10-Q: Rainmaker Worldwide Faces Going Concern Doubt Amid Losses

Sentiment:

Quarterly Report 11 August 2025 4:56 PM

📋All filings for Rainmaker Worldwide INC

Rainmaker Worldwide Inc. reports continued losses and significant financial challenges, raising substantial doubt about its ability to continue operations, despite strategic moves in water technology.

Delay expectedThe water infrastructure business has long sales cycles, often contingent upon factors such as timely permitting for projects that require water treatment, which can delay revenue realization.

Capital raiseManagement plans include seeking to procure additional funds through debt and equity financing to enable it to meet its operating needs including current and future sales orders.Historically, the company's major sources of cash have comprised proceeds from various private offerings of its securities (including common stock) and debt financing, raising approximately $8.2 million from 2015 through December 31, 2024.

Worse than expectedThe company reported zero revenue for the current and prior comparable periods, indicating a complete lack of sales.Net losses significantly increased year-over-year, demonstrating a worsening financial performance.The accumulated deficit continued to grow, reflecting ongoing operational losses.The cash balance remains critically low, raising immediate liquidity concerns.The company's auditors reported substantial doubt about its ability to continue as a going concern.Material weaknesses in internal controls and ineffective disclosure controls were identified, indicating significant operational and financial reporting deficiencies.

Summary

Rainmaker Worldwide Inc. (RAKR) reported no revenue for the three and six months ended June 30, 2025, and June 30, 2024.
The company incurred a net loss of $382,030 for the three months ended June 30, 2025, an increase from $135,296 in the same period of 2024.
For the six months ended June 30, 2025, the net loss was $652,370, up from $455,255 in the prior year period.
General and administrative expenses increased by 52.9% to $253,033 for the six months ended June 30, 2025, primarily due to a 421.4% increase in stock-based compensation to $125,020.
The company's cash balance was extremely low at $440 as of June 30, 2025.
An accumulated deficit of $77,630,465 as of June 30, 2025, indicates significant historical losses.
Financial statements were restated to correct an error related to unaccrued interest on a 2016 legal judgment, increasing the contingent liability to $6,390,429.
The company's investment in Rainmaker Worldwide Inc. (Ontario) (RWI) was impaired to zero due to RWI's financial challenges, with RAKR's ownership decreasing to 12.38%.
RAKR continues to hold distribution rights for Miranda products in Mexico and the United States, with potential expansion to Central and South America.
Significant amounts of convertible promissory notes and preferred shares were converted into common stock during the period, leading to increased common shares outstanding.

Sentiment

Score: 2

Explanation: The company faces severe financial distress with no revenue, increasing losses, critically low cash, and a going concern warning. Significant internal control weaknesses and a large contingent liability further compound the negative outlook, despite strategic partnerships and a new customer deposit.

Positives

The company's cash balance slightly increased to $440 as of June 30, 2025, from $116 at December 31, 2024.
RAKR retains valuable distribution rights for Miranda products in key markets like Mexico and the United States, despite impairing its equity investment in RWI.
A new customer deposit for a reverse osmosis (RO) machine was received from a US-based large-scale customer in the oil and gas and mining sectors, indicating potential future revenue streams.
The company has a full suite of products capable of delivering distributed water solutions globally, leveraging both Rainmaker and Miranda technologies.
Management is actively seeking additional debt and equity financing to fund operations and future sales orders.

Negatives

The company reported zero revenue for the current and prior comparable periods, indicating a lack of operational sales.
Net losses significantly increased, with the six-month loss rising to $652,370 from $455,255 year-over-year.
The accumulated deficit grew to $77,630,465, highlighting substantial historical losses.
The company's cash position remains critically low at $440, raising concerns about immediate liquidity.
A material weakness in internal control over financial reporting was identified due to insufficient segregation of duties, lack of a formal policy for related party transactions, and a history of material audit adjustments.
Disclosure controls and procedures were deemed not effective as of June 30, 2025.
The company's investment in RWI was impaired to zero due to RWI's insufficient cash flow, net liabilities, and ongoing net losses.
A significant contingent liability of $6,390,429 exists from a 2016 legal judgment, which includes accrued interest and required a restatement of prior financial statements.
In 2024, one customer accounted for 100% of total revenue, indicating high customer concentration risk if revenue generation resumes.

Risks

Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses, negative cash flows, and limited resources.
Inability to raise additional capital on acceptable terms or generate sufficient cash flows from operations could force a reduction in business scope.
The water infrastructure sector is characterized by long sales cycles, often contingent upon timely permitting for projects, which can delay revenue realization.
The company's reliance on independent distributors and project developers for future sales introduces dependency risk.
Material weaknesses in internal controls over financial reporting, including insufficient segregation of duties and lack of formal related party transaction policies, pose risks to financial accuracy and compliance.
The significant contingent liability from a legal judgment, with ongoing accrued interest, represents a substantial financial burden.
Customer concentration risk is high, as one customer accounted for 100% of 2024 revenue (though current revenue is nil), making the company vulnerable to the loss of that customer.
The impairment of the RWI investment to zero reflects the financial instability of a key strategic partner, despite retained distribution rights.

Future Outlook

Management plans to procure additional funds through debt and equity financing to meet operating needs and future sales orders. The company forecasts revenues at the operational level and is focused on business development across North, South, and Central America, as well as the Caribbean. The strategy involves pairing Rainmaker technologies with those of Miranda and affiliate partners to increase revenue and shareholder value, recognizing the long sales cycles inherent in the water infrastructure business.

Management Comments

Management believes there are no claims or possible claims that, if resolved, would individually or collectively result in a material adverse impact on the company's financial position, results of operations, or cash flows.
Management acknowledges the need to raise additional capital or imminently become revenue positive to continue executing its business plan.
The company's CEO and Interim CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness related to accounting for accrued interest on a legal judgment.
Management concluded that internal control over financial reporting was not effective as of June 30, 2025, citing insufficient segregation of duties, lack of a formal policy for related party transactions, and material audit adjustments.
Management is actively developing and implementing remediation plans, including enhanced review procedures and improved documentation related to contingent liabilities and legal accruals, to address identified weaknesses.

Industry Context

The company operates in the global water infrastructure sector, which faces immense demand due to fresh water scarcity, with less than 3% of the world's water being fresh and only 0.5% accessible for human and animal consumption. The market for water was estimated at $880 billion in 2023 and is projected to grow to $1.2 trillion by 2031. Rainmaker aims to address this demand with energy-efficient potable water production and purification technologies, including Atmospheric Water Generator (AWG) systems and solutions for contaminated or seawater. The industry is characterized by long sales cycles and permitting dependencies, which can delay revenue generation.

Comparison to Industry Standards

The company's solutions are designed to be optimally profitable when competing with bottled water or bulk water transported to remote communities, where costs can range from US$0.30 to US$2.00 per liter.
Rainmaker claims its technologies use up to 50% less power than competitors, offering a significant cost per liter competitive advantage.
The company's AWG units can produce approximately 5,000 liters of water per unit per day under optimal climatic conditions, positioning it as a scalable solution.
Rainmaker's wastewater and purification systems are stated to be highly efficient compared to competitors, using a fraction of the electricity for the same water volume.
The company seeks to adhere to World Health Organization standards for clean water, aligning with global benchmarks for water quality.
While high-income countries treat 70% of wastewater, low-income countries treat only 8%, indicating a vast underserved market that Rainmaker's solutions are tailored to address.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Financial Statement Restatement	Restatement of previously issued financial statements to correct an error related to the omission of accrued interest on a legal judgment from 2016, resulting in an understatement of accrued liabilities and accumulated deficit.	2025-06-30	Increased accrued liabilities and accumulated deficit in affected periods; did not impact cash flows or cash balances as it was a non-cash adjustment. Led to conclusion of ineffective disclosure controls and internal control over financial reporting.
Internal Control Effectiveness	Disclosure controls and procedures were concluded to be not effective as of June 30, 2025, due to a material weakness related to accounting for accrued interest on a legal judgment.	2025-06-30	Indicates deficiencies in processes designed to ensure material information is recorded, processed, summarized, and reported accurately. Remediation plans are being developed.
Internal Control over Financial Reporting (ICFR) Effectiveness	ICFR was concluded to be not effective as of June 30, 2025, due to material weaknesses including insufficient segregation of duties, lack of a formal policy for related party transactions, and a history of material audit adjustments.	2025-06-30	Raises significant concerns about the reliability of financial reporting and the ability to prevent or detect material misstatements. Management is implementing remediation plans.

Legal Proceedings

A judgment of $4,423,910 was rendered on August 8, 2016, against several parties including a former subsidiary and a predecessor to the company. The judgment was upheld on appeal in 2018.
The company has accrued interest at 5% per annum from the judgment date, resulting in a total contingent liability of $6,390,429 as of June 30, 2025.
The company has not been contacted by the Plaintiff since its last report.

Related Party Transactions

Outstanding compensation and expense reimbursements due to consultants engaged by the company amounted to $921,750 as of June 30, 2025 (compared to $764,385 in 2024).
A loan to RHBV (a related party) was eliminated on December 31, 2024, by applying it to certain payables related to RHBV.
The company's investment in Rainmaker Worldwide Inc. (Ontario) (RWI), in which RAKR holds a 12.38% equity interest, was impaired to zero due to RWI's financial situation.
Conversion of related party convertible promissory notes and long-term promissory notes into common shares occurred in Q1 and Q2 2025, including notes totaling $230,000 plus $22,496 accrued interest converted into 7,271,300 restricted common shares, and $622,000 plus $60,837 accrued interest converted into 19,664,124 restricted common shares.

Stakeholder Impact

**Shareholders**: Face significant dilution from ongoing debt and preferred stock conversions into common shares. The 'going concern' doubt and recurring losses pose a high risk to investment value. The 1-for-25 reverse stock split aimed to increase share price but does not address underlying financial issues.
**Creditors**: Convertible note holders have converted debt into equity, reducing some debt burden but also indicating a lack of cash repayment. The large contingent legal liability remains a significant claim against the company's limited assets.
**Employees/Consultants**: Compensation expenses, including stock-based compensation, are a major component of operating expenses, indicating continued reliance on and payments to personnel despite no revenue. However, the 'insufficient segregation of duties' due to limited staff suggests potential operational strain.
**Customers**: The company's lack of revenue and 'development stage' status means current customer base is minimal. The new customer deposit for an RO machine is a positive sign for future engagement, but the long sales cycles in the water infrastructure sector mean revenue realization is delayed.
**Suppliers**: The company's reliance on Miranda and other global equipment manufacturers means their financial health and operational stability are indirectly tied to Rainmaker's ability to secure projects and generate revenue.

Next Steps

Procure additional funds through debt and equity financing.
Continue business development across North, South, and Central America, and the Caribbean.
Maximize the value of sales efforts through collaboration with RWI, Miranda, and partners.
Finalize and implement projects, allocating necessary resources to address long sales cycles and permitting requirements.
Implement remediation plans to address material weaknesses in internal controls, including enhanced review procedures and improved documentation related to contingent liabilities and legal accruals.
Monitor operational growth to assess whether additional segment disclosures become necessary in future periods.

Key Dates

Date	Description
2016-08-08	Original judgment date for the legal proceeding against the company and its predecessors.
2016-11-06	Date of promissory notes with a principal amount of $13,516, due and bearing 5% interest, payable on demand.
2017-07-03	Rainmaker Worldwide Inc. became publicly traded following a reverse merger.
2017-12-31	Compensation of $312,000 was due to executive management team members, later converted into loans.
2018-04-27	Company identified a judgment dated August 8, 2016.
2018-06-22	Decision on the appeal of the 2016 judgment was rendered, upholding the original judgment.
2020-09-14	Company issued a Senior Secured Convertible Promissory Note in the amount of $3,105,897.
2020-10-01	$1,850,000 was advanced to the company under the Senior Secured Convertible Promissory Note.
2021-02-02	Company entered into a short-term loan agreement for $50,000 at 5% annual interest.
2022-06-21	Company signed a two-year loan facility agreement with RHBV for $5,000 at 8% interest.
2022-06-29	Company authorized a total of 501,000,000 shares, including 1,000,000 preferred shares.
2022-07-01	Company granted 60,000 options to the VP Sales and 100,000 to the VP Finance.
2022-07-07	First tranche of the loan to RHBV in the amount of $5,000 was issued.
2023-03-31	RAKR divested 60% interest in RWI.
2023-05-08	Company issued a convertible promissory note in the amount of $21,000 bearing 12% interest.
2023-05-23	Company filed a Certificate of Designation, creating Series A Preferred Stock.
2023-05-26	Company received $150,000 in exchange for 150,000 shares of Series A Preferred Stock.
2023-09-14	An amendment to the Senior Secured Convertible Promissory Note was signed, rolling accrued interest into principal and extending maturity to March 14, 2024.
2023-11-06	Company issued 1,600,000 shares to RWI to finalize the Miranda acquisition.
2023-12-31	RWI underwent a restructuring, converting RAKR's investment into RWI shares and reducing RAKR's ownership to 13.65%.
2024-01-01	Two convertible promissory notes and accrued interest were converted into 7,271,300 restricted common shares.
2024-01-08	Company issued four convertible promissory notes totaling $326,883 as part of a debt restructuring and three long-term promissory notes totaling $640,000.
2024-01-16	RAKR entered into an agreement with RWI to acquire Miranda Environmental and Water Treatment Technologies, requiring RAKR to invest $400,000 into RWI.
2024-01-22	RWI finalized the acquisition of Miranda Environmental and Water Treatment Technologies.
2024-03-14	A second amendment to the Senior Secured Convertible Promissory Note was signed, rolling accrued interest into principal and extending maturity to July 14, 2024.
2024-04-01	Effective date of RAKR's divestment of 60% interest in RWI.
2024-09-26	Company filed Articles of Amendment to effect a 1-for-25 reverse stock split, which became effective on this date.
2025-01-02	Company issued 26,935,424 restricted common shares upon conversions of convertible promissory notes.
2025-01-14	Company and Sphere 3D agreed to an amendment to the convertible promissory note, extending maturity to January 14, 2026, and adding unpaid interest to principal.
2025-04-24	Company issued 9,400,000 restricted shares of common stock to consultants as compensation.
2025-05-07	Company issued 2,512,930 restricted common shares upon conversion of a convertible promissory note.
2025-05-08	Maturity date of the convertible promissory note issued on May 8, 2023.
2025-05-09	Company filed an Amended Certificate of Designation, increasing authorized Series A Preferred Stock from 150,000 to 600,000 shares.
2025-06-16	A holder of Series A Preferred Stock converted 34,462 preferred shares into 2,297,467 common shares.
2025-06-17	Company issued an additional 430,000 shares of Series A Preferred Stock.
2025-06-30	End of the quarterly period covered by this Form 10-Q.
2025-07-03	Company issued 3,000,000 common shares upon conversion of 45,000 preferred shares.
2025-08-05	Company received a deposit for a reverse osmosis (RO) machine from a US-based large-scale customer.
2025-08-08	Date of common and preferred stock outstanding share count.

Recommendation

strong sell

Rainmaker Worldwide Inc. presents an extremely high-risk investment profile. The company has reported zero revenue for multiple periods, while net losses are increasing significantly. Its cash balance is critically low at $440, and auditors have expressed substantial doubt about its ability to continue as a going concern. The presence of material weaknesses in internal controls and ineffective disclosure controls indicates severe deficiencies in financial reporting and governance. A large contingent legal liability further burdens the balance sheet. While strategic partnerships and a recent customer deposit offer a glimmer of future potential, the immediate financial health and operational stability are dire. Investors face a high probability of further capital erosion and potential delisting or bankruptcy. The ongoing dilution from debt conversions also negatively impacts existing shareholders. This is a speculative investment with overwhelming negative indicators.

Keywords

Water Technology, Atmospheric Water Generator, Water Purification, SEC Filing, Quarterly Report, Going Concern, Financial Losses, Liquidity, Debt Conversion, Reverse Stock Split, Internal Controls, Contingent Liability, Miranda Acquisition, Sustainable Water Solutions

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