NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
MARCH
31, 2022
The
accompanying unaudited condensed consolidated financial statements of OriginClear, Inc. (the “Company”) have been prepared
in accordance with accounting principles generally accepted in the United States of America 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring
adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended
March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further
information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December
31, 2021.
The
Company has implemented a new outsourced water treatment business called Water On Demand (“WOD”). The WOD model intends to
offer private businesses water self-sustainability as a service. Four subsidiaries have been established to house capital dedicated to
this program. During the three months ended March 31, 2022, the Water On Demand business reached its first $1 million milestone in dedicated
capital. The Company is evaluating the first pilot opportunity to enable a commercial customer to treat its dirty water by the gallon
as a managed service, instead of the client having to come up with significant up-front capital. The Company has announced that it plans
to spin off the WOD business into its newly formed wholly owned subsidiary, Water On Demand, Inc.
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. The accompanying 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, 2021 expressed substantial doubt about our ability to continue as a going
concern.
The
ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other
things, achieving a level of profitable operations and receiving additional cash infusions. During the three months ended March
31, 2022, the Company obtained funds from the sales of its preferred stock. Management believes this funding will continue from its’
current investors and from new investors. For the three months ended March 31, 2022, the Company generated revenue of $1,234,105 and
has standing purchase orders and open invoices with customers, which will provide funds for operations. 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. No assurance can be given that any future financing
will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain
additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for
our stockholders, in case of equity financing.
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICES |
This
summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements.
The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and
objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been
consistently applied in the preparation of the financial statements.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of OriginClear, Inc. and its wholly owned operating subsidiaries,
Progressive Water Treatment, 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 accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s 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 in the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
Net
Earnings (Loss) per Share Calculations
Basic
loss per share calculation is computed by dividing income (loss) available to common shareholders by the weighted-average number of common
shares available. Diluted earnings per share is computed similarly to basic earnings per share except that the denominator is increased
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. The Company’s diluted earnings per share were not the same as the basic
loss per share for the three months ended March 31, 2022 and 2021, respectively, as the inclusion of any potential shares in the three
months ended March 31, 2022 and 2021, would have had an anti-dilutive effect due to the Company generating a loss.
| |
For
the Three Months Ended | |
| |
2022 | | |
2021 | |
Income
(Loss) to common shareholders (Numerator) | |
$ | (3,576,267 | ) | |
$ | (19,895,424 | ) |
| |
| | | |
| | |
Basic weighted average
number of common shares outstanding (Denominator) | |
| 416,397,236 | | |
| 91,595,414 | |
| |
| | | |
| | |
Diluted weighted average
number of common shares outstanding (Denominator) | |
| 416,397,236 | | |
| 91,595,414 | |
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 when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists,
title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably
assured.
Revenues
and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance
with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated
profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations).
All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the
event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.
Revisions
in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions
become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes
in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final
contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined.
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.
Contract
Receivable
The
Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive
basis as work is completed. Credit is extended based on evaluation of clients’ 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 the receivables past due from customers on a monthly basis. The
Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted,
and the potential for recovery is considered remote. The allowance for doubtful accounts was $0 and $0 as of March 31, 2022 and December
31, 2021, respectively. The net contract receivable balance was $1,039,746 and $2,150,967 at March 31, 2022 and December 31, 2021, respectively.
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,”
where the 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 is allocated using 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 and 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 at March 31, 2022 and determined there was no
impairment of indefinite lived intangibles and goodwill.
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 betterment are capitalized. Furniture and equipment are depreciated on the straight-line method and include the following
categories:
Estimated Life |
|
|
|
|
Machinery and equipment |
|
|
5-10 years |
|
Furniture, fixtures and computer equipment |
|
|
5-7 years |
|
Vehicles |
|
|
3-5 years |
|
Leasehold improvements |
|
|
2-5 years |
|
| |
| |
| |
3/31/2022 | | |
12/31/21 | |
Machinery
and Equipment | |
$ | 383,569 | | |
$ | 383,569 | |
Computer
Equipment | |
| 62,854 | | |
| 62,854 | |
Furniture | |
| 29,810 | | |
| 29,810 | |
Leasehold
Improvements | |
| 26,725 | | |
| 26,725 | |
Vehicles | |
| 64,276 | | |
| 64,276 | |
Demo
Units | |
| 36,139 | | |
| 36,139 | |
| |
| 603,373 | | |
| 603,373 | |
Less
accumulated depreciation | |
| (400,715 | ) | |
| (389,982 | ) |
Net
Property and Equipment | |
$ | 202,658 | | |
$ | 213,391 | |
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. In the event that the facts and circumstances indicate that the cost of any long-lived assets
may be impaired, an evaluation of recoverability would be performed following generally accepted accounting principles.
Depreciation
expense during the three months ended March 31, 2022 and March 31, 2021, was $10,733 and $11,631, respectively.
Inventory
The
Company expenses inventory on a first in, first out basis, and had raw materials of $2,850 and $2,850 as of March 31, 2022
and December 31, 2021, respectively.
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 whereas the value of the award is measured on the date of grant and recognized
over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with
the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the
measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary
performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the
vesting period on a straight-line basis. In certain circumstances where 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 such instruments are derivatives or contain features that qualify as
embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially
recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of
operations. For stock-based derivative financial instruments, the Company uses a probability weighted average series Binomial lattice
option pricing models to value the derivative instruments at inception and on subsequent valuation dates.
The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated
at the end of each reporting period. Derivative instrument liabilities are classified in the 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 to recognized in the balance sheet,
where it is practicable to estimate that value. As of March 31, 2022, the balances reported for cash, contract receivables, cost in excess
of billing, prepaid expenses, accounts payable, billing in excess of cost, and accrued expenses approximate the fair value because of
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 accounting principles generally accepted in the United States and expands disclosures
about fair value measurements.
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, defined as observable
inputs such as quoted prices for identical instruments in active markets; |
|
|
|
|
● |
Level 2, defined as 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; and |
|
|
|
|
● |
Level 3, defined as 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. |
The
following table presents certain investments and liabilities of the Company’s financial assets measured and recorded at fair value
on the Company’s balance sheets on a recurring basis and their level within the fair value hierarchy as of March 31,
2022.
| |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Investment
at fair value-securities | |
$ | 94,940 | | |
$ | 94,940 | | |
$ | - | | |
$ | - | |
Total
Assets measured at fair value | |
$ | 94,940 | | |
$ | 94,940 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
| |
| Total | | |
| (Level 1)
| | |
| (Level 2)
| | |
| (Level 3)
| |
Derivative Liability, March 31, 2022 | |
$ | 7,852,842 | | |
$ | - | | |
$ | - | | |
$ | 7,852,842 | |
Total
liabilities measured at fair value | |
$ | 7,852,842 | | |
$ | - | | |
$ | - | | |
$ | 7,852,842 | |
The
following is a reconciliation of the derivative liability for which level 3 inputs were used in determining the approximate fair value:
Balance as of January 1, 2022 | |
$ | 6,526,129 | |
Fair value at issuance | |
| - | |
Loss on conversion of
debt and change in derivative liability | |
| 1,326,713 | |
Balance as of March 31, 2022 | |
$ | 7,852,842 | |
For
purpose of determining the fair market value of the derivative liability, the Company used Binomial lattice formula valuation model.
The significant assumptions used in the Binomial lattice formula valuation of the derivative are as follows:
|
|
|
3/31/22 |
|
Risk free interest
rate |
|
|
0.17% - 2.45 % |
|
Stock volatility factor |
|
|
20.0% - 190.0 % |
|
Weighted average expected option life |
|
|
6 months - 5 years |
|
Expected dividend yield |
|
|
None |
|
Segment
Reporting
The
Company’s business currently operates in one segment based upon the Company’s organizational structure and the way in which
the operations are managed and evaluated.
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 requires public business entities
to use the exit price notion when measuring the fair value of financial instruments for disclosure purpose, and separate presentation
of financial assets and financial liabilities by measurement category and form of financial asset. It eliminates the requirement for
public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be
disclosed for financial instruments measured at amortized cost. The Company has evaluated the potential impact this standard may have
on the condensed consolidated financial statements and determined that it had a significant impact on the condensed consolidated financial
statements. The Company accounts for its investment in Water Technologies International, Inc. as available-for-sale securities, and the
unrealized gain on the available-for-sale securities is 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 the intellectual
property (IP) is distinct from the non-license goods or services and has significant standalone functionality that provides a benefit
or value. The functionality will not change during the license period due to the licensor’s activities. Because the significant
standalone functionality is delivered immediately, the revenue is generally recognized when the license is delivered.
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 price of materials and labor related to the construction of equipment to be sold to customers.
Recently
Issued Accounting Pronouncements
Management
reviewed currently 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.
Preferred
Stock
Series
C
On
March 14, 2017, the Board of Directors authorized the issuance of 1,000 shares of Series C preferred stock, par value $0.0001 per share,
to T. Riggs Eckelberry in exchange for his continued employment with the Company. The holder of Series C preferred stock is not entitled
to receive dividends, is not entitled to any liquidation preference and shares of Series C preferred stock does not have any conversion
rights. The Series C Preferred Stock entitles the holder to 51% of the total voting power of our stockholders. The purchase price of
the Series C preferred stock was $0.0001 per share representing a total purchase price of $0.10 for 1,000 shares. As of March 31, 2022,
there were 1,000 shares of Series C preferred stock outstanding held by Mr. Eckelberry.
Series
D-1
On
April 13, 2018, the Company designated 50,000,000 shares of its authorized preferred stock as Series D-1 preferred stock. The shares
of Series D-1 preferred stock are not entitled to dividends and do not have a liquidation preference. Each share of Series D-1 preferred
stock is convertible into 0.0005 of one share of common stock. The Series D-1 preferred stock may not be converted to common stock to
the extent such conversion would result in the holder beneficially owning more than 4.99% of our outstanding common stock, which amount
may be increased to 9.99% at the holders discretion upon 61 days’ written notice. As of March 31, 2022, there were 31,500,000 shares
of Series D-1 preferred stock issued and outstanding.
Series
E
On
August 14, 2018, the Company designated 4,000,000 shares of its authorized preferred stock as Series E preferred stock. The shares of
Series E preferred stock are not entitled to dividends and not have a liquidation preference. Each share of Series E preferred stock
is convertible into 0.05 shares of common stock. The shares of Series E preferred stock do not carry any voting rights. The Series
E preferred stock may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more
than 4.99% of our outstanding common stock which amount may be increased to 9.99% at the holder’s discretion. As of March 31, 2022,
there were 1,537,213 shares of Series E preferred stock issued and outstanding.
Series
F
On
August 14, 2018, the Company designated 6,000 shares as Series F preferred stock. The shares of Series F preferred stock have a liquidation
preference equal to the stated value of $1,000 per share plus any accrued but unpaid dividends. The Series F preferred stock is not convertible
into common stock. The holders of outstanding shares of Series F preferred stock are entitled to quarterly dividends at the annual rate
of 8% of the stated value, in preference to any dividends on the common stock. The shares of Series F preferred stock do not carry any
voting rights. The Company may, in its sole discretion, at any time while the Series F preferred stock is outstanding, 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. As of December 31, 2021, there
were 260 shares of Series F preferred stock issued and outstanding. As of December 31, 2021, a holder of 100 of such outstanding shares
of Series F preferred stock, agreed that the Company would have no obligation to redeem such holder’s shares of Series F preferred
stock prior to September 1, 2022. On February 14, 2022, the Company exchanged those 100 shares of the holder’s Series F preferred
stock for 100 shares of Series Q preferred stock. As of March 31, 2022, the Company had 160 outstanding shares of Series F preferred
stock, which the Company was required to, and failed to redeem on September 1, 2020, and was and remains in default for an aggregate
redemption price (equal to the stated value) of $160,000.
Series
G
On
January 16, 2019, the Company designated 6,000 shares as Series G preferred stock, each share having a stated value of $1,000 per
share and holders of Series G preferred stock are entitled to cumulative dividends at the annual rate of 8% of the stated value,
payable quarterly. The Series G preferred stock does not have voting rights, except as required by law and is not convertible into common
stock. The Company may, in its sole discretion, at any time while the Series G preferred stock is outstanding, 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, at a price equal to the stated value plus any accrued but
unpaid dividends. 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 ($500) divided by the closing price on the date the Company receives the executed subscription documents and purchase
price from such investor. As of March 31, 2022, there were 25 shares of Series G preferred stock issued and outstanding, which
the Company was required to, and failed to redeem on April 30, 2021, and was and remains in default for an aggregate redemption price
(equal to the stated value) of $25,000.
Series
I
On
April 3, 2019, the Company designated 4,000 shares of preferred stock as Series I. The Series I has a stated value of $1,000 per
share. Series I holders are entitled to cumulative dividends at the annual rate of 8% of the stated value, payable quarterly within
60 days from the end of each fiscal quarter. The Series I is not entitled to any voting rights except as may be required by applicable
law, and are not convertible into common stock. The Company has the right to redeem the Series I at any time while the Series I are outstanding
at a price equal to the stated value plus any accrued but unpaid dividends. The Company is required to redeem the Series I 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 March 31, 2022, there were 235 shares of
Series I preferred stock issued and outstanding which the Company was required to, and failed to redeem between May 2, 2021, and June
10, 2021, and was and remains in default for an aggregate redemption price (equal to the stated value) of $235,000.
Series
J
On
April 3, 2019, the Company designated 100,000 shares of preferred stock as Series J. The Series J has a stated value of $1,000 per
share and holders are entitled to receive dividends on an as-converted basis with the Company’s common stock. The Series J preferred
stock is convertible into shares of the Company’s common stock, on the terms and conditions set forth in the Series J COD, which
includes certain make-good shares for certain prior investors. As of March 31, 2022, there were 215 shares of Series J preferred
stock issued and outstanding.
Series
K
On
June 3, 2019, the Company designated 4,000 shares of preferred stock as Series K. The Series K has a stated value of $1,000 per
share. Series K holders are entitled to cumulative dividends at the annual rate of 8% of the stated value, payable quarterly within
60 days from the end of each fiscal quarter. The Series K is not entitled to any voting rights except as may be required by applicable
law, and is not convertible into common stock. The Company has the right to redeem the Series K at any time while the Series K are outstanding
at a price equal to the stated value plus any accrued but unpaid dividends. The Company is required to redeem the Series K 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 is 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. 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. During the three months ended March 31, 2022, the
Company redeemed 63.5 shares of Series K preferred stock equal to the stated value of $63,500 and exchanged an aggregate of 35 shares
of Series K preferred stock for 35 shares of Series W preferred stock. The shares were issued and exchanged within the terms of
the agreement and no gain or loss was recognized. As of March 31, 2022, there were 482 shares of Series K preferred stock issued
and outstanding which the Company was required to, and failed to redeem between August 5, 2021 and March 26, 2022, and was and remains
in default for an aggregate redemption price (equal to the stated value) of $482,150.
Series
L
On
June 3, 2019, the Company designated 100,000 shares of preferred stock as Series L. The Series L has a stated value of $1,000 per
share and holders are entitled to receive dividends on an as-converted basis with the Company’s common stock. The Series L preferred
stock is convertible into shares of the Company’s common stock, on the terms and conditions set forth in the Series L COD, which
includes certain make-good shares for certain prior investors. During the three months ended March 31, 2022, the Company issued an aggregate
of 14,528,106 shares of common stock upon conversion of 124 shares of Series L preferred stock, for a loss in the
amount of $210,997. As of March 31, 2022, there were 486 shares of Series L preferred stock issued and outstanding.
Series
M
On
July 1, 2020, the Company designated 800,000 shares of its preferred stock as Series M. Each share of Series M has a stated value of
$25. The Series M is not convertible into common stock. The holders of outstanding shares of Series M are entitled to receive dividends,
at the annual rate of 10%, payable monthly, payable in preference and priority to any payment of any dividend on the common stock. The
Series M is entitled to a liquidation preference in an amount equal to $25 per share plus any declared but unpaid dividends, before any
payments to holders of common stock. The Series M have no pre-emptive or subscription rights, and there are no sinking fund provisions
applicable to the Series M. The Series M does not have voting rights, except as required by law and with respect to certain protective
provisions set forth in the Certificate of Designation of Series M preferred stock. To the extent it may lawfully do so, the Company
may, in its sole discretion, at any time when there are outstanding shares of Series M, redeem any or all of the then outstanding shares
of Series M at a redemption price of $37.50 per share (150% of the stated value) plus any accrued but unpaid dividends. As of March 31,
2022, there were 40,300 shares of Series M preferred stock issued and outstanding.
Series
O
On
April 27, 2020, the Company designated 2,000 shares of preferred stock as Series O. The Series O has a stated value of $1,000 per
share, and entitles holders to receive cumulative dividends (i) in cash at an annual rate of 8% of the stated value, and (ii) in
shares of common stock of the Company (valued based on the conversion price as in effect on the last trading day of the applicable fiscal
quarter) at an annual rate of 4% of the stated value, payable quarterly within 60 days from the end of such fiscal quarter. The
Series O has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to the common stock.
The Series O has no preemptive or subscription rights, and there is no sinking fund provision applicable to the Series O. The Series
O does not have voting rights except as required by law. The Series O is convertible into common stock of the Company in an amount determined
by dividing 200% of the stated value of the Series O being converted by the conversion price, provided that, the Series O may not
be converted into common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the
Company’s outstanding common stock (which may be increased up to 9.99% upon 61 days’ written notice). The conversion
price is equal to the average closing sale price of the common stock for the five trading days prior to the conversion date. The Company
has the right (but no obligation) to redeem the Series O at any time while the Series O are outstanding at a redemption price equal to
the stated value plus any accrued but unpaid dividends. During the three months ended March 31, 2022, the Company issued an aggregate
of 261,707 shares of common stock in prorated 4% annualized dividends which are recorded as interest expense. As of March
31, 2022, there were 615 shares of Series O preferred stock issued and outstanding.
Series
P
On
April 27, 2020, the Company designated 500 shares of preferred stock as Series P. The Series P has a stated value of $1,000 per
share, and entitles holders to receive dividends on an as-converted basis with the Company’s common stock. The Series P is convertible
into shares of the Company’s common stock, on the terms and conditions set forth in the Certificate of Designation of Series P
preferred stock, which includes certain make-good shares for certain prior investors, and provided that, the Series P may not be converted
into common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the Company’s
outstanding common stock (which may be increased up to 9.99% upon 61 days’ written notice). The Series P entitles the holders
to a payment on an as-converted and pari passu basis with the common stock upon any liquidation. The Series P has no preemptive or subscription
rights, and there is no sinking fund or redemption provisions applicable to the Series P. The Series P votes on an as-converted basis
with the common stock, subject to the beneficial ownership limitation. As of March 31, 2022, there were 57.5 shares of Series
P preferred stock issued and outstanding.
Series
Q
On
August 21, 2020, the Company designated 2,000 shares of preferred stock as Series Q. The Series Q has a stated value of $1,000 per share,
and entitles holders to receive cumulative dividends in cash at an annual rate of 12% of the stated value, payable quarterly within 60
days from the end of such fiscal quarter. The Series Q has a liquidation preference equal to the stated value plus any accrued but unpaid
dividends, in preference to the common stock. The Series Q has no preemptive or subscription rights, and there is no sinking fund provision
applicable to the Series Q. The Series Q does not have voting rights except as required by law. The Series Q is convertible into common
stock of the Company in an amount determined by dividing 200% of the stated value of the Series Q being converted by the conversion price,
provided that, the Series Q may not be converted into common stock to the extent such conversion would result in the holder beneficially
owning more than 4.99% of the Company’s outstanding common stock (which may be increased up to 9.99% upon 61 days’ written
notice). The conversion price will be equal to the average closing sale price of the common stock for the five trading days prior to
the conversion date. The Company has the right (but no obligation) to redeem the Series Q at any time while the Series Q are outstanding
at a redemption price equal to the stated value plus any accrued but unpaid dividends. The cumulative dividends are recorded as interest
expense. During the three months ended March 31, 2022, the Company exchanged 100 shares of Series F preferred stock for 100 shares of
Series Q preferred stock. The shares were issued and exchanged within the terms of the agreement and no gain or loss was recognized.
As of March 31, 2022, there were 615 shares of Series Q preferred stock issued and outstanding.
Series
R
On
November 16, 2020, the Company designated 5,000 shares of preferred stock as Series R. The Series R has a stated value of $1,000 per
share, and entitles holders to receive cumulative dividends in cash at an annual rate of 10% of the stated value, payable quarterly within
60 days from the end of such fiscal quarter. The Series R holders are not entitled to any voting rights except as may be required by
applicable law. The Series R is convertible into common stock of the Company in an amount determined by dividing 200% of the stated value
of the Series R being converted by the conversion price; certain prior investors are also entitled to certain make-good shares; provided
that, the Series R may not be converted into common stock to the extent such conversion would result in the holder beneficially owning
more than 4.99% of the Company’s outstanding common stock (which may be increased up to 9.99% upon 61 days’ written notice).
The conversion price will be equal to the average closing sale price of the common stock for the five trading days prior to the conversion
date. The Company has the right (but no obligation) to redeem the Series R at any time while the Series R are outstanding at a redemption
price equal to, if paid in cash, the stated value plus any accrued but unpaid cash dividends, or, if paid in shares of common stock,
in an amount of shares determined by dividing the stated value being redeemed by the conversion price. The subscribers were offered warrants
with the purchase of Series R. During the three months ended March 31, 2022, the Company issued an aggregate of 27,162,453 shares of
common stock upon conversion of 378 shares of Series R preferred stock. The shares were issued and exchanged within the terms of the
agreement and no gain or loss was recognized. As of March 31, 2022, there were 3,054 shares of Series R preferred stock along with 101,498,340
Series A warrants (with an exercise price of $0.05) and 49,177,670 Series B warrants (with an exercise price of $0.10) issued and outstanding
with a fair value of $11,181,822 on the original issuance. The warrants were valued using the Black Scholes model (see additional information
under warrants footnote).
Series
S
On
February 5, 2021, the Company designated 430 shares of preferred stock as Series S. The Series S has a stated value of $1,000 per share,
and entitles holders to receive cumulative dividends in cash at an annual rate of 12% of the stated value, payable quarterly within 60
days from the end of such fiscal quarter. The Series S holders are not entitled to any voting rights except as may be required by applicable
law. The Series S is convertible into common stock of the Company in an amount determined by dividing 200% of the stated value of the
Series S being converted by the conversion price, provided that, the Series S may not be converted into common stock to the extent such
conversion would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common stock (which may
be increased up to 9.99% upon 61 days’ written notice). The conversion price is equal to the average closing sale price of the
common stock for the five trading days prior to the conversion date. The Company has the right (but no obligation) to redeem the Series
S at any time while the Series S are outstanding at a redemption price equal to the stated value plus any accrued but unpaid dividends.
As of March 31, 2022, there were 170 shares of Series S preferred stock issued and outstanding.
Series
T
On
February 24, 2021, the Company designated 630 shares of preferred stock as Series T. The Series T has a stated value of $1,000 per share,
and entitles holders to receive cumulative dividends in cash at an annual rate of 10% of the stated value, payable monthly. The Series
T holders are not entitled to any voting rights except as may be required by applicable law. The Series T is convertible into common
stock of the Company pursuant to the Series T COD, provided that, the Series T may not be converted into common stock to the extent such
conversion would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common stock (which may
be increased up to 9.99% upon 61 days’ written notice). The Company will have the right (but no obligation) to redeem the Series
T at any time while the Series T are outstanding at a redemption price equal to the stated value plus any accrued but unpaid dividends.
On March 1, 2021, the Company issued an aggregate of 630 shares of Series T Preferred Stock to an accredited investor (the “Purchaser’’)
per terms of a Securities Purchase Agreement (the “SPA”). Per the SPA, the Company agreed to sell to Purchaser, and
Purchaser agreed to purchase from the Company, 630 shares of the Company’s Series T, and two-year cashless warrants to acquire
25,200,000 shares of the Company’s common stock, valued at $0.05 per share per terms of the SPA, which may be exercised at any
time in whole or in part. Per the SPA, the Series T, including any convertible shares acquired pursuant to exercise of the warrants,
the Company shall pay 10% annual dividends in cash, paid monthly. Purchaser may convert any portion of the Series T, including convertible
shares acquired pursuant to exercise of the warrants, at any time into shares of the Company’s common stock at an agreed upon conversion
rate per terms of the SPA. The purchaser and the Company agreed that in lieu of the purchase price for the Series T, the Purchaser transferred
to the Company real property, with an aggregate value agreed to be $630,000 based on an appraisal from an international independent company.
The real property consists of residential real estate in Buenos Aires Argentina valued at $580,000, and eight undeveloped lots valued
at $50,000 in Terralta private neighborhood development. The real property exchanged for 630 shares of Series T was recorded at $630,000
and reflected on the balance sheet as a long term asset for sale. The fair value of the warrants associated with acquiring 25,200,000
preferred shares were valued at $2,037,849, using the Black Scholes model and accounted for as deemed dividends and reflected in stockholder’s
equity as accumulated paid in capital. The Company has actively listed the residential real property for sale since July 2021. On September
13, 2021, the Company received an offer for the property for $464,000, which was $116,000 below the original independent appraisal of
$580,000. Based on that indicator of impairment, during the year ended December 31, 2021, the Company adjusted the original value of
the long term asset for sale from $630,000 to $514,000 on the balance sheet and recorded an impairment of $116,000 in the consolidated
financial statements. During the three months ended March 31, 2022, the Company issued an aggregate of 17,193,676 shares of
common stock upon conversion of 145 shares of Series T preferred stock. As of March 31, 2022, there were 485 shares of Series
T preferred stock issued and outstanding.
Series
U
On
May 26, 2021, the Company designated 5,000 shares of preferred stock as Series U. The Series U has a stated value of $1,000 per share.
The Series U holders are not entitled to any dividends and do not have any voting rights except as may be required by applicable law.
The Series U is convertible into common stock of the Company in an amount determined by dividing 150% of the stated value of the Series
U being converted by the conversion price; certain prior investors are also entitled to certain make-good shares; provided that, the
Series U may not be converted into common stock to the extent such conversion would result in the holder beneficially owning more than
4.99% of the Company’s outstanding common stock (which may be increased up to 9.99% upon 61 days’ written notice). The conversion
price is equal to the lesser of $0.20 or the average closing sale price of the common stock for the five trading days prior to the conversion
date. The Company has the right (but no obligation) 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 200% of the stated value being
redeemed by the conversion price then in effect, and adding any applicable make-good shares. During the three months ended March
31, 2022, the Company issued an aggregate of 22,794,493 shares of common stock upon conversion of 432 shares of Series U preferred stock.
The shares were issued within the terms of the agreement and no gain or loss was recognized. As of March 31, 2022, there were 635 shares
of Series U preferred stock issued and outstanding, along with 18,115,000 Series A warrants (with an exercise price of $0.05), 6,246,000
Series B warrants (with an exercise price of $0.10), and 1,561,000 Series C warrants (with an exercise price of $1.00) issued and outstanding
with a fair value of $828,186 on the original issuance. The warrants were valued using the Black Scholes model (see additional information
under warrants footnote).
Series
V
On
December 1, 2021, the Company filed a certificate of withdrawal of the Company’s certificate of designation of Series V preferred
stock and filed a certificate of designation for a new series of Series V preferred stock with the Secretary of State of Nevada. Pursuant
to the Series V COD, the Company designated 3,000 shares of preferred stock as Series V. The Series V has an original issue price of
$100,000 per share, and holders are entitled to an annual distribution of 25% of annual net profits of newly established Company wholly-owned,
Water On Demand subsidiaries, designated by each holder, paid within 3 months of subsidiary’s accounting year-end. The Series V
holders are not entitled to any dividends and do not have any voting
rights except as may be required by applicable law. The Series V is convertible into common stock
of the Company pursuant to the Series V COD, provided that, the Series V may not be converted into common stock to the extent such conversion
would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common stock (which may be increased
up to 9.99% upon 61 days’ written notice). The Company has the right (but no obligation) to redeem the Series V at any time at
a redemption price equal to, if paid in cash, the stated value plus any accrued but unpaid distributions of 25% of subsidiary’s
annual net profits. During the three months ended March 31, 2022, the Company exchanged 4 shares of Series V preferred stock for
4 shares of Series Y preferred stock, and exchanged an aggregate of 3,200,000 warrants associated with the Series V into Series Y. The
shares were issued and exchanged within the terms of the agreement and no gain or loss was recognized. As of March 31, 2022, there were
no shares of Series V preferred stock issued and outstanding.
Series
W
On
April 28, 2021, the Company designated 3,390 shares of preferred stock as Series W. The Series W has a stated value of $1,000 per share,
and Series W holders are entitled to cumulative dividends in cash at an annual rate of 12% of the stated value, payable quarterly. The
Series W holders are not entitled to any voting rights except as may be required by applicable law. The Series W is convertible into
common stock of the Company in an amount determined by dividing 200% of the stated value of the Series W being converted by the conversion
price; provided that, the Series W may not be converted into common stock to the extent such conversion would result in the holder beneficially
owning more than 4.99% of the Company’s outstanding common stock. The conversion price will be equal to the average closing sale
price of the common stock for the five trading days prior to the conversion date. The Company has the right (but no obligation) 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 three months
ended March 31, 2022, the Company issued 35 shares of Series W preferred stock in exchange for 35 shares of Series K preferred stock
and issued an aggregate of 694,446 shares of common stock upon conversion of 10 shares of Series W preferred stock. The shares were issued
within the terms of the agreement and no gain or loss was recognized. As of March 31, 2022, there were 770 shares of Series W preferred
stock issued and outstanding.
Series
X
On
August 10, 2021, the Company designated 25 shares of preferred stock as Series X. The Series X has a stated value of $10,000 per share.
The Series X holders are not entitled to any dividends and do not have any voting rights except as may be required by applicable law.
The Series X is convertible into common stock of the Company pursuant to the Series X COD, provided that, the Series X may not be converted
into common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the Company’s
outstanding common stock (which amount may be increased up to 9.99% upon 61 days’ written notice). Beginning on the one year anniversary
of the subscription agreement for the Series X Preferred Stock, until the two year anniversary of the subscription agreement, the holders
will have the right to require the Company to redeem all of the Series X purchased by the subscriber at a price equal to 125% of the
$250,000 original purchase price, or $312,500. The holders also have the right, exercisable at any time, to require the Company to redeem
all of the holder’s Series X in exchange for the issuance of shares of the Company’s common stock in an amount equal to 250%
of the original $250,000 purchase price, or $625,000, divided by the closing price of the Company’s common stock as of the date
the holders executed the subscription agreement. On August 10, 2021, the Company issued and sold to an accredited investor an aggregate
of 25 shares of Series X preferred stock for a purchase price of $250,000. Per the Series X COD, as of March 31, 2022, $140,000 of the
$250,000 was classified as restricted cash. As of March 31, 2022, there were 25 shares of Series X preferred stock issued and outstanding.
Series
Y
On
December 6, 2021, the Company designated 3,000 shares of preferred stock as Series Y. The Series Y has an original issue price of
$100,000 per share, and holders are entitled to receive, on a pro rata and pari passu basis, annual distribution of 25% of annual
net profits of newly established, wholly-owned, Water On Demand subsidiaries, designated by each holder, paid within 3 months of subsidiary’s
accounting year-end. The Series Y holders are not entitled to any voting rights except as may be required by applicable law. The Series
Y is convertible into common stock of the Company pursuant to the Series Y COD, provided that, the Series Y may not be converted into
common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the Company’s outstanding
common stock (which may be increased up to 9.99% upon 61 days’ written notice). The Company has the right (but no obligation) 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 25% of the subsidiary’s annual net profits. During
the three months ended March 31, 2022, the Company issued 12.5 shares of Series Y preferred stock at an original issue price of $1,244,200
and issued an aggregate of 9,953,600 warrants with a fair value of $270,385 to Series Y holders, and issued 4 shares of Series Y preferred
stock in exchange for 4 shares of Series V for an aggregate value of $400,000 and issued an aggregate of 3,200,000 warrants with a fair
value of $97,507 to those Series Y preferred stock investors. Per the Series Y COD, $622,100 of the $1,244,200 received was classified
as restricted cash. As of March 31, 2022, there were 21.1 shares of Series Y preferred stock issued and outstanding, along with 16,913,600
warrants (with an exercise price of $0.05) and 6,246,000 Series B warrants (with an exercise price of $0.10) issued and outstanding with
a fair value of $1,561,500 on the original issuance. The warrants were valued using the Black Scholes model (see additional information
under warrants footnote).
Series
Z
On
February 11, 2022, the Company designated 25 shares of preferred stock as Series Z. The Series Z has an original issue price of
$10,000 per share. The Series Z holders are not entitled to dividends or any voting rights except as may be required by applicable law.
The Series Z is convertible into common stock of the Company pursuant to the Series Z COD, provided that, the Series Z may not be converted
into common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the Company’s
outstanding common stock (which amount may be increased up to 9.99% upon 61 days’ written notice). The Company has the right
(but no obligation) to redeem the Series Z at any time at a redemption price equal to the original issue price plus any accrued but unpaid
distributions of 25% of Subsidiary’s annual net profits. On February 18, 2022, the Company issued and sold to
an accredited investor an aggregate of 25 shares of Series Z preferred stock for a purchase
price of $250,000 and issued an aggregate of 2,500,000 warrants with a fair value of $56,036 to Series Z holders.
As
of March 31, 2022, the Company accrued aggregate dividends in the amount of $352,359 for all series of preferred stock.
The
Series J, Series L, Series M, Series O, Series P, Series Q Series R, Series S, Series T, Series U, Series V, Series W, Series X, 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.
Common
Stock
Three
Months Ended March 31, 2022
The
Company issued 12,461,909 shares of common stock for the settlement of convertible promissory notes in an aggregate principal amount
of $69,900, plus interest in the amount of $49,734, for a total aggregate of $119,634 based upon a conversion price of $0.00955.
The
Company issued 13,314,289 shares of common stock for services at fair value of $338,724 at share prices ranging from $0.0235 - $0.0319.
The
Company issued 261,707 shares of common stock for Series O preferred stock dividends payable.
The
Company issued 111,010,481 shares of common stock for settlement of conversion agreements at a fair value of $11,101.
The
Company issued shares of common stock upon conversion of 82,373,174 shares of preferred stock.
Three
Months Ended March 31, 2021
The
Company issued 6,354,895 shares of common stock for the settlement of convertible promissory notes in an aggregate principal amount of
$37,500, plus interest in the amount of $23,507, at a conversion price of $0.00955.
The
Company issued 4,766,280 shares of common stock for services at fair value of $339,119, at share prices ranging from $0.0351 - $0.124.
The
Company issued 236,205 shares of common stock for preferred stock dividends payable.
The
Company issued 36,487,963 shares of common stock upon conversion of 1,251 shares of preferred stock.
4. |
RESTRICTED STOCK AND WARRANTS |
Restricted
Stock to CEO
Between
May 12, 2016, and January 1, 2022, the Company entered into Restricted Stock Grant Agreements (“the RSGAs”) with its Chief
Executive Officer, Riggs Eckelberry, to create management incentives to improve the economic performance of the Company and to increase
its value and stock price. All shares issuable under the RSGAs are performance based shares. The RSGAs provides for the issuance of up
to an aggregate of 242,109,214 shares of the Company’s common stock to Mr. Eckelberry provided certain milestones are met in certain
stages; a) If the Company’s consolidated gross revenue, calculated in accordance with generally accepted accounting principles,
consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company’s quarterly
or annual financial statements, the Company will issue up to an aggregate of 121,054,607 shares of its common stock; b) If the Company’s
consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation &
Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing
twelve month period as reported in the Company’s SEC Reports, the Company will issue up to an aggregate of 121,054,607
shares of its common stock. The Company has not recognized any costs associated with the milestones, because achievement is not
probable. As the performance goals are achieved, the shares shall become eligible for vesting and issuance.
Restricted
Stock to the Board, Employees and Consultants
Between
May 12, 2016, and January 1, 2022, the Company entered into Restricted Stock Grant Agreements (“the BEC RSGAs”) with its
members of the Board, employees, and consultants to create management incentives to improve the economic performance of the Company and
to increase its value and stock price. All shares issuable under the BEC RSGAs are performance based shares. The BEC RSGAs provide for
the issuance of up to 356,141,542 shares of the Company’s common stock to employees and consultants provided certain milestones
are met in certain stages; a) If the Company’s consolidated gross revenue, calculated in accordance with generally accepted accounting
principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company’s
quarterly or annual financial statements, the Company will issue up to an aggregate of 178,070,771 shares of its common stock; b) If
the Company’s consolidated operating profit Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses
- Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds
$1,500,000 for the trailing twelve month period as reported as reported in the Company’s SEC reports, the Company will issue up
to an aggregate of 178,070,771 shares of its common stock. The Company has not recognized
any costs associated with the milestones, because achievement is not probable. As the performance goals are achieved, the shares shall
become eligible for vesting and issuance.
On
August 14, 2019, the Board of Directors approved an amendment to the RSGAs and BEC RSGAs to include an alternative vesting schedule for
the Grantees and on January 26, 2022, the Company amended the procedures for processing the RSGAs and BEC RSGAs. Once a Grantee
is eligible to participate in alternate vesting, then they will be added to the list of alternate vestees, enlarging the pool of vestees
among which, 10% of stock sales that are allowed under the agreement is divided for the next year. The Company then (i) calculates the
value of the Company common stock traded in the year immediately prior to the vesting year, using daily adjusted close and volume, as
quoted on the public securities trading market on which the Company’s common stock is then traded (ii) determines the cost basis
of the shares, which shall be the closing price quoted on the public securities trading market, quoted on the first trading day of the
vesting year which will be the grantee’s cost basis, and (iii) applies the 10% calculation and divides it into the number of qualifying
alternate vestees, giving the gross number of shares available to each Grantee. For each alternate vestee for each year in which there
occurs a vesting or a potential vesting, the Company (i) does a 90-day lookback from the first day of the latest vesting month, to limit
cumulative vesting of shares for each alternate vestee for the 90-day period to 1% of total Company shares of common stock outstanding
for the period, using the then current figure for shares outstanding at the time of the lookback; (ii) places the excess shares (the
“Overlimit Shares”) in suspense for issuance in the next 90-day period so that in each future 90-day period they may be issued,
and (iii) if on the 90-day lookback, cumulative issuances are less than 1% of shares outstanding, the Company will add the shares from
previous 90-day lookback, if any. For the avoidance of doubt, the Company will not record any Overlimit Shares as vested until such as
time as they have been finally issued. If the fair market value of the Company’s common stock on the date the shares are
vested is less than the fair market value of the Company’s common stock on the effective date of the RSGA or BEC RSGA, then the
number of vested shares issuable (assuming all conditions are satisfied) shall be increased so that the aggregate fair market value of
vested shares issuable 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 be as set forth under the restricted stock award agreement.
During
the three months ended March 31, 2022, the Company did not issue any shares relating to the RSGAs nor the BEC RSGAs.
Warrants
During
the three months ended March 31, 2022, the Company granted 15,653,600 common stock purchase warrants, associated with the issuance of
preferred stock. A summary of the Company’s warrant activity and related information follows for the three months ended March 31,
2022:
| |
3/31/2022 | |
| |
Number
of
Warrants | | |
Weighted
average
exercise
price | |
Outstanding - beginning of period | |
| 217,085,783 | | |
$ | 0.0868 | |
Granted | |
| 15,653,600 | | |
$ | 0.1210 | |
Exercised | |
| - | | |
| - | |
Expired | |
| (50,076,010 | ) | |
$ | 0.0736 | |
Outstanding - end of period | |
| 182,663,373 | | |
$ | 0.0893 | |
At
March 31, 2022, the weighted average remaining contractual life of warrants outstanding:
| | |
2022 | |
| | |
| | |
| | |
Weighted
Average | |
| | |
| | |
| | |
Remaining | |
Exercisable | | |
Warrants | | |
Warrants | | |
Contractual | |
Prices | | |
Outstanding | | |
Exercisable | | |
Life
(years) | |
$ | 0.02 | | |
| 600,000 | | |
| 600,000 | | |
| 4.42 | |
$ | 0.05 | | |
| 90,175,000 | | |
| 90,175,000 | | |
| 0.01 - 0.92 | |
$ | 0.10 | | |
| 58,440,000 | | |
| 58,440,000 | | |
| 0.01 - 1.65 | |
$ | 0.25 | | |
| 10,006,000 | | |
| 10,006,000 | | |
| 1.25 – 4.75 | |
$ | 0.0275 | | |
| 8,727,273 | | |
| 8,727,273 | | |
| 9.16 | |
$ | 0.125 | | |
| 13,153,600 | | |
| 13,153,600 | | |
| 4.77 - 4.99 | |
$ | 1.00 | | |
| 1,561,500 | | |
| 1,561,500 | | |
| 2.25 - 2.72 | |
| | | |
| 182,663,373 | | |
| 182,663,373 | | |
| | |
At
March 31, 2022, the aggregate intrinsic value of the warrants outstanding was $0.
5. |
CONVERTIBLE PROMISSORY
NOTES |
As
of March 31, 2022, the outstanding convertible promissory notes are summarized as follows:
Convertible
Promissory Notes | |
$ | 3,012,155 | |
Less
current portion | |
| 1,596,008 | |
Total
long-term liabilities | |
$ | 1,416,147 | |
Maturities
of long-term debt for the next two years are as follows:
Year Ending
March 31, | |
Amount | |
2023 | |
| 1,596,008 | |
2024 | |
| 1,312,275 | |
2025 | |
| 103,772 | |
| |
$ | 3,012,155 | |
On
various dates from November 2014 through April 2015, the Company issued unsecured convertible promissory notes (the “2014-2015
Notes”), that matured on various dates and were extended sixty (60) months from the effective date of each Note. The 2014-2015
Notes bear interest at 10% per year. The maturity dates were extended to November 2023 through April 2024. The 2014-2015 Notes may be
converted into shares of the Company’s common stock at conversion prices ranging from the lesser of $4,200 to $9,800 (subject to
adjustment for stock splits, dividends, combinations and other similar transactions) or 50% of the lowest trade price on any trade day
following issuance of the 2014-2015 Notes. In addition, for as long as the 2014-2015 Notes or other convertible notes in effect between
the purchaser and the Company are outstanding, if the Company issues any security with terms more favorable than the terms of the 2014-2015
Notes or such other convertible notes or a term was not similarly provided to the purchaser of the 2014-2015 Notes or such other convertible
notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the 2014-2015 Notes and such
other convertible notes. The conversion feature of the 2014-2015 Notes was considered a derivative in accordance with current accounting
guidelines because of the reset conversion features of the 2014-2015 Notes. During the three months ended March 31, 2022, the Company
issued 12,461,909 shares of common stock, upon conversion of $69,900 in principal, plus accrued interest of $49,734. As of March 31,
2022, the 2014-2015 Notes had an aggregate remaining balance of $860,100, which are long term.
The unsecured convertible promissory notes (the “OID Notes”)
had an aggregate remaining balance of $184,124, plus accrued interest of $13,334. The OID Notes included an original issue discount and
one-time interest, which has been fully amortized. The OID Notes matured on December 31, 2017, which were extended to June 30, 2023. The
OID Notes were convertible into shares of the Company’s common stock at a conversion price initially of $30,620. After the
amendment, the conversion price changed to the lesser of $5,600 per share, or b) fifty percent (50%) of the lowest trade price of common
stock recorded since the original effective date of this note, or c) the lowest effective price per share granted to any person or entity
after the effective date. The conversion feature of the notes was considered a derivative in accordance with current accounting guidelines,
because of the reset conversion features of the notes. As of March 31, 2022, the remaining balance was $62,275, which is long term.
The Company issued various, unsecured convertible promissory notes
(the “2015Notes”), on various dates ending on August 2015. The 2015 Notes matured and were extended from the date of each
tranche through maturity dates ending on February 2024 through March 2024, and April 2022 through August 2022. The 2015 Notes bear interest
at 10% per year. The 2015 Notes may be converted into shares of the Company’s common stock at conversion prices ranging from the
lesser of $1,400 to $5,600 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 50% of
the lowest trade price on any trade day following issuance of the 2015 Notes. The conversion feature of the 2015 Notes was considered
a derivative in accordance with current accounting guidelines because of the reset conversion features of the 2015 Notes. As of March
31, 2022, the 2015 Notes had an aggregate remaining balance of $1,200,000, of which $780,000 is short term and $420,000 is long term.
The
Company issued a convertible note (the “Dec 2015 Note”) in exchange for accounts payable in the amount of $432,048, which
could be converted into shares of the Company’s common stock after December 31, 2015. The Dec 2015 Note was accounted for under
ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The Dec 2015 Note did not meet the criteria of a
derivative, and was accounted for as a beneficial conversion feature, which was amortized over the life of the Dec 2015 Note and recognized
as interest expense in the financial statements. On January 1, 2016, the Dec 2015 Note met the criteria of a derivative and was accounted
for under ASC 815. The Dec 2015 Note has zero stated interest rate, and the conversion price shall be equal to 75% of the average three
lowest last sale prices traded during the 25 trading days immediately prior to conversion. As of March 31, 2022, the remaining balance
on the Dec 2015 Note was $167,048, which is short term.
The
Company issued a convertible note (the “Sep 2016 Note”) in exchange for accounts payable in the amount of $430,896, which
could be converted into shares of the Company’s common stock after September 15, 2016. The Sep 2016 Note was accounted for under
ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The Sep 2016 Note met the criteria of a derivative
and was accounted for under ASC 815. The Sep 2016 Note has zero stated interest rate, and the conversion price shall be equal to 75%
of the average three lowest last sale prices traded during the 25 trading days immediately prior to conversion. The Sep 2016 Note did
not meet the criteria of a derivative at the date of the issuance, and was accounted for as a beneficial conversion feature, which was
amortized over the life of the Sep 2016 Note and recognized as interest expense in the financial statements. The conversion feature of
the Sep 2016 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion feature
of the Sep 2016 Note. As of March 31, 2022, the remaining balance on the Sep 2016 Note was $430,896, which is short term.
The
Company issued two (2) unsecured convertible promissory notes (the “Apr & May 2018 Notes”), in the aggregate amount of
$300,000 on April 2, 2018 and May 31, 2018. The Apr & May 2018 Notes had maturity dates of April 2, 2019 and May 31, 2019,
respectively. The Apr & May 2018 Notes bear interest at 10% per year. The Apr & May 2018 Notes may be converted into shares of
the Company’s common stock at a variable conversion price of 50% of the lesser of the lowest trading price twenty-five (25) trading
days prior to conversion. The conversion feature of the Apr & May 2018 Notes was considered a derivative in accordance with
current accounting guidelines because of the reset conversion features of the Notes. On March 13, 2019, the Company entered into a settlement
agreement with the investor in the amount of $570,000, based on the outstanding balance due and payable under the Apr & May 2018
Notes. The Company set up a reserve of 2,630,769 shares of common stock of the Company for issuance upon conversion by the
investor of the amounts owed under the Notes, in accordance with the terms of the Notes, including, but not limited to the beneficial
ownership limitations contained in the Notes. In addition to the foregoing, upon the sale by the investor of the settlement shares as
delivered to the investor by the Company, resulting in total net proceeds less than the settlement value, the investor is entitled to
additional settlement shares of the Company’s common stock. If after the investor has sold all settlement shares, the investor
delivers a written notice to the Company certifying that the investor is entitled to additional settlement shares of the Company’s
common stock (the “Make-Whole Shares”). The number of make-whole shares being equal to the greater of ((i) zero and (ii)
the quotient of (1) the difference of (x) the settlement value with respect to each sale of shares by the Investor after the delivery
of the Settlement Shares, minus (y) the aggregate net consideration received by the Investor from the resale of all shares of common
stock issued by the Company, divided by (2) the average trailing closing price for ten (10) trading days for the shares immediately preceding
the date of delivery of the make-whole shares. As of March 31, 2022, the remaining balance on the May 2018 Note was $218,064, which is
short term.
The Company entered into an unsecured convertible promissory note (the
“Nov 20 Note”), on November 19, 2020 in the amount of $50,000. The Company received funds in the amount of $50,000. The Nov
20 Note matures on November 19, 2021, twelve months from the effective date of the Note. The Note may be extended sixty (60) months
from the maturity date. The Nov 20 Note bears interest at 10% per year. The Nov 20 Note may be converted into shares of the
Company’s common stock at a lesser price of $0.05 per share or (b) fifty percent (50%) of the lowest trade price of common stock
recorded on any trade after the effective date, or (c) the lowest effective price per share granted. In addition, for each conversion,
in event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $2,000 per day shall
be assessed for each day after the third business day until the shares are delivered. The conversion feature of the Nov 20 Note was
considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. As of March
31, 2022, the remaining balance on the Nov 20 Note was $13,772, which is long term.
The
Company entered into an unsecured convertible promissory note (the “Jan 21 Note”), on January 25, 2021 in the amount of $60,000.
The Company received funds in the amount of $60,000. The Jan 21 Note matures on January 25, 2022, twelve months from the effective
date of the Note. The Note may be extended sixty (60) months from the maturity date. The Jan 21 Note bears interest at 10% per year.
The Jan 21 Note may be converted into shares of the Company’s common stock at a conversion price equal to the lower of (a) $0.05
per share, (b) fifty percent (50%) of the lowest trade price of common stock recorded on any trade after the effective date, or (c) the
lowest effective price per share granted. In addition, for each conversion, in event that shares are not delivered by the fourth business
day (inclusive of the day of conversion), a penalty of $2,000 per day shall be assessed for each day after the third business day until
the shares are delivered. The conversion feature of the Jan 25 Note was considered a derivative in accordance with current accounting
guidelines because of the reset conversion features of the Note. The Company recorded amortization of debt discount, which was recognized
as interest expense in the amount of $3,743 during the three months ended March 31, 2022. As of March 31, 2022, the balance of the
Jan 21 Note was $60,000, which is long term.
We
evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature
of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to its variable conversion
rate. The note has no explicit limit on the number of shares issuable, so they did not meet the conditions set forth in current accounting
standards 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 derivative. The derivative liability is adjusted periodically according to the stock price
fluctuations.
The
derivative liability recognized in the financial statements as of March 31, 2022 was $7,852,842.
6. |
REVENUE FROM CONTRACTS
WITH CUSTOMERS |
Equipment
Contracts
Revenues
and related costs on equipment contracts are recognized as the performance obligations for work are satisfied over time in accordance
with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated
profit will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations).
All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the
event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.
The
following table represents a disaggregation of revenue by type of good or service from contracts with customers for the March 31, 2022
and 2021.
|
|
Three Months
Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Equipment Contracts |
|
$ |
812,245 |
|
|
$ |
502,441 |
|
Component Sales |
|
|
354,731 |
|
|
|
265,135 |
|
Waste Water Treatment Systems |
|
|
49,460 |
|
|
|
- |
|
Rental Income |
|
|
6,573 |
|
|
|
8,114 |
|
Services Sales |
|
|
11,096 |
|
|
|
20,488 |
|
|
|
$ |
1,234,105 |
|
|
$ |
796,178 |
|
Revenue
recognition for other sales arrangements, such as sales for components, and service sales will remain materially consistent.
Contract
assets represents revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represents 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 balance sheets, as they will be liquidated in the normal course of the contract completion.
The contract asset for the three months ended March 31, 2022 and the year ended December 31, 2021, was $781,967 and $378,932, respectively.
The contract liability for the three months ended March 31, 2022, and the year ended December 31, 2021, was $2,494,825 and $1,886,946,
respectively.
Fair
value investment in Securities
On
November 12, 2021, the Company served a conversion notice to WTII and recorded additional interest and fees of $15,988 through that date,
according to the terms of the securities purchase agreement for an aggregate of $149,867. The Note was converted into 45,208,649 shares
of WTII common stock. As of March 31, 2022, the investment in securities was recorded at fair value in the amount of $94,940, with an
unrealized loss of $103,978.
On
May 15, 2018, the Company received 4,000 shares of WTII Series C convertible preferred stock for the use of OriginClear, Inc. technology
associated with their proprietary electro water separation system. Each share of Series C convertible preferred stock is convertible
into one thousand (1,000) shares of WTII common stock. The stock was valued at fair market value of $0.0075 for a price of $30,000 on
the date of issuance. The Company analyzed the licensing agreement using ASU 606 to determine the timing of revenue recognition. The
licensing of the intellectual property (IP) is distinct from the non-license goods or services and has significant standalone functionality
that provides a benefit or value. The functionality will not change during the license period due to the licensor’s activities.
Because the significant standalone functionality was delivered immediately, the revenue was recognized in the financial statements as
of June 30, 2018. As of March 31, 2022, the fair value of the preferred shares was $8,800.
Secured
Loans Payable
The
Company entered into short term loans with various lenders for capital expansion secured by the Company’s assets in the amount
of $1,749,970, which included finance cost of $624,810. The finance cost was amortized over the terms of the loans, which have various
maturity dates ranging from October 2018 through February 2019. As of December 31, 2020, the finance cost was fully amortized. During
the year ended December 31, 2021, the Company settled the majority of the loans in the amount of $262,250, of which $157,250 was recognized
on the statement of operations as a gain on write-off of loan payable. The term of the loans ranged from two months to six months. During
the period ended March 31, 2022, the Company received $25,000 as a settlement and wrote off $50,000 of secured loans payable. The net
balance as of March 31, 2022 was $30,646.
Small
Business Administration Loans
Between
April 30, 2020 and September 12, 2020, the Company received total loan proceeds in the amount of $505,000, which included an aggregate
of $345,000 under the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act,
an Economic Injury Disaster Loan (the “EIDL”) in the amount of $150,000, and an Economic Injury Disaster Grant in the amount
of $10,000. The principal and accrued interest under the PPP was forgivable if the Company used the PPP loan proceeds for eligible purposes,
including payroll, benefits, rent and utilities, and otherwise complied with PPP requirements. The Company used the full proceeds of
the PPP loan specifically for eligible purposes per requirements of the PPP and during the period ending December 31, 2021, the Company
submitted satisfactory documentation regarding its compliance with the applicable requirements and obtained forgiveness of the PPP loan.
The Company must repay any unforgiven principal amount, with interest, on a monthly basis following the deferral period for the EIDL.
For the period ended December 31, 2021, the aggregate amount of $345,000 received under the PPP, and the Economic Injury Disaster Grant
in the amount of $10,000 was recognized in the statement of operations as other income due to forgiveness.
The
Company entered into a capital lease for the purchase of equipment during the year ended December 31, 2018. The lease is for a sixty
(60) month term, with monthly payments of $757 per month, and a purchase option at the end of the lease for $1.00. As of March 31, 2022,
there remain a current balance of $5,713.
On
January 22, 2020 the Company entered into a strategic partnership with Permionics Separations Solutions, Inc., a unit of India’s
Permionics Group (“Permionics”) for the Asia-Pacific Region. This strategic partnership assists the Company with overcoming
the typical hurdles in commercializing a technology overseas with engineering support, developing customer proposals, infrastructure
to handle logistics and purchasing, inventory and shipping from and into foreign countries, customer training, startup assistance and
service.
The
Company believes that Permionics is best suited to accomplish all of the above for its customers in the Asia-Pacific countries and as
a result, has terminated all activities of its fully owned subsidiary, OriginClear Technologies Limited, in Hong Kong, China, working
instead with Permionics when applicable.
The
Company acquired real estate assets to be held for sale to finance their water projects, by issuing 630 shares of Series T preferred
stock for a fair value of $630,000, in conjunction with common stock purchase warrants, through an asset purchase agreement. The assets
held for sale consisted of residential property, plus eight (8) lots of undeveloped land. The real property has been listed actively
on the market to be sold. Based on the offers received and the market conditions, the Company adjusted the fair value by $116,000 leaving
a fair value of $514,000.
12. |
COMMITMENTS AND CONTINGENCIES |
Facility
Rental – Related Party
Our
Dallas based subsidiary, PWT, rents an approximately12,000 square foot facility located at 2535 E. University Drive, McKinney, TX 75069,
with a current monthly rent of $7,900.
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 has 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
provided under PWT based on the opinion of management and based on Company history in the amount of $20,000 for the three months ended
March 31, 2022.
Litigation
On
January 24, 2022, OriginClear, Inc., Progressive Water Treatment, Inc., OriginClear, Inc., and T. Riggs Eckelberry, individually (collectively,
the “GTR Plaintiffs”), on the one hand, and GTR Source LLC and Tzvi “Steve” Reich (collectively, the “GTR
Defendants”), on the other hand, settled a dispute between the parties relating to two distinct merchant funding agreements that
were entered into on July 20, 2018 and August 28, 2018, and a settlement agreement entered into on December 13, 2018. Pursuant to the
terms of settlement, all of which have been performed as of the filing date, (i) the GTR Defendants paid $25,000 to the GTR Plaintiffs,
(ii) the parties mutually released each other from all claims, controversies, etc. that could have been asserted by any party against
any other party pursuant to the aforesaid merchant funding agreements and settlement entered thereunder, and (iii) the GTR Plaintiffs
dismissed with prejudice the action commenced by the GTR Plaintiffs in the Supreme Court for the State of New York in and for the County
of Ontario and the appeal in the United States Court of Appeals for the Second Circuit. In addition the foregoing terms of settlement,
on January 11, 2022, the GTR Defendants filed a vacatur of the judgment by confession, with prejudice, that was obtained in favor of
the GTR Defendants and against the GTR Plaintiffs in the Supreme Court for the State of New York in and for the County of Ontario. As
of the filing date, the Company views the aforesaid GTR matter as closed.
On
March 12, 2021, OriginClear, Inc. Progressive Water Treatment, Inc. and T. Riggs Eckelberry, individually (collectively, the “C6
Plaintiffs”), and C6 Capital LLC (“C6 Capital”) agreed to settle the dispute between the parties relating to a merchant
cash advance agreement entered into on July 17, 2018. Pursuant to the terms of the settlement, (i) C6 has vacated the judgment obtained
by C6 Capital against the C6 Plaintiffs; (ii) C6 has released any and all bank levies, liens, security interests, powers of attorney,
and other encumbrances its has against the C6 Plaintiffs; (iii) the C6 Plaintiffs have dismissed the plenary action commenced in
the Supreme Court for the State of New York in and for the County of Broome against C6 Capital with prejudice and; (iv) the sister-state
judgment C6 Capital obtained against the C6 Plaintiffs in California is currently in the process of being vacated by stipulation. Accordingly,
the C6 Plaintiffs no longer owe any further amounts to C6 Capital with respect to the C6 Agreement.
On
February 12, 2019, Auctus Fund, LLC (“Auctus”) filed a complaint against OriginClear in the United States District Court
for the District of Massachusetts for numerous claims arising from two convertible promissory notes and accompanying securities purchase
agreements. On March 13, 2019, Auctus and OriginClear entered into a Settlement Agreement and Mutual General Release, under which Auctus
would be permitted to convert $570,000 into OriginClear securities pursuant to the terms set forth in the convertible promissory notes.
On February 2, 2021, OriginClear filed a Motion to Set Aside the Settlement Agreement as Void under Section 29(b) of the Securities Exchange
Act of 1934 (the “Act”) for Auctus’ violation of Section 15(a) of the Act. If granted, the Settlement Agreement would
be declared void and unenforceable. As of the filing date, no decision has been rendered on OriginClear’s Motion to Set Aside the
Settlement Agreement.
Management
has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has determined that there are the following subsequent
events:
On
April 6, 2022, OriginClear agreed in principle to an arrangement with Houston-based, international water service company Envirogen Technologies
(www.envirogen.com), a 30-year international provider of environmental technology and process solutions, to deliver and maintain OriginClear’s
Water On Demand fully-outsourced industrial and agriculture systems.
Between
April 6, 2022 and May 10, 2022, the Company entered into subscription agreements with certain accredited investors pursuant to which
the Company sold an aggregate of 6.25 shares of the Company’s Series Y preferred stock for an aggregate purchase price of $625,000.
The Company also issued an aggregate of 5,000,000 warrants to these investors.
On
April 13, 2022, the Company’s Board of Directors approved the plan to spin off its Water On Demand business into a newly formed
wholly-owned subsidiary, Water On Demand Inc., which will hold the assets, liabilities, intellectual property and business operations
of the Water On Demand business. The Board also approved the issuance of rights to receive shares in Water On Demand Inc. as a bonus
to the purchasers of its Series Y Preferred Shares, which are currently being offering pursuant to a private placement.
On
April 18, 2022, holders of the Company’s Series K preferred stock exchanged an aggregate of 50 shares of Series K preferred stock
for 50 shares of the Company’s Series W preferred stock.
Between
April 18, 2022 and May 2, 2022, the Company issued to consultants an aggregate of 4,565,014 shares of the Company’s common stock
for services.
On
April 18, 2022, the Company entered into settlement agreements with certain accredited investors pursuant to which the Company issued
an aggregate of 18,731,644 shares of the Company’s common stock in settlement of certain claims with such persons.
Between
April 19, 2022 and May 11, 2022, holders of the Company’s Series W preferred stock converted an aggregate of 35 Series W shares
into an aggregate of 3,117,364 shares of the Company’s common stock.
On
April 19, 2022, a prior holder of the Company’s Series P preferred stock was issued an aggregate of 518,232 shares of the Company’s
common stock as a make-good for a prior Series P conversion.
On
April 25, 2022, holders of the Company’s Series T preferred stock converted an aggregate of 60 Series T shares into an aggregate
of 9,230,770 shares of the Company’s common stock.
On
April 25, 2022, holders of the Company’s Series Y preferred stock converted an aggregate of 50 Series Y shares into an aggregate
of 4,230,769 shares of the Company’s common stock.
On
April 26, 2022, holders of the Company’s Series L preferred stock converted an aggregate of 10 Series L shares into an aggregate
of 1,445,086 shares, including make-good shares, of the Company’s common stock.
On
April 26, 2022, holders of the Company’s Series R preferred stock converted an aggregate of 20 Series R shares into an aggregate
of 2,504,816 shares, including make-good shares, of the Company’s common stock.
On
May 10, 2022, holders of the Company’s Series I preferred stock exchanged an aggregate of 10 shares of Series I preferred stock
for 10 shares of the Company’s Series W preferred stock.
On
May 11, 2022, holders of the Company’s Series J preferred stock converted an aggregate of 5 Series J shares into an aggregate of
512,737 shares, including make-good shares, of the Company’s common stock.