ORIGINCLEAR, INC. This Quarterly Report contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:
? business strategy;
? financial strategy;
? intellectual property;
? production;
? future operating results; and
? plans, objectives, expectations and intentions contained in this report
that are not historical.
All statements, other than statements of historical fact included in this report, regarding our strategy, intellectual property, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words "could," "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. These statements may be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as in this report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.
Organizational History
?OriginClear's Twitter Account (https://twitter.com/OriginClear) ?OriginClear's Facebook Page (https://www.facebook.com/OriginClear) ?OriginClear's LinkedIn Page (https://www.linkedin.com/company/2019598)
The information we post through these social media channels may be deemed
material. Accordingly, investors should monitor these accounts, in addition to
following the company's press releases,
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We have not incorporated by reference into this report the information in, or that can be accessed through, our website or social media channels, and you should not consider it to be a part of this report.
Overview of Business
Our mission is to provide expertise and technology to help make clean water available for all. Specifically, we have the following initiatives:
1. We license our technology on a limited basis to treat heavily
polluted waters and also to remove harmful micro-contaminants from
drinking water, using minimal energy, chemicals, and materials.
2. A versatile designer and builder of municipal, utility, commercial,
industrial, agricultural and specialty water purification, treatment
and conveyance systems based in Texas . This company, Progressive
Water Treatment Inc. (PWT), which we acquired in 2015, just
celebrated its 20th anniversary and has a solid industry reputation
for quality and innovation. We have integrated our Modular Water
Systems (MWS) division with PWT, adding a synergy of innovative
patented prefabricated systems and a visionary chief engineer, Dan
Early .
3. Leveraging the expertise of PWT/MWS, we are building a network of
customer-facing water brands to expand our global market presence
and our technical expertise.
4. We develop new business models, such as Water As A Career™ and
WaterChain™, both of which are designed to help achieve funding for
water treatment and management systems, and the entrepreneurs
selling these. We have completed a Proof of Concept pilot program
for Water As A Career and intend to expand it, as finances allow.
WaterChain is in a research and development phase.
5. We are expanding our network of activities internationally through
our partnership with Philanthroinvestors Inc. , and applying their
successful real estate philanthropic investing practices to the
water industry.
Water is our most valuable resource, and the mission of
Technology Licensing Division
For its first eight years of operations,
The Technology
The electro-chemical process was then extended, first to cleaning up oil and gas waste water and most recently, to industrial, agricultural and urban effluents. These water treatment applications are entirely electrochemical in nature and do not rely on algae for its cleaning capabilities, which is a separate application of the technology. EWS is designed to be an early step in removal of oils, solids and pathogens; reducing the work that more expensive, downstream processes such as Ultra Filtration or Reverse Osmosis must do, therefore enabling more cost-efficient and high-volume water cleanup overall.
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In March of 2016,
Today, we are capable of pairing the two technologies as EWS:AOx™, or
separately, as the application requires.
Overall, the system has shown a dramatic reduction in Total Organic Compounds which includes all forms of organic contamination, solids, miscible or dissolved, to meet new stringent global discharge requirements.
Technology Division Milestones
On
On
On
The alliance is intended to capitalize on efforts by the Company's licensee in
OriginClear Group™
Outsourcing is a fast-growing reality in water treatment. Tougher regulations,
water scarcities and general outsourcing trends are driving industrial and
agricultural water treatment users to delegate their water problem to service
providers. As Global Water Intelligence pointed out in their report on
The Company cautions that suitable acquisition candidates may not be identified and even if identified, the Company may not have adequate capital to complete the acquisition and/or definitive agreement may not be reached. Internally-incubated businesses are an ongoing laboratory, and similarly, may not become commercial successes.
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Group Development Milestones
Water As A Career™
On
The first field pilot of the experimental program, a pool-cleaning system rental application, was internally funded by the Company, and it is the Company's intention to continue to develop water equipment career programs using its own resources, under the Water As A Career (WAAC) brand.
The Company intends to develop the Investor Water marketplace concept to connect investors with secured water projects at some stage in the future. The Company may modify or abandon this program at any time.
On
As disclosed in its annual report, the Company agreed to renew its 2018 license
with inventor
Water Technologies International
On
WaterChain, Inc.
On
With the PWT and future potential acquisitions, the creation of the Modular
Water Systems product line as an integral part of PWT, and integrating its core
technology,
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PWT's Business
Since 1995, PWT has been designing and manufacturing a complete line of water treatment systems for municipal, industrial and pure water applications. PWT designs and manufactures a complete line of water treatment systems for municipal, industrial and pure water applications. Its uniqueness is its ability to gain an in-depth understanding of customer's needs and then to design and build an integrated water treatment system using multiple technologies to provide a complete, not partial solution.
To help address customer needs, PWT utilizes a wide range of technologies,
including chemical injection, media filters, membrane, ion exchange and SCADA
(supervisory control and data acquisition) technology in turnkey systems. The
Company also offers a broad range of services including maintenance contracts,
retrofits and replacement assistance. In addition, PWT rents equipment in
contracts of varying duration. Customers are primarily served in
PWT is also a certified manufacturer of products using
PWT Milestones
In the first quarter of 2019, the Company increased the number of the manufacturer's representatives for its operating units, PWT and Modular Water Systems ("MWS").
On
On
Modular Water Systems
On
With PWT and other companies as fabricators and assemblers, MWS designs,
manufactures and delivers prefabricated water transport (pump stations) and
wastewater treatment plant ("WWTP") products to customers and end-users that
have to clean their own wastewater. It uses Structurally Reinforced
Thermoplastic ("SRTP") materials to focus on patented developing water and
wastewater collection, conveyance, and treatment systems that have high
performance and sustainability. Typical customers may include schools, small
communities, institutional facilities, real estate developments, factories, and
industrial parks.
MWS designs, manufactures and implements advanced prepackaged wastewater treatment, pump stations and custom systems with primary focus on decentralized opportunities away from the very competitive large municipal wastewater treatment plants. These decentralized opportunities include: rural communities, housing developments, industrial sites, schools and many more.
Today, MWS is fully integrated with PWT in
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Patents
On
On
We may contract with distribution channels (equipment distributors, oil service companies, water treatment companies, system integrators and engineering companies) of our choice to act on our behalf for the purpose of selling and integrating the Early IP.
The Early IP consists of combined protection on the materials and configurations of complete packaged water treatment systems, built into containers. The parents consist of the following:
Date Patent Expiration
# Description Patent No. Issued Date
1 Wastewater System & Method US 8,372,274 B2
Applications: WIPO,
Mexico 02/12/13 07/16/31
Steel Reinforced HDPE Rainwater
2 Harvesting US 8,561,633 B2 10/22/13 05/16/32
3 Wastewater Treatment System CIP US 8,871,089 B2 10/28/14 05/07/32
4 Scum Removal System for Liquids US 9,205,353 B2 12/08/15 02/19/34
Portable, Steel Reinforced HDPE Pump
5 Station CIP US 9,217,244 B2 12/22/15 10/20/31
With the rising need for local, point-of-use or point-of-discharge water treatment solutions, the Modular Water Systems licensed IP family is the core to a portable, integrated, transportable, plug-and-play system that, unlike other packaged solutions, can be manufactured in series, have a longer life and are more respectful of the environment.
The common feature of this IP family is the use of a construction material (SRTP), for the containers that is:
? more durable: an estimated 75 to 100-year life cycle as opposed to a
few decades for metal, or 40 to 50 years maximum for concrete;
? easier to manufacture: vessels manufacturing process can be automated; and
? recyclable and can be made out of biomaterials
In addition, patents US 8,372,274 and US 8,871,089 (1 and 3) relate to the use of vessels or containers made out of this material combined with a configuration of functional modules, or process, for general water treatment.
Other subsequent patents, while keeping the original claims and therefore making them stronger, focus on more targeted applications. These patents outline a given combination of modules engineered inside the vessel to address a specific water treatment challenge.
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Expansion of the PWT and MWS Business-Lines
Beginning with its first installation, PWT built MWS components. PWT and MWS are now fully integrated as a single profit and manufacturing center.
In
On
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Critical Accounting Policies
Revenue Recognition
We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.
Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss, as it is determined. Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company's goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, valuations of non-cash capital stock issuances and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Fair Value of Financial Instruments
Fair value of financial instruments requires disclosure of the fair value
information, whether or not recognized in the balance sheet, where it is
practicable to estimate that value. As of
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Recently Issued Accounting Pronouncements
Management reviewed currently issued pronouncements during the three months
ended
Results of Operations for the three months ended
Revenue and Cost of Sales
For the three months ended
Our gross (loss) profit was
Selling and Marketing Expenses
For the three months ended
General and Administrative Expenses
General and administrative expenses were
Research and Development Cost
Research and development cost were
Depreciation and amortization expense
Depreciation and amortization expense were
Other Income and (Expenses)
Other income and (expenses) for the three months ended
Net Income/(Loss)
Our net income (loss) for the three months ended
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Results of Operations for the nine months ended
Revenue and Cost of Sales
For the nine months ended
Our gross profit was
Selling and Marketing Expenses
For the nine months ended
General and Administrative Expenses
General and administrative expenses were
Research and Development Cost
Research and development cost for the nine months ended
Depreciation and amortization expense
Depreciation and amortization expense were
Other Income and (Expenses)
Other income and (expenses) for the nine months ended
Net Income/(Loss)
Our net income (loss) for the nine months ended
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Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, raising additional capital and increasing sales. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing.
At
During the first nine months of 2020, we raised an aggregate of
Net cash used in operating activities was
Net cash flows used in investing activities for the nine months ended
Net cash flows provided by financing activities was
We do not have any material commitments for capital expenditures during the next twelve months. Although our proceeds from the issuance of preferred stock together with revenue from operations are currently sufficient to fund our operating expenses in the near future, we will need to raise additional funds in the future so that we can expand our operations. Therefore, our future operations are dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Additional capital may not be available on acceptable terms or at all. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.
We have estimated our current average burn, and believe that we have assets to ensure that we can function without liquidation for a limited time, due to our cash on hand, growing revenue, and our ability to raise money from our investor base. Based on the aforesaid, we believe we have the ability to continue our operations for the immediate future and will be able to realize assets and discharge liabilities in the normal course of operations. However, there cannot be any assurance that any of the aforementioned assumptions will come to fruition and as such we may only be able to function for a short time.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.
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