW”), which harvests fresh water from humidity in the atmosphere, and (2) Water-to-Water (“WW”), which transforms seawater or polluted water into drinking water. The technology can use wind, solar, or use conventional power sources (grid or generator), is deployable anywhere, and leaves no carbon trace if renewable resources are deployed.
Our post-restructuring business focus will deliver Water-as-a-Service (“WaaS”) i.e., selling water directly to the customer on a per liter basis. This will be executed by forming local joint venture partnerships (“JV”) who will in turn own the Rainmaker and related equipment. In most if not all cases, RAKR will have an ownership stake in the JV the percentage of which will be determined by the relative contribution of the stakeholders.
As
part of the asset restructuring, Rainmaker retains a
The Company will focus its future on the development of WaaS projects globally and has already set up such projects that are ready for deployment in Turks and Caicos and potentially other Caribbean and European locations. Our business development activities are expected to yield more definitive agreements during 2022. WaaS involves the selling of produced (AW) or purified water (WW) on a per liter basis either in a bottle for drinking or in bulk for industrial and commercial services. This requires the Company to deliver its operational, maintenance, marketing and sales expertise in combination with local partners in most cases. These projects will often require working with complementary technology for post treatment of water, mineralization, bottling plant and energy companies. Business activities include the full integration of such technologies.
Reverse Merger
RWI
was incorporated on
| F-7 |
Merger with Sphere 3D
On July 15, 2020 Sphere 3D Corp. (NASDAQ: ANY) announced that it entered into a definitive merger agreement pursuant to which it would have acquired all the outstanding securities of Rainmaker Worldwide Inc. Upon closing, Sphere 3D’s name would have changed to Rainmaker Worldwide Inc., and its business model would focus “WaaS”. Rainmaker management would have assumed operational leadership of the combined entity.
Under
the terms of that agreement, Rainmaker, would have merged with S3D Nevada Inc., a Nevada company wholly owned by Sphere 3D, and the merged
entity would have been a wholly owned subsidiary of Sphere 3D.
The
transaction was subject to completion of an equity financing, or series of financings, for a minimum of US$
On September 14, 2020 Sphere 3D announced that the Merger Agreement had been amended to change the ratio of Sphere 3D stock to be received by Rainmaker shareholders (the “Amendment”). This change was intended to better reflect the current market values of the respective companies. At closing, holders of Rainmaker common shares and holders of Rainmaker preferred shares would have each received 1/15th of a share of Sphere 3D per common or preferred share that they hold.
As
part of the Amendment, Sphere 3D also agreed to advance US$
The Merger Agreement was adjusted to become an asset purchase agreement January 3, 2021 with the same business focus being WaaS. The agreement was ultimately terminated on February 12, 2021 and was subsequently announced publicly. Rainmaker is continuing its ordinary course of business focusing on WaaS.
Going Concern
The
Company has incurred continuing losses from its operations and has an accumulated deficit of $
The Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financings to enable it to meet its operating needs including current and future sales orders. In addition, revenues are being forecasted at the operational level considering the imminent implementation of local JV-based WaaS agreements once travel restrictions due to COVID permit.
| F-8 |
Note 2: Significant Accounting Policies
Basis of Preparation
The consolidated financial statements presented are for the entity Rainmaker and its wholly owned subsidiary, Rainmaker Worldwide Inc. (Ontario) and Rainmaker Holland B.V. (“RHBV” Discontinued Operations) as a consolidated entity. The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles.
The preparation of the consolidated financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
All accounting policies are chosen to ensure the resulting financial information satisfies the concepts of relevance and reliability.
Foreign Currency Translation
The reporting currency of the Company is the United States dollar. The financial statements of discontinued operations and the subsidiary located outside of the United States are measured in their functional currency: Rainmaker Worldwide Inc. (Ontario) reports in Canadian dollars and Rainmaker Holland B.V. (as Discontinued Operations) reports in Euros. Monetary assets and liabilities of these subsidiaries are translated at the exchange rates at the balance sheet date. Income and expense items are translated using average annual exchange rates. Non-monetary assets are translated at their historical exchange rates. Translation adjustments are included in accumulated other comprehensive income in the consolidated balance sheets.
Intangible Assets
The Company acquired intellectual property including know-how and patents in the December 2015 Asset Purchase Agreement whereby Rainmaker Worldwide Inc. (Ontario) purchased the assets of Dutch Rainmaker B.V. (“DRM”) and Wind En Water Technologie Holding B.V. (“WWT”). Commencing January 2016, the Company has amortized the patents and know-how using the average life expectancy of the patents which is 14 years. As discussed in Note 19 (Discontinued Operations), these intangible assets were a part of the restructuring agreement.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and any recognized impairment loss. Cost includes the original purchase price of the asset and any costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is provided at rates estimated to write off the cost of the relevant assets less their estimated residual values by equal annual amounts over their expected useful lives. Residual values and expected useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. Depreciation periods for the Company’s property and equipment are as follows:
| Manufacturing
Equipment – | ||
| Office
Furniture & Equipment – |
Demonstration
Equipment – | |
| Intellectual
Property – |
Computer
Software – |
Demonstration Equipment
Demonstration equipment is stated at cost less accumulated depreciation and any recognized impairment loss. Cost includes the original purchase price of the asset and any costs attributable to bringing the asset to its working condition for its intended use.
Depreciation for the demonstration equipment is at a rate estimated to write off the cost of the equipment less its estimated residual value by an equal annual amount over its expected useful life. The residual value and expected useful life of the demonstration equipment is reviewed and adjusted, if appropriate, at the end of each reporting period.
| F-9 |
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 Debt with Conversion and Other Options for consideration of any beneficial conversion features.
Revenue Recognition
In May 2014, the FASB issued an accounting standard update (‘ASU”), 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. On January 1, 2018, the Company adopted the new Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers using the modified retrospective method, and the Company determined the new guidance does not change the Company’s policy of revenue recognition.
The Company will have three sources of revenue. The first is through the direct sales of water production and purification systems. A contract with a customer is established once an agreement is signed and the initial down payment is received. Each transaction price is established in the signed contract. Unearned revenue is recognized upon receipt of the down payment for the system. The revenue is recognized once title of the system transfers to the customer. The nature of the business of equipment sales implies there is only one performance obligation which is delivery of the product to the customer. Our contracts outline each party’s rights and obligations including the terms and timing of payments.
The second is through participation in WaaS partnerships. These partnerships will purchase the machines from the Company and the revenue is recognized in accordance with the corresponding rules. These partnerships will also generate revenue sharing as water is sold in accordance with the various agreements and that revenue is recognized in the period it is earned. The third source of revenue is in exchange for operating, maintenance and professional services to these joint ventures. That revenue is recognized in the period it is earned.
In June 2018, the FASB issued guidance clarifying the revenue recognition and measurement issues for grants, contracts, and similar arrangements, ASU Topic 958. Government grants and contracts are agreements that generally provide cost reimbursement for certain types of expenditures in return for research and development activities over a contractually defined period. During 2019, RHBV received a Grant from the European Commission. That Grant and associated contract with European Commission has been analyzed and it has been determined it is a non-exchange transaction and falls within the scope of ASU 958, and revenue should be recognized in accordance with Topic 958 guidance. Accordingly, the Company recognizes revenue from its grant and contract in the period during which the related costs are incurred, provided that the conditions under which the grants and contracts were provided have been met and only perfunctory performance obligations are outstanding.
Related Party Transactions
Parties are considered to be related if one party has the ability to directly or indirectly control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions that are in the normal course of business and have commercial substance are measured at the exchange amount.
| F-10 |
Share-based Payment Expense
The Company follows the fair value method of accounting for stock awards granted to employees, directors, officers, and consultants. Share-based awards to employees are measured at the fair value of the related share-based awards. Share-based payments to others are valued based on the related services rendered or goods received or if this cannot be reliably measured, on the fair value of the instruments issued. Issuances of shares are valued using the fair value of the shares at the time of grant; issuances of options are valued using the Black-Scholes model with assumptions based on historical experience and future expectations.
Asset Retirement Obligation
Included in the assets acquired in the December 2015 Asset Purchase Agreement, the Company obtained an obsolete wind turbine located in Leeuwarden, Netherlands. In accordance with ASC 410, Asset Retirement and Environmental Obligations and pursuant to the guidelines of the City of Leeuwarden for land leases, the Company was required to decommission the turbine including disassembly and removal of wind turbine generator and tower, substation and interconnection facilities, as well as foundation for the tower, and to provide for restoration of the property to its original state. The Company recorded an initial asset retirement obligation at fair value as a liability in the period in which a legal obligation associated with the retirement of tangible long-lived assets occurs. The liability is accreted each period over the maximum term of the contractual agreements. The Company records the offsetting asset to the initial obligation as an increase to the carrying amount of the related long-lived asset and depreciates that cost over the maximum term of the contractual agreements. In July 2020, the asset was dismantled, and the asset retirement obligation eliminated. (See Note 16).
Financial Liabilities and Equity Instruments
Financial liabilities and equity instruments are classified and accounted for as debt or equity according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Marketing, Advertising and Promotional Costs
As required by Generally Accepted Accounting Principles of the United States, the Company records marketing costs as an expense in the year to which such costs relate. The Company does not defer amounts on its year-end consolidated balance sheets with respect to marketing costs. Advertising costs are expensed as incurred.
| F-11 |
Segment Reporting
ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, establishes standards for the way that public business enterprises report information about operating segments in the Company’s consolidated financial statements. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and assess performance. The Company has reportable segments in the United States, Canada and The Netherlands (discontinued operations).
| December 31 | December 31 | |||||||
| 2021 | 2020 | |||||||
| Gross Profit | ||||||||
| United States | ||||||||
| Europe-discontinued operations | ||||||||
| Canada | ||||||||
| $ | $ | |||||||
| Net Loss | ||||||||
| United States | ||||||||
| Europe-discontinued operations | ||||||||
| Canada | ||||||||
| $ | $ | |||||||
| Assets | ||||||||
| United States | ||||||||
| Europe-discontinued operations | ||||||||
| Canada | ||||||||
| $ | $ | |||||||
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
The Company reports loss per share in accordance with ASC 260, “Earnings per Share”. Basic loss per share is computed by dividing net loss by the weighted average number of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock and other potentially dilutive securities outstanding during the year. To the extent that the fully diluted shares exceed the authorized capital at any point in time, action will be taken by the Executive Management and Board of the Company to ensure those shares are available for distribution.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
| F-12 |
The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted by the date of the statement of financial position.
Equity-Settled Transactions
The costs of equity-settled transactions with employees are measured by reference to the fair value at the date on which they are granted.
The costs of equity-settled transactions are recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). The cumulative expense is recognized for equity-settled transactions at each reporting date until the vesting date reflects the Company’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and the corresponding amount is represented in share-based compensation reserve.
No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the share-based payment arrangement or is beneficial to the employee as measured at the date of modification.
Inventory
Inventory and work in progress are valued at the lower of cost and net realizable value. The production cost of inventory includes an appropriate proportion of depreciation and production overheads based the ratio of indirect vs. direct costs. Cost is determined on the following bases: Raw materials and consumables are valued at cost on a first in, first out (FIFO) basis; finished products are valued at raw material cost, labor cost and a proportion of manufacturing overhead expenses.
Financial Instruments
ASC 820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides a fair value hierarchy prioritizing the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants.
| F-13 |
Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.
Level 3 - Significant unobservable inputs that cannot be corroborated by market data.
The Company’s policy is to recognize transfers into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were no such transfers during the periods being reported.
Customer Concentration
Due to the infancy of the Company’s market penetration, current sales are concentrated on a limited number of customers.
Cash and Cash Equivalents
The
Company considers all highly liquid instruments with a maturity of three months or less to be cash equivalents. The Company maintains
the majority of its cash accounts at a commercial bank. Cash balances are insured by the Canada Deposit Insurance Corporation (“CDIC”)
up to CAD$
Note 3: Convertible Notes Payable
On
June 30, 2017, Gold and Silver Mining of Nevada, Inc. held unsecured, matured and past due convertible notes payable of $
The following summarizes the above notes including notes forgiven:
| ● | Original
note of $ | |
| ● | Original
note of $ | |
| ● | Original
note of $ | |
| ● | Original
note of $ | |
| ● | All
of the above notes were convertible at $ |
Following
the Merger, $
On
May 14, 2020, $
On
June 15, 2020, $
| F-14 |
On
June 29, 2020, $
As
a result of the above conversions, there are $
On
May 10, 2018, the Company entered into a $
In
exchange for the above note dated May 10, 2018, the holder advanced the Company an additional $
On
September 10, 2019, the Company issued two notes each for $
On
November 5, 2019, the Company entered into a convertible loan agreement. This loan agreement is for the aggregate amount of $
On
April 2, 2020, the Company issued two convertible promissory notes of $
On
September 14, 2020, the Company issued a Senior Secured Convertible Promissory Note in the amount of $
| F-15 |
On
February 22, 2021, to settle accounts payables due to various entities, the Company issued Convertible Promissory Notes totaling $
During
2020 the Company recognized $
Note 4: Convertible Notes Payable, Related Parties
On
April 18, 2019, the Company entered into a convertible loan agreement with an entity that is controlled by an officer of the Company.
This loan agreement was for the aggregate amount of $
On
September 10, 2019, the Company entered into two convertible promissory notes with an entity controlled by an officer of the Company
each in the amount of $
Compensation
was due to members of the executive management team in the amount of $
Compensation
due to members of the executive management team in the amount of $
Note 5: Notes Payable, Related Parties
The
Company recorded interest expense for the amortization of the discount related party convertible notes in the amount of $
Promissory
notes amounting to $
| F-16 |
During
2021, a related party loaned the Company, on a short-term basis, $
Note 6: Other Loans Payable
On
January 25, 2019, the Company entered into a loan agreement for $
On
August 4, 2020, the Company entered into a loan agreement for $
The
City Development Fund (“SOFIE”) in Rotterdam, The Netherlands, is an initiative of the municipality of Rotterdam and is made
possible through funds from the European Regional Development Fund. The SOFIE fund was created in the summer of 2013 with the goal of
making the Rotterdam City Ports more attractive to new entrepreneurship.
On
February 2, 2021, the company entered into a short-term loan agreement in the amount of $
Note 7: Intellectual Property
On December 21, 2015, the Company, through its subsidiary, RWI, agreed to purchase the intangible assets of WWT/DRM, companies incorporated in Netherlands. WWT/DRM developed and exclusively owned all necessary know-how, patents, patent applications and technology allowing for the manufacture and commercial sale of water treatment and processing systems using renewable energy. This know-how and technology, at the time, was collectively known as the Dutch Rainmaker system. The resultant products remain the basis for the Company to deliver WaaS to its customers. The original purchase price in 2015 included stock and future royalty obligations based on sales of equipment. The Company evaluated the Intellectual Property for impairment as of December 31, 2020, and determined a full impairment was necessary. As part of the restructuring completed March 31, 2021, any obligation under the original agreements became the full responsibility of RHBV who, in turn, issued shares in RHBV to satisfy these obligations (see Note 19 on Discontinued Operations).
| F-17 |
Note 8: Property and Equipment
Demonstration Equipment
Demonstration equipment is stated at cost less accumulated depreciation and any recognized impairment loss. Cost includes the original purchase price of the asset and any costs attributable to bringing the asset to its working condition for its intended 10-year useful life.
The Company has created demonstration equipment to allow it to show a working version of its technology and equipment to customers and organizations. The demonstration equipment was completed in September 2017 therefore the Company commenced depreciation in the 4th quarter of 2017.
Depreciation
for the demonstration equipment is at a rate estimated to write off the cost of the equipment less its estimated residual value by an
equal annual amount over its expected useful life. The residual value and expected useful life of the demonstration equipment is reviewed
and adjusted, if appropriate, at the end of each reporting period. The depreciation period for the Company’s demonstration equipment
is
As part of the restructuring, Demonstration Equipment remains with RHBV and is included in assets of discontinued operations. See Note 19 for full details.
Note 9: Common Stock
Common Stock
As at December 31, 2020, the Company has authorized common stock with $ par value with shares outstanding. At December 31, 2021, shares are outstanding. The following table details the number of common stock issued:
Number of Stock | ||||
| Balance, December 31, 2019 | ||||
| Shares issued for debt | ||||
| Private placements | ||||
| Shares issued for services | ||||
| Conversion of convertible promissory notes | ||||
| Balance, December 31, 2020 | ||||
| Private placements | ||||
| Conversion of convertible promissory notes | ||||
| Shares cancelled | ( | ) | ||
| Balance, March 31, 2021 | ||||
| Balance, June 30, 2021 | ||||
| Private placements | ||||
| Balance, September 30, 2021 | ||||
| Balance, December 31, 2021 | ||||
In
Q1 2020, the remaining two convertible promissory notes issued on September 10, 2019 totaling $
On February 28, 2020, the Company issued restricted common stock at $ per stock in fulfillment of a services contract entered into September 11, 2019.
In
Q1 2020, the Company completed a private placement raising gross proceeds of $
In
Q2 2020, the Company completed a private placement raising gross proceeds of $
In
Q2 2020, the Company issued shares of common stock for the conversion of $
| F-18 |
In
Q2 2020, the Company issued shares of common stock for the conversion of $
On
June 15, 2020, the Company executed a contract for the provision of services. The first invoice of that contract totaled $
On
August 7, 2020, under the above contract for services, the Company issued shares of restricted common stock valued at $
per share, the closing market price on July 31, 2020. This issuance related to the second invoice in the amount of $
December
2020, the Company sold shares for total proceeds of $
On February 8 & 9, 2021, the Company issued a total of restricted shares upon conversion of promissory notes. (See Note 4 for details).
On March 4, 2021, the Company issued a total of restricted shares as settlement of various debts. (See Note 3 for details).
On March 31, 2021, as part of the restructuring agreement, shares were returned to the Company and subsequently cancelled.
On
September 8, 2021, the Company sold shares for total proceeds of $
Note 10: Related Party Transactions
Outstanding
compensation and expense reimbursements due to consultants engaged by the Company $
The
Company’s head office location in Peterborough, Ontario, Canada, is leased from an entity that was controlled by the Executive
Chairman of the Company. Lease expense for the period is $
Refer to other related party payables in Notes 4 and 5.
The Company entered into an agreement regarding Royalties Payable in 2020, however, as part of the restructuring completed March 31, 2021, the Company no longer bears any responsibility for financial obligations under this agreement. See further discussion in Note 19.
The Company has prepaid expenses to related
parties in the amount of $
Note 11: Commitments and Contingencies
In the ordinary course of operating the Company’s business, it may, from time to time, be subject to various claims or possible claims. Management’s view that there are no claims or possible claims that if resolved would either individually or collectively result in a material adverse impact on the Company’s financial position, results of operations, or cash flows. These matters are inherently uncertain, and management’s view of these matters may change in the future.
On
April 27, 2018, the Company located a judgement dated August 8, 2016 against six Defendants including a former subsidiary of the Company
as well as a predecessor of the Company as currently named and constituted. The amount of the judgement including costs is $
| F-19 |
Note 12: Inventory
Inventory is stated at the lower of cost or market. Cost is recorded at standard cost, which approximates actual cost, on the first-in first-out basis.
| Year ended December 31 | Year ended December 31 | |||||||
| 2021 | 2020 | |||||||
| Finished Goods | $ | $ | ||||||
| Components | - | - | ||||||
| Discontinued operations | - | |||||||
| Total Inventory | $ | $ | ||||||
Note 13: Leases
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate.
The following are the lease related assets and liabilities recorded on the Company’s consolidated balance sheet.
Year Ended December 31 | Year ended December 31 | |||||||
| 2021 | 2020 | |||||||
| Classification on Balance Sheet | ||||||||
| Assets | ||||||||
| Operating lease right of use assets | - | |||||||
| Operating lease right of use assets-discontinued operations | - | |||||||
| Total lease assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Operating lease liability | - | |||||||
| Operating lease liability-discontinued operations | - | |||||||
| Total lease liability | $ | $ | ||||||
The
lease expense for the period ended December 31, 2021, from continuing operations is $
Note 14: Stock Option Plan
The Company’s 2017 Equity Incentive Plan (the “Option Plan”) was established to attract, retain, incentivize and motivate officers and employees of, consultants to, and non-employee directors providing services to the Company and its subsidiaries and affiliates and to promote the success of the Company by providing such participating individuals with a proprietary interest in the performance of the Company. Effective July 3, 2017, at the time of completion of the Merger, the Board adopted the Option Plan under which up to twenty percent of the outstanding shares of common stock of the Company (“Shares”) may be reserved for the issuance of options to purchase Shares (“Options”). The previous Option Plan was administered by the Board, which has all of the powers necessary to enable it to carry out its duties under any Option Plan, including the power and duty to construe and interpret any Option Plan and to determine all questions arising under it. Under the Option Plan, “Eligible Individuals” includes officers, employees, consultants, advisors and non-employee directors providing services to the Company and its subsidiaries and affiliates. In the future, the Board will determine which Eligible Individuals will receive grants of options.
| F-20 |
Commencing July 3, 2017, in fulfillment of conditions contained in the share exchange agreement and other contracts, the Board authorized the grant of the following Options:
| ● |
Options to four individuals who are officers and/or directors as compensation for the termination of certain RWI stock option rights;
these options are fully vested, expire on and are exercisable at a price of $ | |
| ● |
Options to seven individuals who are officers and/or directors or contractual service providers; one third of these Options vested
on while the balance vest monthly over a period of 24 months; they have a term of years and are exercisable at a price
of $ | |
| ● |
Options to a director; of these Options vested on while the balance vest monthly over a period of 24 months;
they have a term of years and are exercisable at a price of $ | |
| ● |
Options to an officer; of these options vested on October 10, 2017; vested on January 13, 2018 and the balance vest
monthly over a period of 24 months thereafter; they have a term of years and are exercisable at a price of $ | |
| ● |
Options to a contractual service provider; one third of these options vested on July 4, 2017; the balance vest monthly over a period
of 24 months thereafter; they have a term of years and are exercisable at a price of $ | |
| ● |
Options to a contractual service provider; one third of these options vested on July 4, 2017; the balance vest monthly over a period
of 24 months thereafter; they have a term of years and are exercisable at a price of $ | |
| ● |
Options to a contractual service provider; one third of these options vested on July 4, 2017; the balance vest monthly over a period
of 24 months thereafter; they have a term of years and are exercisable at a price of $ | |
| ● |
Options to a contractual service provider; exercisable at $ | |
| ● |
Options to the five members of the Company’s Strategic Advisory Board; vesting monthly commencing July 3, 2017 over a period
of 24 months, have a -year term and are exercisable at a price of $ | |
| ● |
Options to a contractual service provider; of these options vested on February 15, 2018; the balance vest monthly over a
period of 24 months thereafter; they have a term of years and are exercisable at a price of $ | |
| ● | On
February 15, 2018, the Board authorized the grant of options to a newly appointed Director of the Board; vested on
February 15, 2018 with the remainder vesting monthly over a period of 24 months with a term of years and exercisable at a price
of $ | |
| ● | On
April 15, 2018, the Board authorized the grant of options to a newly appointed Director of the Board; vested on April
15, 2018 with the remainder vesting monthly over a period of 24 months with a term of years and exercisable at a price of $ |
| F-21 |
| ● | Effective September 30, 2019, the Board of Directors approved the immediate vesting of all remaining options resulting in the immediate recognition of the of the remaining option expense. | |
| ● | In January 2020, all holders of options agreed to waive their right to exercise the above options. | |
| ● | On January 22, 2020, the Company entered into a three-year consulting agreement with a third party for consulting and business development services. The contract includes warrants as follows: |
| ○ |
exercisable at $ | |
| ○ |
exercisable at $ | |
| ○ |
exercisable at $ |
| On
December 22, 2020, the Company terminated this agreement thereby cancelling the 2nd and 3rd warrant blocks.
The first tranche of remain in effect under the same conditions and expiring | ||
| ● | On
January 21, 2020, the Company entered into a -year consulting agreement with a company controlled by its new CEO. The contract
included warrants with an exercise price of $ | |
| ● | On
October 1, 2020, the Company entered into a consulting agreement with an Advisor which granted warrants in full compensation for
services. It included warrants at an exercise price of $ | |
| ● | On
April 1, 2021, the Company granted options as part of an amendment to an Executive Consultant’s contract;
options vest per month commencing April 1, 2021, with a term of years and exercisable at a price of $ | |
| ● | On
December 20, 2021, the Company granted options as compensation for two new Board Members. options vested immediately
for each of the two board members and the remaining options vest over maximum of , with a term of years and exercisable
at $ | |
| ● | For
the period ended December 31, 2020, the Company recorded a stock option expense of $ |
| Warrants and Options | ||||||||||||||
| Vested | Granted | Vested | Non-Vested | |||||||||||
| Dec 31, 2020 | To Dec 31, 2021 | To Dec 31, 2021 | To Dec 31, 2021 | |||||||||||
| ● | The assumptions used in the Company’s Black Scholes option pricing is as follows: |
| Stock Price | $ | -$ | ||
| Exercise Price | $ | -$ | ||
| Number of Options Granted | ||||
| Dividend Yield | % | |||
| Expected Volatility | - | % | ||
| Weighted Average Risk-Free Interest Rate | - | % | ||
| Term (in years) | - |
| F-22 |
Note 15: Income Taxes
The
Company recognizes deferred tax assets and liabilities using the asset and liability method. Deferred tax assets and liabilities are
recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect
when these differences are expected to reverse. This method requires the reduction of deferred tax assets by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
As of December 31, 2020, the Company’s deferred tax assets relate to net operating loss (“NOL”) carryforwards that
were derived from operating losses and stock-based compensation from prior years. A full valuation allowance has been applied to the
Company’s deferred tax assets. The valuation allowance will be reduced when and if the Company determines it is more likely than
not that the related deferred income tax assets will be realized. At December 31, 2021, the Company had federal net operating loss carryforwards,
which are available to offset future taxable income, of $
| Year ended December 31 | Year ended December 31 | |||||||
| 2021 | 2020 | |||||||
| Net Loss | ( | ) | ( | ) | ||||
| Add back: | ||||||||
| Stock Compensation | ||||||||
| Amortization of Debt Discount | ||||||||
| Taxable Income | ( | ) | ( | ) | ||||
| Tax Rate | % | % | ||||||
| Deferred Tax Asset: | ||||||||
| Net Operating (Gain) Loss | ||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Net Deferred Asset | ||||||||
Note 16: Asset Retirement Obligation
The
Company recorded an asset retirement obligation of $
Note 17: European Commission Grant
In
Q3 2019, RHBV was awarded a €
| F-23 |
Note 18: Investments
The
Company will hold, based on an investment of $
Note 19: Discontinued Operations
On March 31, 2021, the Company, including Rainmaker-Ontario, came to an agreement with Rainmaker Holland B.V. (“RHBV”), Dutch Rainmaker B.V. and Wind en Water Technologie Holding B.V. These companies were considered related parties on that date due to stock ownership of more than 10%. The parties agreed to an exchange of contractual obligations, debt owed, an exchange of shares in full settlement of all obligations among the parties. The resultant Financial Statements, in accordance with ASC 205-20-45-1E, reflect the impact of these exchanges to the Company. These initiatives were taken subsequent to the mutual decision among the parties to cancel the Sphere 3D Asset Purchase Agreement (see Note 1, “Merger with Sphere 3D”). After the termination of that agreement, the Company and RHBV decided to restructure to optimize and broaden access to capital markets. The Company and RHBV, as mutual shareholders in each other’s companies, continue to pursue the mission and objective of providing low-cost water to communities and commercial entities in need of water solutions.
| Change to APIC for Disposition of Discontinued Operations | ||||
| Notes Payable moved to RHBV | $ | |||
| Accrued Interest on Notes Payable | ||||
| Royalties Payable moved to RHBV | ||||
| Elimination of Intercompany Loans | ( | ) | ||
| Return Common Shares for Cancellation () | ||||
| Accumulated Losses of Discontinued Operations | ||||
| Total change to APIC for Disposition of Discontinued Operations | $ |
Note 20: Subsequent Events
On
February 3, 2022 the Company signed a Term Sheet with an investor to lend the Company up to $
The Company was up-listed to OTCQB on March 17, 2022.
| F-24 |
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.
| Rainmaker Worldwide Inc. | ||
| Date: March 31, 2022 | By: | /s/ Michael O’Connor |
| Michael O’Connor | ||
| President, Chief Executive Officer and Interim Chief Financial Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Michael O’Connor | Director | March 31, 2022 | ||
| Signature | Title | Date | ||
| /s/ James Ross | Director | March 31, 2022 |
| 28 |