UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
FOR
THE QUARTERLY PERIOD ENDED:
For the transition period from __________ to __________
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)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Ticker symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark
whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 13, 2024,
there were
TABLE OF CONTENTS
| Page | ||
| PART I | 1 | |
| Item 1. | Financial Statements. | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 34 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 43 |
| Item 4. | Controls and Procedures. | 43 |
| PART II | 44 | |
| Item 1. | Legal Proceedings. | 44 |
| Item 1A. | Risk Factors. | 44 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 44 |
| Item 3. | Defaults Upon Senior Securities. | 44 |
| Item 4. | Mine Safety Disclosures. | 44 |
| Item 5. | Other Information. | 44 |
| Item 6. | Exhibits. | 44 |
| SIGNATURES | 45 | |
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORIGINCLEAR, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Current assets held-for-sale | ||||||||
| Fair value investment in securities | ||||||||
| Prepaid expenses | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Net property and equipment | ||||||||
| Net property and equipment held-for-sale | ||||||||
| NET PROPERTY AND EQUIPMENT | ||||||||
| OTHER ASSETS | ||||||||
| Receivable on sale of asset | ||||||||
Non-current assets held- for-sale | ||||||||
| Fair value investment-securities | ||||||||
| Trademark | ||||||||
| TOTAL OTHER ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and other payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Cumulative preferred stock dividends payable | ||||||||
| Customer deposit | ||||||||
| Secured loans payable | ||||||||
| Loans payable, SBA | ||||||||
| Derivative liabilities | ||||||||
| Series F 8% Preferred Stock, | ||||||||
| Series G 8% Preferred Stock, | ||||||||
| Series I 8% Preferred Stock, | ||||||||
| Series K 8% Preferred Stock, | ||||||||
| Convertible promissory notes, net of discount of $ | ||||||||
| Current liabilities held-for-sale | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Long Term Liabilities | ||||||||
| Convertible promissory notes, net of discount of $ | ||||||||
| TOTAL LONG TERM LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 13) | ||||||||
| Series J Convertible Preferred Stock, | ||||||||
| Series L Convertible Preferred Stock, | ||||||||
| Series M Preferred Stock, | ||||||||
| Series O 8% Convertible Preferred Stock, | ||||||||
| Series P Convertible Preferred Stock, | ||||||||
| Series Q 12% Convertible Preferred Stock, | ||||||||
| Series R 12% Convertible Preferred Stock, | ||||||||
| Series S 12% Convertible Preferred Stock, | ||||||||
| Series U Convertible Preferred Stock, | ||||||||
| Series W 12% Convertible Preferred Stock, | ||||||||
| Series Y Convertible Preferred Stock, | ||||||||
| SHAREHOLDERS’ DEFICIT | ||||||||
| 1,000 and 1,000 shares of Series C issued and outstanding, respectively | - | - | ||||||
| Subscription payable for purchase of equipment | ||||||||
| Additional paid in capital - Common stock | ||||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying Notes to Consolidated Financial Statements.
1
ORIGINCLEAR, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross (loss) profit | ( | ) | ( | ) | ( | ) | ||||||||||
| Operating expenses | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Other income | ||||||||||||||||
| Impairment of receivable from SPAC | ( | ) | ||||||||||||||
| Gain on write off of loans payable | ||||||||||||||||
| Unrealized loss on investment securities | ( | ) | ||||||||||||||
| (Loss) gain on conversion of stock | ( | ) | ||||||||||||||
| Gain (loss) on net change in derivative liability and conversion of debt | ( | ) | ( | ) | ||||||||||||
| Interest and dividend expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) from continuing operations | ( | ) | ( | ) | ||||||||||||
| Net loss from assets held-for-sale | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
2
ORIGINCLEAR, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Deficit
(Unaudited)
| SIX MONTHS ENDED JUNE 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock | Mezzanine | Common Stock | Additional Paid-in- | Subscription | Other Comprehensive | Noncontrolling | Accumulated | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Equity | Shares | Amount | Capital | Payable | Loss | Interest | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
| Common stock issued for cash per equity financing agreement | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued upon conversion of convertible promissory note | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued at fair value for services | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series O Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Q Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series R Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series S Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series U Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Y Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Z Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series O Preferred stock dividends | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion settlement agreements | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for alternate vesting | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued through a Reg A to investors for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A Preferred stock granted to Series Y investors | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series B Preferred stock granted to investors | ||||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series K Preferred stock for Series W Preferred stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series Y Preferred stock through a private placement | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series R Preferred stock for WODI secured convertible note | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Exchange of Series X Preferred stock for WODI secured convertible note | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Return of investment for Series Y Preferred stock | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Redemption of common stock for note purchase agreements | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 (unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
3
ORIGINCLEAR,
INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Deficit
(Unaudited)
| SIX MONTHS ENDED JUNE 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock | Mezzanine | Common stock | Additional Paid-in | Subscription | Other Comprehensive | Noncontrolling | Accumulated | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Equity | Shares | Amount | Capital | Payable | loss | Interest | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||
| Rounding | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Shares redeemed/cancelled for Note Purchase Agreement | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Common stock issued for alternative vesting | - | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion settlement | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series O Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Q Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series R Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series S Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series W Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series Y Preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued at fair value for services | - | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series O Preferred stock dividends | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Issuances of Series Y Preferred stock through private placement | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series F Preferred stock for Series Q preferred stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exchange of Series K Preferred stock for Series W Preferred stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 (unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
4
ORIGINCLEAR, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ||||
| Net loss from assets held-for sale | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Common and preferred stock issued for services | ||||||||
| Loss (gain) on net change in valuation of derivative liability | ( | ) | ||||||
| Stock based compensation expense | ||||||||
| Preferred stock incentive compensation expense | ||||||||
| Debt discount recognized as interest expense | ||||||||
| Net unrealized loss on fair value of securities | ||||||||
| Impairment of receivable from SPAC | ||||||||
| Conversion and settlement value loss on WODI | ||||||||
| Gain on redemption of common stock | ( | ) | ( | ) | ||||
| Gain on write-off of payable | ( | ) | ||||||
| Change in Assets (Increase) Decrease in: | ||||||||
| Contracts receivable | ||||||||
| Contract asset | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Change in Liabilities Increase (Decrease) in: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Contract liabilities | ( | ) | ||||||
| Tax liability 83(b) | ( | ) | ||||||
| Trust escrow | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||
| Purchase of SPAC notes payable | ( | ) | ( | ) | ||||
| Payments received on long term asset | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments on loan payable, SBA | ( | ) | ( | ) | ||||
| Proceeds from line of credit | ||||||||
| Payments on line of credit | ( | ) | ||||||
| Proceeds from loans, merchant cash advance | ||||||||
| Payments on loans, merchant cash advance | ( | ) | ||||||
| Equity financing through the purchase of common shares | ||||||||
| Net payments on cumulative preferred stock dividends | ||||||||
| Proceeds from convertible secured promissory notes | ||||||||
| Proceeds from issuance of warrants | ||||||||
| Net proceeds for issuance of preferred stock for cash - mezzanine classification | ||||||||
| Net cash provided by financing activities | ||||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALAENTS END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Interest and dividends paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS | ||||||||
| Common stock issued at fair value for conversion of debt, plus accrued interest, and other fees | $ | $ | ||||||
| Issuance of Series O dividends | $ | $ | ||||||
| Preferred stock converted to common stock - mezzanine | $ | $ | ||||||
| Exchange of Series R Preferred Stock for WODI secured convertible note | $ | $ | ||||||
| Exchange from liability to mezzanine | $ | $ | ||||||
| Common stock issued as settlement | $ | $ | ||||||
| Exchange of Series X Preferred Stock for WODI secured convertible note | $ | $ | ||||||
| Shares issued for alternate vesting | $ | $ | ||||||
| Redemption of shares for secured promissory notes | $ | $ | ||||||
| Conversion of liability classified preferred stock to mezzanine | $ | $ | ||||||
5
ORIGINCLEAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
| 1. | Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements of OriginClear, Inc. (the “Company”) are unaudited and, in the opinion of management, include all adjustments, including all normal recurring items for a fair statement of the Company’s financial position and results of operations for all periods presented. All intercompany balances and transactions are eliminated in consolidation.
The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2023 (the Annual Report). The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
The consolidated financial statements included in this report have been prepared consistently with the accounting policies described in the Annual Report, except as noted, and should be read together with the Annual Report.
The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for fiscal year ending December 31, 2024.
OriginClear was founded as OriginOil® in 2007 and began trading on the OTC in 2008. In 2015, it was renamed OriginClear® to reflect its new mission to develop breakthrough businesses in the industrial water sector. Today, OriginClear is structured as the Clean Water Innovation Hub™ and intends to leverage its retail investor development capabilities to help bring potentially disruptive companies to market. For the foreseeable future, OriginClear will focus its entire capabilities to the success of its subsidiary, Water On Demand, Inc. (“WODI”).
In 2023, OriginClear combined three of its operating divisions into WODI in anticipation of a merger of such subsidiary with Fortune Rise Acquisition Corp (“FRLA”) a Special Purpose Acquisition Company. The definitive merger agreement between WODI and FRLA was announced on October 24, 2023: https://www.originclear.com/company-news/originclears-water-on-demand-and-fortune-rise-acquisition-corporation-announce-business-combination-to-create-nasdaq-listed-company.
WODI is now composed of three operating units: Modular Water Systems (“MWS”), Progressive Water Treatment (“PWT”), and Water on Demand (“WOD”), the last being a development stage business.
| ● | PWT is responsible for a significant percentage of the Company’s revenue, specializing in engineered water treatment solutions and custom treatment systems. |
| ● | MWS holds a worldwide, exclusive master license to the intellectual property of Daniel M. Early, which includes five patents and related intellectual property, know-how, and trade secrets (“Early IP”). In April 2023, OriginClear commissioned a valuation of the Early IP. MWS features products differentiated by the Early IP and complemented with additional know-how and trade secrets. |
| ● | WOD is an incubation of the Company that aims to offer private businesses water self-sustainability as a service, enabling them to pay for water treatment and purification services on a per-gallon basis. This model is commonly known as Design-Build-Own-Operate (“DBOO”). |
Going Concern
The accompanying 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. These financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2023, expressed substantial doubt about our ability to continue as a going concern.
The Company’s ability to continue
as a going concern and appropriateness of using the going concern basis depend on, among other things, achieving profitable operations
and receiving additional cash infusions. During the six months ended June 30, 2024, the Company obtained funds from the issuance
of convertible note agreements and from sale of its preferred stock. Management believes this funding will continue from its’ current
investors and from new investors. The Company generated revenue of $
6
Management believes the existing shareholders, the prospective new investors, and future sales will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the development of its core business operations. However, 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 the case of equity financing.
| 2. | Summary of Significant Accounting Policies |
This summary of significant accounting policies is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of OriginClear, Inc. and its subsidiaries: WODI, (which consists of operating divisions Progressive Water Treatment, Modular Water Systems and Water On Demand), Water On Demand #1, Inc., and OriginClear Technologies, Ltd. All material intercompany transactions have been eliminated upon consolidation of these entities.
Cash and Cash Equivalent
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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, but are not limited to, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, warranty reserves, inventory valuation, derivative liabilities and other conversion features, fair value investments, 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 under 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.
Net Earnings (Loss) per Share Calculations
Basic loss per share is calculated by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated similarly to basic earnings per share, except that the denominator is adjusted to include securities or other contracts to issue common stock that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. For the six months ended June 30, 2024, and 2023, the Company’s diluted earnings per share were the same as basic loss per share because the inclusion of any potential common shares would have been anti-dilutive due to the Company’s net losses.
7
Loss per share
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Loss to common shareholders (Numerator)- continuing operations | $ | ( | ) | $ | ||||
| Loss to common shareholders (Numerator) - related to assets held-for-sale | ( | ) | ( | ) | ||||
The Company excludes issuable shares from warrants, convertible notes and preferred stock, if their impact on the loss per share is anti-dilutive and includes the issuable shares if their impact is dilutive.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contract with Customers (“ASC 606”). 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.
Nature of Contracts and Performance Obligations
Engineered Water Treatment Solutions (PWT)
We design, manufacture, and install our customer water treatment systems for municipalities, industrial clients, and commercial entities. Our performance obligations typically include the delivery and installation of water treatment systems that meet specific customer requirements. Revenue from these contracts is recognized over time as performance obligations are satisfied, using a cost-cost input method, which reflects the extent of progress towards completion. The transaction price is determined based on fixed fees agreed upon in the contract, and any variable considerations, such as performance bonuses, are estimated at contract inception and constrained to avoid significant reversals.
Sales Price Calculation
The transaction price for each contract is determined based on the agreed-upon terms with the customer, indicating fixed fees and variable consideration where applicable. Variable consideration is estimated at contract inception and constrained to the extent that is it probable that significant reversal of recognized revenue will not occur when the uncertainty is resolved.
Contract Modifications
Contract modifications are accounted for when they create or change existing enforceable rights and obligations. The impact of modifications on transaction prices and performance obligations is recognized in the period when the modifications are approved.
Significant Judgements and Estimates
| ● | Estimating Progress Towards Completion: For long-term contracts, we use the cost-to-cost method to estimate progress towards completion, considering total costs incurred relative to total estimated costs to complete the project. |
| ● | Variable Consideration: Estimates to variable considerations are constrained to ensure that recognized revenue is not subject to significant reversals in future periods. |
8
Material Rights and Obligations
Our contracts may include material rights for customers to receive effective water treatment solutions and ongoing maintenance services. Our obligations include designing, manufacturing, delivering, installing, and maintaining water treatment systems, as well as providing continuous water treatment services under the DBOO model.
In accordance with ASC 280-10-50-38 through 50-41, we provide entity wide disclosures, including:
| ● | Product and Services: Our products and service offering include comprehensive water treatment solutions, such as design, manufacturing, and outsourced water treatment services. |
| ● | Geographical Areas: We primarily serve customers in the United States and Canada, with some international clients in Japan, Argentina and the Middle East. |
Significant Customers
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 are 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.
Contract receivables are recorded on contracts for amounts currently due based on progress billings, as well as retention, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations and not allocated to contract costs.
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 ASC 606. 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.
Contract receivables are recorded on contracts for amounts currently due based upon progress billings, as well as retention, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs.
9
Contract Receivable
The Company bills its customers in accordance with contractual agreements, which generally require billing on a progressive basis as work is completed. Credit is extended based on evaluation of each client’s financial condition, and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments.
Management performs a quantitative and qualitative review of past-due receivables from customers on a monthly basis. An allowance against uncollectible items is recorded for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. Reasonable means of collection may include multiple follow-up communications, renegotiation of payment terms, and if necessary, legal action.
The allowance for doubtful accounts
was $
Indefinite Lived Intangibles and Goodwill Assets
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Under this method, total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price allocation uses the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed, is recognized as goodwill.
The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year, or whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill as of June 30, 2024, and 2023, respectively, and determined there was no impairment of indefinite lived intangibles and goodwill.
Prepaid Expenses
The Company records expenditures that have been paid in advance for goods or services to be received in the future as prepaid expenses. These prepaid expenses are initially recorded as assets because they have future economic benefits. They are expensed as the benefits are realized.
The prepaid expenses balance was $
Property and Equipment
Property and equipment are stated at
cost. Gain or loss is recognized upon disposal of property and equipment, and the asset and related accumulated depreciation are removed
from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred, while expenditures for addition and improvement
are capitalized.
| Estimated Life | ||
| Machinery and equipment | ||
| Furniture, fixtures and computer equipment | ||
| Computer software | ||
| Vehicles | ||
| Leasehold improvements |
10
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Computer equipment and software | ||||||||
| Vehicles | ||||||||
| Demo Units | ||||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Gross property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | $ | $ | ||||||
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the event that the facts and circumstances indicate that the cost of any long-lived assets be impaired, an evaluation of recoverability would be performed in accordance with GAAP.
Depreciation expense during the six
months ended June 30, 2024, and 2023, was $
Long Term Asset Held for Sale
On March 1, 2021, the Company
issued
During the year ended December 31,
2022, after evaluating several offers, the Company accepted an offer of $
In January 2023, the Company accepted
the offer and on April 8, 2023, executed a deed for the sale of the property for $
11
The initial payment was received by
SMS Argentina (“SMS”), an accounting and consulting firm that was appointed by the Company as the Power of Attorney for the
property. SMS remitted taxes due on the transaction to the Federal Administration of Public Income (“AFIP”), the taxation
authority in Argentina. On June 21, 2023, the Company received a net payment of $
During 2023, the Company recorded a
receivable of $
Stock-Based Compensation
The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (“FASB”), where the value of the award is measured on the grant date and recognized over the vesting period.
For stock option and warrant grants issued and vesting to non-employees, the Company follows the authoritative guidance of the FASB, where the value of the stock compensation is determined based upon the measurement date, which is either (a) the date at which a performance commitment is reached, or (b) the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges are generally amortized over the vesting period on a straight-line basis. If there are no future performance requirements by the non-employee, option grants vest immediately, and the total stock-based compensation charge is recorded in the period of the measurement date.
Accounting for Derivatives
The Company evaluates all its financial instruments to determine if they qualify as derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments accounted for as liabilities, the derivative instrument is initially recorded at its fair value and revalued at each reporting date. Changes in the fair value are reported in the consolidated statements of operations.
For stock-based derivative financial instruments, the Company uses a probability-weighted average series Binomial lattice option pricing model to value the derivative instruments at inception and on subsequent valuation dates.
The classification of derivative instruments, including the determination of whether they should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified on the condensed consolidated balance sheet as current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Fair Value of Financial Instruments
Fair Value of Financial Instruments requires disclosure of the fair value information, whether or not recognized in the condensed consolidated balance sheet, where it is practicable to estimate that value. As of June 30, 2024, the balances reported for cash, contract receivables, costs in excess of billing, prepaid expenses, accounts payable, billing in excess of cost, and accrued expenses approximate the fair value due to their short maturities.
We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.
12
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring 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). These tiers include:
| ● | Level 1: Observable inputs such as quoted prices for identical instruments in active markets; | |
| ● | Level 2: Inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active. | |
| ● | Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Investment at fair value-securities, June 30, 2024 | $ | $ | $ | $ | ||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Convertible notes liability | $ | $ | $ | $ | ||||||||||||
| Warrants liability | ||||||||||||||||
| Total derivative liability, June 30, 2024 | ||||||||||||||||
| Balance as of January 1, 2024 | $ | |||
| Net loss on conversion of debt and change in derivative liabilities | ||||
| Balance as of June 30, 2024 | $ |
| June 30, | ||||
| 2024 | ||||
| Risk free interest rate | | |||
| Stock volatility factor | ||||
| Weighted average expected option life (in years) | . | |||
| Expected dividend yield |
Segment Reporting
The Company operates in a single business segment based on its organizational structure and the manner in which the operations are managed and evaluated.
13
Marketable Securities
The Company adopted ASU 2016-01, “Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires investments, except those accounted for under the equity method of accounting, or those that result in consolidation of the investee, to be measured at fair value, with changes in fair value recognized in net income. It also mandates the use the exit price notion for measuring the fair value of financial instruments for disclosure purposes and requires the separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. Additionally, it eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost.
The Company evaluated the impact of this standard on the condensed consolidated financial statements and determined it had a significant impact. The Company accounts for its investment in Water Technologies International, Inc. as available-for-sale securities, with unrealized gains on these securities recognized in net income.
Licensing agreement
The Company analyzed the licensing agreement using ASU 606 to determine the timing of revenue recognition. The licensing of intellectual property (“IP”) is distinct from the non-license goods or services and possesses significant standalone functionality that provides a benefit or value to the customer. This functionality does not change during the license period due to the licensor’s activities. Because the significant standalone functionality is delivered immediately, revenue is generally recognized when the license is delivered.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation used in the current condensed consolidated financial statements for comparative purposes. These reclassifications had no material effect on the Company’s previously issued financial statements.
Work-in-Process
The Company recognizes as an asset the accumulated costs for work-in-process on projects expected to be delivered to customers. Work-in-process includes the cost of materials and labor related to the construction of equipment to be sold to customers.
Recently Issued Accounting Pronouncements
Management has reviewed recently issued pronouncements and does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.
| 3. | WODI Assets and Liabilities Held-for-Sale, Discontinuing Operations |
On September 21, 2023, WODI entered into a merger agreement with PWT, whereby WODI was merged with PWT. This merger was completed to create better enterprise value for a potential merger opportunity with FRLA. In connection with the merger, PWT changed its name to Water on Demand, Inc.
On September 28, 2023, the Letter of Intent (“LOI”) executed on January 5, 2023, with WODI was amended to designate PWT as the new target of the acquisition. Under the amended LOI, FRLA proposed to acquire all the outstanding securities of the new combined WODI/PWT entity, based on certain material financial and business terms and conditions being met. The LOI is not binding on the parties and is intended solely to guide good-faith negotiations toward definitive agreements.
14
On October
24, 2023, FRLA and WODI entered into a definitive business combination agreement (the “BCA”). The transaction represents
a pro forma equity valuation of approximately $
On October 25, 2023, at the Special Meeting, FRLA shareholders approved a proposal to extend the period FRLA has to consummate its initial business combination by up to twelve-one-month extensions, from November 5, 2023, to November 5, 2024, subject to certain conditions.
On February 14, 2024, the Company and FRLA filed a registration statement on Form S-4 with the SEC which includes a preliminary proxy statement and prospectus in connection with the proposed business combination with WODI.
In accordance with ASC 205-20, a disposal of a component or a group of components should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when a component of or group of components meets the initial criteria for classification of held for sale to be classified as held for sale. Per the initial criteria for classification of held for sale, a component or a group of components, or a business or nonprofit activity (the entity to be sold), should be classified as held for sale in the period in which all of the following criteria are met:
| ● | Management, having the authority to approve the action, commits to a plan to sell the entity to be sold. |
| ● | The entity to be sold is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such entities to be sold. |
| ● | An active program to locate a buyer or buyers and other actions required to complete the plan to sell the entity to be sold have been initiated. |
| ● | The sale of the entity to be sold is probable (the future event or events are likely to occur), and transfer of the entity to be sold is expected to qualify for recognition as a completed sale, within one year, unless events or circumstances beyond an entity’s control extend the period required to complete the sale as discussed below. |
| ● | The entity to be sold is being actively marketed for sale at a price that is reasonable in relation to its current fair value. |
| ● | Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. |
15
Since the proposed business combination of WODI with FRLA meets all the initial criteria for classification of held for sale, the assets, liabilities, and operating results of WODI have been classified as held for sale in the period ending June 30, 2024. The condensed consolidated financial statements for the prior year ending in December 31, 2023, have been adjusted to reflect comparable information as follows:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Contracts receivable, net allowance of $ | ||||||||
| Contract assets (Note 7) | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets Held-For-Sale | ||||||||
| NET PROPERTY AND EQUIPMENT HELD-FOR-SALE | ||||||||
| NON-CURRENT ASSETS HELD-FOR SALE | ||||||||
| SPAC Class B common shares purchase cost (Note 10) | ||||||||
| Security deposit | ||||||||
| CURRENT LIABILITIES HELD-FOR-SALE | ||||||||
| Accounts payable and other payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Contract liabilities (Note 7) | ||||||||
| Tax liability 83(b) | ||||||||
| Customer deposit | ||||||||
| Warranty reserve | ||||||||
| Line of credit (Note 11) | ||||||||
| Secured loans payable | ||||||||
| Convertible secured promissory notes (Note 6) | ||||||||
| Total Current Liabilities Held-For-Sale | $ | $ | ||||||
Net Loss from Assets Held-For-Sale
| Six Months Ended June 30 | ||||||||
| 2024 | 2023 | |||||||
| Sales | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Selling and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Other income | ||||||||
| Impairment of receivable from SPAC | ( | ) | ( | ) | ||||
| Conversion and settlement value added to note purchase agreements (see Note 6) | ( | ) | ( | ) | ||||
| Preferred stock compensation expense | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| TOTAL OTHER (EXPENSE) INCOME | ( | ) | ( | ) | ||||
| NET LOSS FROM ASSETS-HELD-FOR-SALE | $ | ( | ) | $ | ( | ) | ||
16
| 4. | Capital Stock |
OriginClear, Inc. Preferred Stock
Series C
On March 14, 2017, the Board of Directors
authorized the issuance of
Series D-1
On April 13, 2018, the Company designated
Series F
On August 14, 2018, the Company designated
The Company may, in its sole discretion,
redeem all or any portion of the outstanding Series preferred stock at a price equal to the stated value plus any accrued but unpaid
dividends. The Company was required to redeem all outstanding shares of Series F preferred stock on September 1, 2020. During the six
months ended June 30, 2024, the Company exchanged an aggregate of
As of June 30, 2024, the Company had
Series G
On January 16, 2019, the Company designated
17
The Company may, at its sole discretion,
redeem all or any portion of the outstanding Series G preferred stock at a price equal to the stated value plus any accrued but unpaid
dividends. The Company was required to redeem such shares of Series G preferred stock on April 30, 2021. Pursuant to certain subscription
agreements entered into with purchasers of the Series G preferred stock, each purchaser received shares of the Company’s common
stock equal to an amount of, for each share of Series G preferred stock purchased, five hundred dollars ($
As of June 30, 2024, there were
Series I
On April 3, 2019, the Company designated
The Company has the right to redeem the Series I preferred stock at any time at a price equal to the stated value plus any accrued but unpaid dividends. The Company is required to redeem the Series I preferred stock two years following the date that is the later of the (i) final closing of the tranche (as designated in the applicable subscription agreement) or (ii) the expiration date of the tranche that such shares to be redeemed were a part of. The Company was required to redeem such shares of Series I between May 2, 2021, and June 10, 2021, at a price equal to the stated value plus any accrued but unpaid dividends.
The issuances of the shares were accounted
for under ASC 480-10-25-4, which requires liability treatment for certain mandatorily redeemable financial instruments, and the cumulative
dividends are recorded as interest expense. As of June 30, 2024, there were
Series J
On April 3, 2019, the Company designated
Series K
On June 3, 2019, the Company designated
The Company has the right to redeem the Series K preferred stock at any time at a price equal to the stated value plus any accrued but unpaid dividends. The Company was required to redeem the Series K shares two years following the date that is the later of the (i) final closing of the tranche (as designated in the applicable subscription agreement) or (ii) the expiration date of the tranche that such shares to be redeemed were a part of. The Company was required to redeem such shares of Series K between August 5, 2021 and April 24, 2022, at a price equal to the stated value plus any accrued but unpaid dividends.
18
The issuance of the shares was accounted
for under ASC 480-10-25-4, which requires liability treatment for certain mandatorily redeemable financial instruments, and the cumulative
dividends are recorded as interest expense. During the six months ended June 30, 2024, the Company exchanged an aggregate of
As of June 30, 2024, there were
Series L
On June 3, 2019, the Company designated
Series M
Pursuant to the Amended and Restated
Certificate of Designation of Series M Preferred Stock filed with the Secretary of State of Nevada on July 1, 2020, the Company designated
The Series M preferred stock does
not have pre-emptive or subscription rights, and there are no sinking fund provisions applicable to it. The Series M preferred stock
does not have voting rights, except as required by law and with respect to certain protective provisions set forth in the COD (see ITEM
15. Exhibit 3.29). The Company may, at its sole discretion, redeem any or all of the outstanding shares of Series M Preferred Stock at
a redemption price of $
Series O
On April 27, 2020, the Company designated
The Series O preferred stock has no
preemptive or subscription rights, and there is no sinking fund provision applicable to it. The Series O preferred stock does not have
voting rights except as required by law. The Series O preferred stock is convertible into common stock of the Company in an amount determined
by dividing
During the six months ended June 30,
2024, the Company issued an aggregate of
19
Series P
On April 27, 2020, the Company designated
The Series P preferred stock entitles
the holders to a payment on an as-converted and pari-passu basis with the common stock upon any liquidation. The Series P preferred stock
has no preemptive or subscription rights, and there is no sinking fund or redemption provisions applicable. The Series P preferred stock
votes on an as-converted basis with the common stock, subject to the beneficial ownership limitation. As of June
Series Q
On August 21, 2020, the Company designated
During the six months ended June 30,
2024, the Company issued an aggregate of
Series R
On November 16, 2020, the Company
designated
During the six months ended June 30,
2024, the Company issued an aggregate of
20
Series S
On February 5, 2021, the Company designated
During the six months ended June 30,
2024, the Company issued an aggregate of
Series U
On May 26, 2021, the Company designated
The Company has the right to redeem
the Series U at any time at a redemption price equal to, if paid in cash, the stated value, or, if paid in shares of common stock, in
an amount of shares determined by dividing
As of June 30, 2024, there were
Series W
On April 28, 2021, the Company designated
The Company has the right to redeem
the Series W at any time at a redemption price equal to the stated value plus any accrued but unpaid dividends. During the six months
ended June 30, 2024, the Company issued an aggregate of
Series Y
On December 6, 2021, the Company
designated
21
The Company has the right to redeem
the Series Y at any time at a redemption price equal to, if paid in cash, the original issue price plus any accrued but unpaid distributions
of
As of June 30, 2024, there were
Series Z
On February 11, 2022, the Company
designated
On
February 18, 2022, the Company issued and sold to the Purchaser an aggregate of
As of June 30, 2024, the Company accrued
aggregate dividends in the amount of $
During the six months ended June 30,
2024, the Company redeemed an aggregate of
The Series J, Series L, Series M, Series O, Series P, Series Q, Series R, Series S, Series U, Series W, Series Y, and Series Z preferred stock are accounted for outside of permanent equity due to the terms of conversion at a market component or stated value of the preferred stock.
WODI Preferred Stock
On April 22, 2022, WODI authorized
OriginClear, Inc. Common Stock
Six Months Ended June 30, 2024
The Company issued
The Company issued
The Company issued
22
The Company issued
The Company issued
The Company redeemed
Six Months Ended June 30, 2023
The Company
issued
The Company
issued
The Company
issued
The Company
issued
The Company
issued
The Company
issued
The Company
issued
The Company
redeemed
WODI Common Stock
Non-controlling Interest
As of June 30, 2024, WODI had issued
and outstanding shares, of which, the Company owns
| WODI common stock holders | Ownership % | |||
| OriginClear, Inc. | % | |||
| Prior Reg A Holders | % | |||
| Prior Series A Holders | % | |||
| Prior Series B Holders | % | |||
| Total | % | |||
23
| 5. | Restricted Stock Grants and Warrants |
Restricted Stock Grants to CEO, the Board, Employees and Consultants
Between May 12, 2016, and August 4,
2022, the Company entered into Restricted Stock Grant Agreements (“ RSGAs”) with its Chief Executive Officer, the Board,
employees, and consultants to create management incentives aimed at improving the Company’s economic performance and increasing
its value and stock price. All shares issuable under the RSGAs are performance-based shares. The RSGAs provide for the issuance of shares
of the Company’s common stock provided certain milestones are met. These milestones are (a) if the Company’s consolidated
gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $
The Company has not recognized any costs associated with these milestones because achievement is not probable.
On August 14, 2019, the Board of Directors approved an amendment to the RSGAs to include an alternative vesting schedule for the grantees, and on January 26, 2022, the Company amended the procedures for processing the RSGAs. If the fair market value of the Company’s common stock on the date the shares vest is less than the fair market value of the Company’s common stock on the effective date of the RSGAs, the number of vested shares issuable (assuming all conditions are satisfied per terms of the alternative vesting schedule) shall be increased so that the aggregate fair market value of vested shares on the vesting date equals the aggregate fair market value that such number of shares would have had on the effective date. Upon the occurrence of a Company performance goal, the right to participate in the alternate vesting schedule will terminate, and the vesting of the remaining unvested shares will follow the original RSGAs terms. Shares are issued under the alternate vesting schedule per terms of the agreements after electing and qualifying requirements are met.
During the six months ended June 30,
2024, upon qualifying under the alternative vesting schedule, the Company issued an aggregate of
Warrants
During the six months ended June 30, 2024, the Company issued
| Weighted | ||||||||
| average | ||||||||
| Number of | exercise | |||||||
| Warrants | price | |||||||
| Outstanding - beginning of period | $ | |||||||
| Granted | $ | |||||||
| Exercised | $ | |||||||
| Expired | ( | ) | $ | |||||
| Outstanding - end of period | $ | |||||||
24
| Weighted | ||||||||||||||
| Average | ||||||||||||||
| Remaining | ||||||||||||||
| Exercisable | Warrants | Warrants | Contractual | |||||||||||
| Prices | Outstanding | Exercisable | Life (years) | |||||||||||
| $ | 0.0200 | |||||||||||||
| $ | 0.1000 | |||||||||||||
| $ | 0.2500 | |||||||||||||
| $ | 0.0275 | |||||||||||||
| $ | 0.1250 | |||||||||||||
| $ | 1.0000 | |||||||||||||
The derivative liability recognized
in the financial statements for the warrants as of June 30, 2024 was $
At June 30, 2024, the aggregate intrinsic
value of the warrants outstanding was $
| 6. | Convertible Promissory Notes |
OriginClear, Inc.
| Convertible promissory notes | $ | |||
| Less current portion | ||||
| Total long-term liabilities | $ |
| Period ending June 30, | Amount | |||
| 2024 (remaining 6 months) | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| $ | ||||
2014-2015 Notes
On various dates from November 2014
through April 2015, the Company issued unsecured convertible promissory notes (the “2014-2015 Notes”), which matured on various
dates and were extended for an additional sixty months from the effective date of each note. The 2014-2015 Notes bear interest at
25
OID Notes
The unsecured original issue discount
(OID) convertible promissory notes had an aggregate remaining balance of $
2015 Notes
The Company issued various unsecured
convertible promissory notes (the “2015 Notes”) on various dates, with the last issued in August 2015. The 2015 Notes matured
and were extended from the date of each tranche through maturity dates ending in February 2026 through August 2026, bearing interest
at
Dec 2015 Note
The Company issued a convertible note
(the “Dec 2015 Note”) in exchange for accounts payable in the amount of $
Sep 2016 Note
The Company issued a convertible note
(the “Sep 2016 Note”) in exchange for accounts payable in the amount of $
Nov 2020 Note
On November 19, 2020, the Company
entered into an unsecured convertible promissory note (the “Nov 2020 Note”) for $
Jan 2021 Note
On January 25, 2021, the Company entered
into an unsecured convertible promissory note (the “Jan 2021 Note”) for $
26
Evaluation of Convertible Promissory Notes
The Company evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion features of the convertible promissory notes were not afforded the exemption for conventional convertible instruments due to variable conversion rates. The notes have no explicit limit on the number of shares issuable, so they did not meet the conditions set forth for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivatives. The derivative liability is adjusted periodically according to the stock price fluctuations.
Derivative Liability
The derivative liability recognized
in the financial statements for the convertible promissory notes as of June 30 31, 2024 was $
WODI
During the six months ended June 30,
2024, WODI raised capital in the amount of $
| 7. | Revenue from Contracts with Customers |
Equipment Contracts
Revenues and related costs on equipment contracts are recognized as the performance obligations are satisfied over time in accordance with 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, if a loss on a contract is foreseen, the Company will recognize the loss as it is determined.
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Equipment Contracts | $ | $ | ||||||
| Component Sales | ||||||||
| Pump Stations | ||||||||
| Waste Water Treatment Systems | ||||||||
| Services Sales | ||||||||
| Commission & Training | ||||||||
| Rental Income | ||||||||
| $ | $ | |||||||
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Aggregate revenue of $
Revenue recognition for other sales arrangements, such as sales for components, and service sales will remain materially consistent.
Contract assets represent revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represent billings in excess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying condensed consolidated balance sheets, as they will be liquidated in the normal course of the contract completion.
The contract asset for the six months
ended June 30, 2024 and the year ended December 31, 2023, was $
| 8. | Financial Assets |
Fair value investment in Securities
On May 15, 2018, the Company received
On
November 12, 2021, the Company served a conversion notice to WTII and was issued an aggregate of
| 9. | Loans Payable |
Secured Loans Payable
In 2018, the Company entered into
short-term loans with various lenders for capital expansion, secured by the Company’s assets, in the amount of $
On December 6, 2023, the Company entered
into short-term loan arrangement with a lender, secured by the Company’s assets, in the amount of $
Settlement of Liability with C6 Capital LLC
On March 12, 2021, the Company, through it’s subsidiary PWT entered into a settlement agreement with C6 Capital LLC to resolve a dispute regarding merchant cash agreement. As part of the settlement, C6 Capital vacated the judgment against the company, released all encumbrances, and the Company was released from any further amounts owed to C6 Capital.
As a result, the Company recognized
a gain of $
Small Business Administration Loan
On June 12, 2020, the Company received
an Economic Injury Disaster Loan (the “EIDL”) in the amount of $
Receivables Financing Agreement
On May 13, 2024, the Company entered
into a Future Receivables Agreement with Lee Advance LLC. Under this agreement, the Company received $
In addition to the origination fee, the financing arrangement
includes an additional $
28
| 10. | WODI |
WODI was incorporated in the state of Nevada on April 22, 2022. WODI, with the support of its parent, the Company, is developing a new outsourced water treatment business called WOD. The WOD model intends to offer private businesses the ability to pay for water treatment and purification services on a per-gallon basis, commonly known as DBOO. WODI intends to work with regional water service companies to build and operate the water treatment systems it finances.
On November 16, 2022, WODI filed a
Form 1-A Offering Circular for an offering under Regulation A (the “WODI Reg A Offering”) of the Securities Act of 1933 with
the U.S. Securities and Exchange Commission. The purpose of the WODI Reg A Offering is to allow potential investors the opportunity to
invest directly in WODI. The Offering had a minimum investment of $
On December 22, 2022, WODI entered
into a Membership Interest Purchase and Transfer Agreement (the “Purchase Agreement”) with Ka Wai Cheung, Koon Lin Chan,
and Koon Keung Chan (each a “Seller”, and collectively, the “Sellers”) and Fortune Rise Sponsor LLC, a Delaware
limited liability company (the “Sponsor”), pursuant to which WODI purchased 100 membership interests in the Sponsor (“Purchased
Interests”) from the Sellers, which constitutes
On December 22, 2022, WODI paid a
total of $
FRLA is a blank check company incorporated in February 2021 as a Delaware corporation formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. FRLA is a “shell company” as defined under the Exchange Act of 1934, as amended, because it has no operations and nominal assets consisting almost entirely of cash. The SPAC will not generate any operating revenues until after the completion of its initial business combination, at the earliest.
On January 5, 2023, WODI signed a non-binding LOI with FRLA, (“FRLA” collectively with WODI, the “Parties”). The LOI is not binding on the Parties and is intended solely to guide good-faith negotiations toward a definitive business combination agreement. The Parties will work together in good faith with their respective advisors to agree on a structure for the business combination that is most expedient to the consummation of the acquisition, which may result in a new (merged) entity. Pursuant to the LOI, if a business combination were to be consummated and approved, all of the outstanding equity securities of WODI, including all shares of common stock, preferred stock, outstanding options and warrants will convert into new equity of the merged entity.
On February 7, 2023, FRLA and OriginClear
Inc. announced that WODI deposited $
29
WODI assumed the obligation to make any necessary extension payments in connection with the extension of the period of time in which the SPAC may consummate its initial business combination as described in the SPAC’s S-1 Registration Statement, including the three-month extension from November 5, 2022 to February 5, 2023, the Second Extension for an additional three months from February 5, 2023 to May 5, 2023 and a final extension for an additional six months from May 5, 2023 to November 5, 2023.
On April 10, 2023, at the Special
Meeting, a total of
On April
14, 2023, WODI entered into an Asset Purchase Agreement with the Company, whereby it agreed to purchase all of the assets related to
the Company’s “Modular Water Service” business, including licenses, technology, intellectual property, contracts, business
models, patents and other assets in exchange for
On September 21, 2023, WODI entered into a merger agreement with PWT to create better enterprise value for a potential merger opportunity with FRLA and a plan of merger agreement (the “PWT-WODI merger agreement”) was entered into between WODI and PWT. Per the PWT-WODI merger agreement, all shares of WODI common and preferred stock were exchanged for shares of PWT common stock as merger consideration. WODI convertible notes and WODI Restricted Stock Grants were assumed by PWT and remain outstanding. WODI Series A and Series B were converted to WODI common stock prior to the merger.
In connection with the merger with WODI, PWT changed its name to Water on Demand, Inc.
Before issuing common stock to WODI
stockholders in the PWT Merger, PWT had
On September 28, 2023, the LOI executed on January 5, 2023 with WODI was amended to designate PWT as the new target of the acquisition. Under the amended LOI, FRLA proposed to acquire all the outstanding securities of the new combined WODI/PWT entity, based on certain material financial and business terms and conditions being met. The LOI is not binding on the parties and is intended solely to guide good-faith negotiations toward definitive agreements.
On October 24, 2023 FRLA and WODI entered into a definitive business combination agreement (the “BCA”).
On October 25, 2023, at the Special
Meeting, a total of
30
Promissory Notes
Since
acquiring the sponsorship interest in the SPAC on December 22, 2022, through June 30, 2024, WODI and the Company made payments on behalf
of the SPAC in the aggregate amount of $
As of the date of this filing, the
SPAC has been extended through November 5, 2024, to give the Company adequate time to complete all the necessary administrative and regulatory
steps, including filing of the registration statement and timely respond to satisfy potential comments, from regulatory bodies to consummate
the business combination. Management estimates the likelihood of completing the business combination at
Impairment of receivable
Although the payments made on behalf
of the SPAC are amounts receivable to WODI, for the period ended June 30, 2024, WODI considered the aggregate amount of $
Recording of membership interest
As of June
30, 2024, WODI recorded the purchase of Class B Founder Shares at lower of cost or market at $
Impairment analysis for Class B Common Founder Shares as of June 30, 2024
The Company retained an independent valuation firm for the purpose of conducting a valuation of the fair value of Sponsor Founder Shares (Class B) of FRLA as of December 31, 2023.
The independent firm (i) evaluated and analyzed various Sponsor Founder Shares of FRLA; (ii) assessed the terms including various redemption and liquidation features considering each of the Company’s financial plans and market conditions; and (iii) determined the underlying value to be assigned to the FRLA Sponsor Founder Shares as of the Date of Valuation and evaluated the FRLA Sponsor Founder Shares for impairment by performing the following procedures:
| ● | Analyzed the Company’s S-4 filing, business combination agreement and other documentation. |
| ● | Developed Monte Carlo Model that values the FRLA Sponsor Founder Shares based on a multipath random event model and future projections of the various potential outcomes. The Monte Carlo Model simulation included | |
| ● | Developed the discounted cash flow from the sale of the securities at the time the restrictions terminated. | |
| ● | Probability weighted the cash flow, discounted for lack of marketability. |
| ● | Valued the FRLA Sponsor Founder Shares as of the date of valuation. |
Based on the procedures performed the independent valuation firm concluded that the value of FRLA Sponsor Founder Shares was not impaired.
31
Restricted Stock to WODI Board, Employees and Consultants
Between August 12, 2022, and August
3, 2023, WODI entered into Restricted Stock Grant Agreements (the “WODI RSGAs”) with its members of the Board, employees,
and consultants to create management incentives to improve the economic performance of WODI and to increase its value. WODI RSGAs provide
for the issuance of up to
| 11. | Line of Credit |
During the year ended December 31, 2023,
the Company obtained 12-month credit lines in the aggregate amount of $
| 12. | Assets Held for Sale – Continuing Operations |
On March
1, 2021, the Company issued an aggregate of
Based on
indicators of impairment, during the year ended December 31, 2021, the Company adjusted the original value of the asset held for sale
from $
During the
period ended December 31, 2022, after evaluating several offers, the Company considered an offer for $
32
In January
2023, the Company accepted the offer, and on April 8, 2023, a deed was executed for the sale of the property for $
| 13. | Commitments and Contingencies |
Facility Rental – Related Party
Our Dallas based subsidiary, PWT,
rents an approximately
Warranty Reserve
Generally, a PWT project is guaranteed
against defects in material and workmanship for one year from the date of completion, while certain areas of construction and materials
may have guarantees extending beyond one year. The Company maintains various insurance policies relating to the guarantee of completed
work, which, in the opinion of management, will adequately cover any potential claims. A warranty reserve has been established based
on management’s assessment and Company history in the amount of $
Litigation
There are no material updates to the litigation matters with Process Solutions, Inc. as previously disclosed in the Form 10-K filed on April 18, 2024.
| 14. | Subsequent Events |
Management has evaluated subsequent events in accordance with ASC Topic 855 and has identified the following subsequent events:
OCLN Preferred Stock Conversions
| ● | On July 12, 2024, July 24, 2024, and August 1, 2024, holders converted a total of |
OCLN Stock Cancellations by WODI Notes:
| ● | On July 3, 2024, July 12, 2024, July 24, 2024, August 1, 2024, and August 7, 2024, a total of |
Shares issued for services:
| ● | On
July 1, 2024, July 15, 2024, and July 31, 2024, a total of |
Series Y Shares
| ● | Between July 1, 2024 and August 12, 2024, the company entered
into subscription agreements with certain accredited investors pursuant to which the Company sold an aggregate of |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q 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 was founded in 2007 under the name OriginOil® and began trading on the OTC markets in 2008. In 2015, the company rebranded as OriginClear® to reflect its evolving mission of developing breakthrough businesses in the industrial water sector. Today, OriginClear operates as the Clean Water Innovation Hub™ (“CWIB”), leveraging its expertise in retail investor development to bring potentially disruptive water technologies s to market. Currently, OriginClear is focused on advancing the success of its subsidiary, Water On Demand, Inc. (WODI).
In 2023, OriginClear consolidated three of its operating units into the WODI subsidiary in anticipation of a merger with Fortune Rise Acquisition Corp (“FRLA”) a Special Purpose Acquisition Company. The definitive merger agreement between WODI and FRLA was announced on October 24, 2023: https://www.originclear.com/company-news/originclears-water-on-demand-and-fortune-rise-acquisition-corporation-announce-business-combination-to-create-nasdaq-listed-company.
WODI comprises three distinct operating units, Modular Water Systems (“MWS”), Progressive Water Treatment (“PWT”), and Water on Demand (“WOD”), the tlatter being a development-stage business.
| ● | PWT: This unit generates a significant portion of the Company’s revenue by providing engineered water treatment solutions and custom treatment systems. |
| ● | MWS: Water On Demand Inc. holds an exclusive master license to the intellectual property (IP) of Daniel M. Early, which includes five patents and related intellectual property, know-how and trade secrets (“Early IP”). In April 2023, an independent valuation of the Early IP estimated its nominal value between $26.6 million and $53.2 million. MWS’s product offerings are uniquely differentiated by this IP, further enhanced by additional proprietary knowledge. . |
| ● | WOD: This unit in development aims to offer private businesses water self-sustainability as a service – allowing them to pay for water treatment and purification services on a per-gallon basis – a model commonly known as Design-Build-Own-Operate (“DBOO”). |
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Water Businesses
As the Clean Water Innovation Hub™ (“CWIB”), the Company is focused on developing and incubating businesses that create valuable properties within the water industry and beyond. The mission of CWIB is to drive innovation through an incubation process that results in a launch of impactful spinoffs, contributing to the global water industry.
Currently, OriginClear’s mission as CWIB is to:
| 1. | Support the Post-Merger Rollout of the WODI: OriginClear will assist in the transition of WODI post-merger, including a proposed management services contract with WODI. This contract is intended to be phased out over time as WODI establishes its own internal team and capabilities. |
| 2. | Facilitate WODI’s Acquisition Strategy: OriginClear is actively supporting WODI in executing its planned aggressive acquisitions plan, both before and after the SPAC merger (noting that there is no assurance of success for either the merger or planned acquisitions); |
| 3. | Initiate Non-Binding Acquisition Agreements: OriginClear is working to secure non-binding agreements for WODI or the post-merger entity to acquire related businesses, contingent upon the outcome of the Business Combination Agreement ("BCA") process. |
| 4. | Accelerate New Business Ventures: For its own account, OriginClear aims to accelerate the creation of new businesses, as it did with MWS in 2018 and with WOD in 2021, or through strategic acquisitions, as it did with PWT in 2015. In this new phase, the Company may also explore projects outside the water industry. |
On April 2, 2024 OCLN announced a strategic partnership with entrepreneur Kevin Harrington, a co-founding board member of the Entrepreneur’s Organization, to elevate global awareness of OriginClear's Regulation A crowdfunding campaign, which is currently in registration.
www.originclear.com/company-news/its-official-investors-can-now-join-kevin-harrington-the-original-shark-on-shark-tank-to-champion-water-innovation/
www.sec.gov/Archives/edgar/data/1419793/000109690624001442/ocln_1aa.htm
Kevin Harrington, through Kevin Harrington Enterprises, is compensated with fees and options to purchase stock in OriginClear, Inc. and Water On Demand, Inc.
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Water On Demand
The Company is developing an outsourced water treatment business called Water On Demand (“WOD”), which is operated through its subsidiary, Water on Demand, Inc. (“WODI”). The WOD model aims to provide private businesses with water self-sustainability as a service, allowing them to pay for water treatment and purification services on a per-gallon basis. A percentage of net profits from this service is planned to be distributed to investors and stakeholders. This model, commonly referred to as Design-Build-Own-Operate or “DBOO”, is currently under evaluation through pilot opportunities. These pilots will explore outsourced water treatment as a managed service, offering an alternative to significant up-front capital investment for in-house wastewater treatment. Recently, the Company announced agreements with Enviromaintenance, a water services company, and Klir, a utility network software provider, to develop a WOD commercial pilot in the Mobile Home Park (MHP) sector.
WODI intends to delegate the servicing and maintaining of the units it builds, to established service organizations under long-term contracts. On April 6, 2022, WODI reached an agreement in principle with its first intended contractor, Envirogen Technologies (www.envirogen.com), a 30-year international provider of environmental technology and process solutions (www.originclear.com/company-news/originclear-and-envirogen-to-partner-on-water-on-demand). A second partnership was initiated with service provider, Enviromaintenance (see below). While future resources for maintaining and servicing these systems may come from acquisitions, no such acquisitions are actively being planned at this time.
WODI believes the delegation of service and maintenance to long-term partners strategy could enable rapid scaling of the WOD program, while also creating a significant barrier to entry for potential competitors. WODI may also license its designs to local water equipment companies, reserving for itself what it believes is the highly-scalable (and profitable) fintech role.
At the time of this filing, the WOD division of WODI has no dedicated staff or independent resources. WODI’s other divisions, PWT and MWS, employ a total of 32 people. The Board of Directors of OriginClear serves as the Board for WODI, with OriginClear’s CEO and CFO also serving in those roles for WODI. Under a planned management services arrangement, OCLN plans to provide WODI with staffing and administrative resources, in exchange for funding related to WODI’s prospective merger with FRLA and certain special distributions.
On February 15, 2024, the Company and Fortune Rise Acquisition Corporation (Nasdaq: FRLA), a Special Purpose Acquisition Company (SPAC), announced the filing of a registration statement on Form S-4 with the SEC which includes a preliminary proxy statement and prospectus in connection with the proposed business combination with OCLN subsidiary Water On Demand (WODI), an investor-funded service offering decentralized water management solutions and technologies to businesses and communities, potentially without the burden of upfront capital expenditures. WODI is a subsidiary of OriginClear, Inc. (OTC Other: OCLN). https://www.originclear.com/company-news/originclears-water-on-demand-and-fortune-rise-acquisition-corporation-seek-to-combine-under-form-s-4-registration-statement.
On March 26, 2024, the Company announced the signing of a Memorandum of Understanding (MOU) between MWS and Enviromaintenance of Georgetown, TX, to collaborate on the planned Water On Demand pilot program focusing on MHP in the Greater Central Texas Region. https://www.originclear.com/company-news/originclears-modular-water-systems-and-enviromaintenance-partner-for-water-on-demand-pilot-program
On April 9, 2024, the Company announced the selection of Klir, Inc. (www.klir.com) to support its planned Water On Demand pilot program, also focusing on MHP in the Greater Central Texas Region. https://www.originclear.com/company-news/modular-water-systems-and-klir-partner-for-water-on-demand-pilot-program.
Progressive Water Treatment Inc.
PWT is a Dallas-based company specializing in the design, construction and service of a wide range of industrial water treatment applications. PWT aims to provide a comprehensive, end-to-end solution to meet growing corporate demand for outsourced water treatment services. Recently, PWT moved from its McKinney, TX headquarters to a new headquarters located at 5225 W Houston St, Sherman TX 75092. A grand opening is scheduled for August 27, 2024.
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PWT designs and manufactures a complete line of water treatment systems for municipal, industrial and pure water applications. What sets PWT apart is its ability to thoroughly understand each customer’s unique needs and then design and deliver a turnkey water treatment system that integrates multiple technologies, resulting in a complete and tailored solution.
PWT utilizes a diverse array of technologies in its turnkey systems, including chemical injection, media filtrations, membrane technology, ion exchange and SCADA (supervisory control and data acquisition) systems. In addition to system design and construction, PWT offers a broad range of services, including maintenance contracts, retrofits, and replacement assistance. PWT rents equipment under contracts of varying duration.
PWT primarily serves customers in the United States and Canada, but its reach extends globally with projects ranging from Siberia to Argentina to the Middle East.
Modular Water Systems
MWS offers a distinctive line of prefabricated water transport and treatment systems. The division is led by Daniel “Dan” Early, a Professional Engineer ("Early"). On June 25, 2018, Early granted the Company a worldwide, exclusive, non-transferable license to the technology and knowhow behind MWS (See “Intellectual Property”). A consulting agreement between the Company and Early also provided for assignment of inventions from that date. A ten-year renewal on May 20, 2020 expanded the right to include sublicensing rights and the ability to create manufacturing joint ventures. On 9 June 2023, Early signed a new, ten-year license agreement with WODI which assigned these rights to WODI and updated Early's terms of compensation.
MWS, with PWT and other companies as fabricators and assemblers, designs, manufactures, and delivers prefabricated water transport systems, including pump and lift stations under the EveraMOD™ brand, as well as wastewater treatment plant (“WWTP”) products under the EveraSKID™ and EveraTREAT™ brands. These systems serve customers and end-users who need to treat their own wastewater, such as schools, small communities, institutional facilities, real estate developments, factories, and industrial parks.
On August 12, 2022, the Company announced the inaugural delivery and installation of its pre-engineered EveraBOX™ , which implements a low-risk Liquid Ammonium Sulfate (LAS) disinfectant system for Pennsylvania’s Beaver Falls Municipal Water Authority (BFMA). As with otherMWS products, EveraBOX is manufactured using cost-effective, durable materials such as High-Density Polyethylene (HDPE) or Polypropylene (PP) materials, also known as Structural Reinforced Thermoplastic Pipe (SRTP). These materials have shown resilience against supply chain challenges affecting metal and fiberglass construction.
On January 10, 2024, OCLN Plastic Welding and Fabrication, Ltd. (PWF) of Buda, Texas, jointly announced a MOU for a strategic partnership between OriginClear’s subsidiary, WODI, and PWF. https://www.originclear.com/company-news/originclears-water-on-demand-in-strategic-partnership-with-the-intent-to-acquire-manufacturer-for-its-proprietary-modular-products.
PWF is already a key fabricator of highly durable, patent-based enclosures for MWS, the technology division of WODI that designs and develops scalable systems for self-contained water treatment and transportation. This MOU strengthens the strategic relationship, enabling MWS to build its complete water systems on-site where the enclosures are manufactured, ensuring maximum efficiency and speed.
Additionally, the parties signed a Letter of Intent (LOI) outlining a framework to negotiate a definitive agreement for WODI to acquire PWF. If completed, this acquisition would establish the first in-house manufacturing facility for WODI’s MWS division, with the expectation that it be accretive. However, the parties caution that negotiations are in an early stage and may not succeed.
On March 26, 2024, OCLN announced the signing of a MOU between MWS and Enviromaintenance of Georgetown, TX, to collaborate on the sales of standardized systems in the Greater Central Texas Region, from Waco to San Antonio. Enviromaintenance (www.enviromaintenance.com) is a leading provider of large community scale-on-site wastewater treatment and disposal systems, with a significant market presence in the MHP industry in the greater Austin area. The company plans to recommend MWS’s fully integrated, modular wastewater treatment systems to MHPs and other commercial water users, offering owners an affordable, reliable and efficient way to treat their wastewater.
https://www.originclear.com/company-news/originclears-modular-water-systems-and-enviromaintenance-partner-for-water-on-demand-pilot-program.
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Patents and Intellectual Property
On June 25, 2018, Dan Early granted the Company a worldwide, exclusive, non-transferable license to intellectual property, which includes five issued U.S. patents, as well as design software, CAD files, marketing materials, and design and specification documents (collectively referred to as “Early IP”).
On May 20, 2020, the license was renewed for an additional ten years, with the possibility of three-year extensions. The renewal also granted the Company the rights to sublicense the Early IP, and, with approval, to establish ISO-compliant manufacturing joint ventures.
As part of the sale of MWS assets to WODI on April 14, 2023, the license to the Early IP was included. On 9 June 2023, Early signed a new, ten-year license agreement with WODI which assigned these rights to WODI and updated Early's terms of compensation.
The Early IP consists of combined protection on the materials and configurations of complete packaged water treatment systems, built into containers. The patents consist of the following:
| # | Description | Patent No. | Date Patent Issued | Expiration Date | ||||
| 1 | Wastewater System & Method | US 8,372,274 B2 Applications: WIPO, Mexico | 02/12/13 | 07/16/31 | ||||
| 2 | Steel Reinforced HDPE Rainwater Harvesting | US 8,561,633 B2 | 10/22/13 | 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 |