10-K: OriginClear Reports Increased Losses Amidst Strategic Shift to Water On Demand

Sentiment:

Annual Report 31 March 2025 2:26 PM

OriginClear's annual report reveals a strategic focus on its Water On Demand subsidiary despite increased net losses and a challenging financial outlook.

Delay expectedThe proposed business combination with Fortune Rise Acquisition Corporation was terminated due to prolonged regulatory delays.

Capital raiseThe company states that revenues from operations are not currently sufficient to sustain the business, and significant additional capital will be required to continue operations.The company is seeking capital through debt or equity financing.The company raised $1,107,000 through preferred stock offerings and $2,767,701 through convertible secured promissory notes during 2024.The company's ability to continue as a going concern depends on additional capital infusion.

Worse than expectedThe company's net loss increased significantly, indicating a worsening financial performance.Revenue decreased, suggesting challenges in sales and market penetration.The working capital deficit widened, reflecting increased financial strain.The termination of the business combination agreement adds uncertainty to the company's future prospects.

Summary

OriginClear, Inc. reported a net loss of $(18.97) million for the year ended December 31, 2024, compared to a net loss of $(11.63) million in 2023.
The company's revenue decreased to $5.54 million in 2024 from $6.71 million in 2023.
The company is focusing on its Water On Demand (WOD) subsidiary, aiming to provide outsourced water treatment services.
A proposed business combination between WODI and Fortune Rise Acquisition Corporation (FRLA) was terminated in December 2024.
The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern.
The company's working capital deficit increased to $(45.44) million as of December 31, 2024.
The company is pursuing additional financing through debt and equity to sustain operations.
The company's Modular Water Systems (MWS) division experienced revenue growth of 552% year-over-year in January 2025.
The company's Progressive Water Treatment (PWT) division experienced revenue growth of 250% year-over-year in January 2025.
The company employs 34 full-time employees as of the report date.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positives such as revenue growth in specific divisions and strategic initiatives, the significant net loss, working capital deficit, going concern uncertainty, and terminated business combination agreement weigh heavily on the overall sentiment.

Positives

Modular Water Systems (MWS) experienced significant revenue growth, increasing by 552% year-over-year in January 2025.
Progressive Water Treatment (PWT) also saw substantial revenue growth, increasing by 250% year-over-year in January 2025.
The company is actively expanding its sales pipeline and optimizing operational efficiencies.
The company is focusing on the growing decentralized water treatment market.
The company has a strong intellectual property portfolio, including patents for modular water systems.

Negatives

The company reported a significant net loss of $(18.97) million for 2024.
The company's revenue decreased from $6.71 million in 2023 to $5.54 million in 2024.
The company has a substantial working capital deficit of $(45.44) million.
The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
The proposed business combination with Fortune Rise Acquisition Corporation was terminated.
The company has a history of losses and negative cash flows.
The company relies on raising additional capital to continue operations.

Risks

The company's ability to continue as a going concern is uncertain.
The company may be unable to secure additional financing when needed or on acceptable terms.
The company's revenues are dependent on market acceptance of its technology and products.
The company faces competition from other companies in the water treatment market.
The company's intellectual property rights may not be adequately protected.
The company may face claims of violating the intellectual property rights of others.
The company's common stock is subject to dilution and volatility.
The company's internal controls over financial reporting may be ineffective.

Future Outlook

The company's future operations depend on its ability to raise capital through financing transactions and generating sufficient future sales. Management anticipates obtaining further funding from existing and new investors but cannot guarantee such funds will be available or on favorable terms.

Management Comments

The Company, in its role as the CWIH, seeks to create, incubate or accelerate businesses in the water industry and potentially other sectors.
The Company intends to achieve growth by partnering with or developing businesses where it may take equity positions in addition to earning management fees.
The Companys primary focus for the foreseeable future remains the financing, development, and support of its Water On Demand, Inc. subsidiary.

Industry Context

The company operates in the decentralized water treatment market, which is driven by aging infrastructure, rising water costs, and increasing demand for sustainable water management solutions. The company's focus on modular and prefabricated systems aligns with the industry trend towards cost-effective and scalable solutions.

Comparison to Industry Standards

The report mentions competitors such as PureAqua, Harn RO, and Membrane Specialists, highlighting their specific market focuses.
PureAqua concentrates its business in the Middle East, Harn RO specializes in drinking water systems for municipalities in the Southeastern United States, and Membrane Specialists focuses on tubular membrane technology.
OriginClear differentiates itself through its regional footprint, customer loyalty, niche market focus, and limited sales representation.
MWS competes with companies like AdEdge, which offer prepackaged metal systems, while MWS provides a broader range of hybrid treatment processes using SRTP materials.
The company aims to standardize designs and commoditize product engineering to reduce costs and increase scalability, a common strategy in the modular construction industry.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Director	Anthony Fidaleo	Stephen Hall	January 30, 2025	Resignation

Related Party Transactions

The company had outstanding promissory notes issued to its CEO totaling $238,046 as of December 31, 2024.

Stakeholder Impact

Shareholders face potential dilution from equity financing and volatility in the stock price.
Employees face uncertainty due to the company's financial challenges and potential need to reduce operations.
Customers may be impacted by the company's ability to deliver on its contracts and provide ongoing services.
Creditors face increased risk due to the company's substantial indebtedness and going concern uncertainty.

Next Steps

The company intends to identify, develop, and potentially launch new ventures.
The company may pursue strategic acquisitions.
The company intends to scale as it expands by acquiring further staff or independent resources.
The company will continue to monitor and assess the effectiveness of internal controls.
The company is exploring strategic opportunities to enhance shareholder value.

Key Dates

Date	Description
June 1, 2007	OriginClear, Inc. was incorporated in Nevada.
October 1, 2015	Progressive Water Treatment, Inc. (PWT) was acquired.
March 14, 2017	Board of Directors authorized the issuance of Series C preferred stock.
April 13, 2018	The Company designated 50,000,000 shares of its authorized preferred stock as Series D-1 preferred stock.
June 3, 2019	The Company designated 4,000 shares as Series K preferred stock.
July 1, 2020	The Company designated 800,000 shares of preferred stock as Series M.
April 27, 2020	The Company designated 2,000 shares of preferred stock as Series O.
November 16, 2020	The Company designated 5,000 shares of preferred stock as Series R.
February 5, 2021	The Company designated 430 shares of preferred stock as Series S.
May 26, 2021	The Company designated 5,000 shares of preferred stock as Series U.
April 28, 2021	The Company designated 3,390 shares of preferred stock as Series W.
December 6, 2021	The Company designated 3,000 shares of preferred stock as Series Y.
February 11, 2022	The Company designated 25 shares of preferred stock as Series Z.
April 22, 2022	WODI designated 50,000,000 shares of authorized Preferred Stock.
October 13, 2022	WODI designated 1,000,000 shares of its authorized preferred stock as Series A preferred stock.
February 17, 2023	The SEC qualified the Offering Circular for WODI under Regulation A.
April 14, 2023	WODI acquired the MWS business unit from OriginClear, Inc.
April 28, 2023	WODI designated 1,000,000 shares of its authorized preferred stock as Series B preferred stock.
September 21, 2023	WODI merged with PWT.
October 24, 2023	WODI and FRLA entered into a definitive Business Combination Agreement.
December 9, 2024	WODI and FRLA mutually agreed to terminate the Business Combination Agreement.
December 31, 2024	End of the fiscal year.
January 30, 2025	Anthony Fidaleo resigned as director and was replaced by Stephen Hall.
March 31, 2025	Date of the report.

Keywords

Water On Demand, OriginClear, WODI, Water treatment, Modular Water Systems, Progressive Water Treatment, Financial results, Annual report, Decentralized water treatment, Revenue, Net loss, Convertible notes, Preferred stock, Risk factors

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