10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:  March 31, 2012

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: ________________

ORIGINOIL, INC.

 (Exact name of registrant as specified in its charter)

Nevada	26-0287664
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5645 West Adams Blvd

Los Angeles, CA 90016

 (Address of principal executive offices, Zip Code)

(323) 939-6645

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x     No  o   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o     No x

The number of shares of registrant’s common stock outstanding, as of May 18, 2012 was 9,421,549.

1

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1.       Financial Statements.	3
Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3.       Quantitative and Qualitative Disclosures About Market Risk.	19
Item 4.       Controls and Procedures.	19
PART II - OTHER INFORMATION
Item 1.       Legal Proceedings.	20
Item 1A.    Risk Factors.	20
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds.	20
Item 3.       Defaults Upon Senior Securities.	20
Item 4.       Mine Safety Disclosures.	20
Item 5.       Other Information.	20
Item 6.       Exhibits.	21
SIGNATURES	22

2

PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.

ORIGINOIL, INC.

BALANCE SHEETS

	March 31, 2012			December 31, 2011
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	229,733		$	197,868
Work in process		-			248,443
Prepaid expenses		615,468			300,102
Other receivables		8,650			17,977
TOTAL CURRENT ASSETS		853,851			764,390
PROPERTY & EQUIPMENT
Machinery & equipment		30,992			30,992
Furniture & fixtures		27,056			27,056
Computer equipment		28,824			28,824
Capital lease equipment		65,000			-
Leasehold improvements		94,914			94,914
		246,786			181,786
Less accumulated depreciation		(140,656	)		(126,422	)
NET PROPERTY & EQUIPMENT		106,130			55,364
OTHER ASSETS
Investment		20,000			20,000
Patent		180,380			180,380
Trademark		4,467			4,467
Security deposit		14,650			9,650
TOTAL OTHER ASSETS		219,497			214,497
TOTAL ASSETS	$	1,179,478		$	1,034,251
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	306,743		$	342,369
Accrued expenses		108,376			124,417
Deferred income		-			313,163
Derivative liability		759,547			641,900
Convertible debentures, net of discount of $194,686		592,511			397,213
Unsecured subordinated notes, net of discount of $587,062		591,014			13,483
Current capital lease obligation		48,687			-
TOTAL LIABILITIES		2,406,878			1,832,545
SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value;
1,666,667 authorized preferred shares		-			-
Common stock, $0.0001 par value;
16,666,667 authorized common shares
8,867,256 and 7,694,505 shares issued and outstanding		886			770
Additional paid in capital		17,557,189			16,198,019
Common stock subscription payable		-			-
Deficit accumulated during the development stage		(18,785,475	)		(16,997,083	)
TOTAL SHAREHOLDERS' DEFICIT		(1,227,400	)		(798,294	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	1,179,478		$	1,034,251

The accompanying notes are an integral part of these financial statements

3

ORIGINOIL, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended
	March 31, 2012			March 31, 2011
Sales	$	538,163		$	102,000
Cost of Goods Sold		386,091			-
Gross Profit		152,072			102,000
Operating Expenses
Selling and general and administrative expenses		1,107,217			715,582
Research and development		250,715			194,444
Total Operating Expenses		1,357,932			910,026
Loss before Depreciation and Amortization		(1,205,860	)		(808,026	)
Depreciation & amortization expense		14,234			2,557
Loss from Operations before Other Income/(Expenses)		(1,220,094	)		(810,583	)
OTHER INCOME/(EXPENSE)
Foreign exchange loss		(1,182	)
Gain/(Loss) on derivative		(156,646	)		-
Amortization of debt discount		(337,029	)		-
Amortization of beneficial conversion feature		(7,232	)		-
Penalties		-			(2,384	)
Interest expense		(66,209	)		(537	)
TOTAL OTHER INCOME/(EXPENSES)		(568,298	)		(2,921	)
NET LOSS	$	(1,788,392	)	$	(813,504	)
BASIC LOSS PER SHARE	$	(0.25	)	$	(0.13	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		8,194,193			6,369,921

The accompanying notes are an integral part of these financial statements

4

ORIGINOIL, INC.

STATEMENT OF SHAREHOLDERS' DEFICIT

												Deficit
												Accumulated
									Additional			during the
	Preferred stock				Common stock				Paid-in			Development
	Shares		Amount		Shares		Amount		Capital			Stage			Total
Balance at December 31, 2011		-	$	-		7,694,505	$	770	$	16,198,019		$	(16,997,083	)	$	(798,294	)
Common stock issued for conversion of debt
(price per share $1.75) (unaudited)		-		-		30,856		3		53,997			-			54,000
Common stock issued for conversion of interest payable on debt
(price per share $1.75)  (unaudited)		-		-		6,551		1		9,891			-			9,892
Common stock issued for services at fair value
(price per share  between $1.64 -$1.75) (unaudited)		-		-		409,001		40		682,059			-			682,099
Common stock issued with promissory notes at fair value (unaudited)		-		-		726,343		72		(72	)		-			-
Write down of fair value of debenture converted (unaudited)		-		-		-		-		38,998			-			38,998
Original issue discount (unaudited)		-		-		-		-		44,125			-			44,125
Beneficial conversion feature on promissory notes (unaudited)		-		-		-		-		444,259			-			444,259
Options and warrant compensation expense  (unaudited)		-		-		-		-		87,410			-			87,410
Stock issuance cost (unaudited)		-		-		-		-		(1,497	)		-			(1,497	)
Net loss for the period ended March 31, 2012 (unaudited)		-		-		-		-		-			(1,788,392	)		(1,788,392	)
Balance at March 31, 2012 (unaudited)		-	$	-		8,867,256	$	886	$	17,557,189		$	(18,785,475	)	$	(1,227,400	)

The accompanying notes are an integral part of these financial statements

5

ORIGINOIL, INC.

STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31, 2012			March 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,788,392	)	$	(813,504	)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation & amortization		14,234			2,557
Common stock and warrants issued for services		231,350			5,000
Stock compensation expense		87,410			110,946
Gain on change in valuation of derivative liability		156,646			-
Amortization of debenture discount		337,029			-
Amortization of beneficial conversion feature		7,232			-
Original issue discount amortized as interest		44,125			-
Common stock issued for interest payable		9,892			-
Changes in Assets and Liabilities
(Increase) Decrease in:
Prepaid expenses		100,173			22,248
Work in process		248,443			-
Other receivables		9,327			(39,305	)
Deposits		(5,000	)		-
Increase (Decrease) in:
Accounts payable		(1,729	)		(34,624	)
Accrued expenses		(16,041	)		32,659
Deferred income		(313,163	)		272
Other payable		-			17,971
NET CASH USED IN OPERATING ACTIVITIES		(878,464	)		(695,780	)
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Payments on a  capital lease		-			-
NET CASH USED IN INVESTING ACTIVITIES		-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on capital lease		(15,000	)		-
Proceeds from unsecured subordinated debt		926,826			1,012,640
Proceeds for issuance of common stock, net of stock issuance cost		(1,497)			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		910,329			1,012,640
NET INCREASE/(DECREASE) IN CASH		31,865			316,860
CASH BEGINNING OF YEAR		197,868			238,424
CASH END OF YEAR	$	229,733		$	555,284
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	-		$	537
Taxes paid	$	-		$	-
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
During the period ended March 31, 2012, the Company issued 30,856 shares of common stock for the convertible debenture
fair value of $44,000, plus 6,551 shares of common stock for interest payable in the amount of $9,872.

The accompanying notes are an integral part of these financial statements

6

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

1.  Basis of Presentation

The accompanying unaudited financial statements of OriginOil, 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 period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.  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, 2011.

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.  The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion.  The Company has obtained funds from its shareholders in the first quarter of 2012, and has standing purchase orders from a principal customer. Management believes this funding will continue from its’ current investors and has also obtained funding from new investors. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business operations.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Revenue Recognition

We recognize revenue upon delivery of equipment, 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.  Title to the equipment is transferred to the customer once the last payment is received. We record revenue as it is received, and the equipment has been fully accepted by the customer. Returns are based upon each rent-to-own agreement, and revenue would be adjusted based on a pro-rata basis on the unused months of quarterly payments. Generally, we extend credit to our customers and do not require collateral.  We do not ship a product until we have either a purchase agreement or rental agreement signed by the customer with a payment arrangement.  This is a critical policy, because we want our accounting to show only sales which has a final payment arrangement.

We also recognize revenue for services associated with the equipment setup, provided it is part of the rent-to-own agreement.

Cash and Cash Equivalent

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Loss per Share Calculations

Loss per Share dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. No shares for employee options or warrants were used in the calculation of the loss per share as they were all anti-dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the three month periods ended March 31, 2012, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

7

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation

Share based payments applies to transactions in which an entity exchanges its equity instruments for goods or services, and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair value approach using an option-pricing model, such as the Black Scholes option valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method was amortized over the respective vesting period of the stock option.

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2012, the balances reported for cash, prepaid expenses, accounts payable, accrued expenses, and derivative liability approximate the fair value because of their short maturities.

We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 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.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2012:

	Total		(Level 1)		(Level 2)		(Level 3)
Assets	$	20,000	$	-	$	-	$	20,000
Total assets measured at fair value	$	20,000	$	-	$	-	$	20,000
Liabilities
Derivative Liability	$	759,547	$	-	$	-	$	759,547
Unsecured promissory notes		591,013		-		-		591,013
Convertible Debenture, net of discount		592,511		-		-		592,511
Total liabilities measured at fair value	$	1,943,071	$	-	$	-	$	1,943,071

8

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the three month period ended March 31, 2012, and the following pronouncements were adopted:

The Company adopted ASC 840 "Accounting for Operating and Capital leases". This pronouncement addresses the accounting for operating and capital leases. If the Company is leasing an asset that is recorded as an operating lease the Company must disclose the future minimum lease payments for the next five years, as well as the terms of any purchase, escalation, or renewal options. If an asset lease is being recorded as a capital lease, then the Company should present the same information, as well as the amount of depreciation already recorded for these assets. The adoption of this pronouncement did not have a material effect on the financial statements of the Company.

3. CAPITAL STOCK

During the three months ended March 31, 2012, the Company issued 409,001 shares of common stock at fair value for services that ranged in prices from $1.64 to $1.75 with a fair value of $682,099. Also, the Company issued 30,856 shares of common stock for a partial conversion of a convertible debenture, and 6,551 shares of common stock at fair value of $9,892 for interest due on the convertible debenture for the quarter ended March 31, 2012. In addition the Company signed unsecured promissory notes and issued at fair value 726,343 shares of common stock associated with the notes.

4.  STOCK OPTIONS AND WARRANTS

The Company adopted the OriginOil, Inc., 2009 Incentive Stock  Plan (the “Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for Five Hundred Thousand (500,000) shares of Common Stock.  Options granted under the Plan may be either incentive options or nonqualified options and shall be administered by the Company's Board of Directors ("Board").  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (10th) anniversary from the effective date of this option.

During the three months ended March 31, 2012, the Company granted 4,000 stock options during the period. The stock options vest as follows: 1/48 every 30 days thereafter until the remaining stock options have vested. The stock options are exercisable for a period of five years from the date of grant at an exercise price between $4.20and $9.60 per share.

Risk free interest rate		0.95% - 2.04	%
Stock volatility factor		55.16% - 271.95	%
Weighted average expected option life	5 years
Expected dividend yield	None

9

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

4.  STOCK OPTIONS AND WARRANTS (Continued)

A summary of the Company’s stock option activity and related information follows:

	3/31/2012
			Weighted
	Number		average
	of		exercise
	Options		price
Outstanding, beginning of period		351,130	$	6.14
Granted		4,000		1.70
Exercised		-		-
Forfeited/Expired		-		-
Outstanding, end of period		355,130	$	6.92
Exercisable at the end of period		87,452	$	4.03
Weighted average fair value of
options granted during the period			$	0.87

The weighted average remaining contractual life of options outstanding issued under the Plan as of March 31, 2012 was as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.60		6,250		2,853		1.25
$	9.60		209		84		1.25
$	9.60		20,000		12,880		2.43
$	8.40		3,334		2,067		2.52
$	9.00		15,000		9,229		2.54
$	6.90		15,002		6,997		3.14
$	7.20		1,667		635		3.48
$	4.50		33,334		11,284		3.65
$	6.00		33,000		8,476		3.73
$	6.90		100,000		19,880		3.96
$	4.20		13,334		1,525		4.30
$	4.80		100,000		10,360		4.34
$	5.15		10,000		932		4.38
$	1.80		4,000		250		4.51
			355,130		87,452

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in the financial statements of operations during the period ended March 31, 2012, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of March 31, 2012 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to March 31, 2012, based on the grant date fair value estimated. We account for forfeitures as they occur. The stock-based compensation expense recognized in the statement of income during the period ended March 31, 2012 and 2011 is $87,410 and $110,946, respectively.

Warrants

A summary of the Company’s warrant activity and related information follows:

Risk free interest rate		1.51% - 2.5	%
Stock volatility factor		63.04% - 257.10	%
Weighted average expected option life	5 years
Expected dividend yield	None

10

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

4.  STOCK OPTIONS AND WARRANTS (Continued)

	3/31/2012
			Weighted
			average
			exercise
	Options		price
Outstanding -beginning of year		836,189	$	4.20
Granted		-		-
Exercised		-		-
Forfeited		-		-
Outstanding - end of year		836,189	$	4.20

           At March 31, 2012, the weighted average remaining contractual life of warrants outstanding:

						Weighted
						Average
						Remaining
Exercisable		Warrants		Warrants		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.30		256,672		256,672		2.25
$	10.20		28,335		28,335		2.38
$	9.00		9,168		9,168		2.56
$	8.70		3,334		3,334		2.62
$	8.40		667		667		2.83
$	8.70		5,000		5,000		3.16
$	7.20		33,334		33,334		3.23
$	5.70		7,335		7,335		3.34
$	4.50		3,334		3,334		3.45
$	4.20		8,334		8,334		3.48
$	4.20		33,334		33,334		3.50
$	3.60		8,334		8,334		3.58
$	4.50		33,334		33,334		3.65
$	4.20		13,335		13,335		3.67
$	6.00		166,668		166,668		3.73
$	6.00		33,334		33,334		3.74
$	6.30		8,334		8,334		3.97
$	5.70		4,001		4,001		4.00
$	6.90		33,334		33,334		4.21
$	6.90		33,334		33,334		4.21
$	1.90		80,000		80,000		4.51
$	6.90		33,334		33,334		4.71
			836,189		836,189

The Company did not recognize any warrant compensation expense in the statement of income during the three month period ended March 31, 2012.

The total outstanding purchase warrants as of March 31, 2012, was 2,004,075 to purchase shares of common stock, of which 1,167,886 is not included in the table above.

11

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

5. CONVERTIBLE DEBENTURES

On July 7, 2011, the Company entered into a securities purchase agreement with certain institutional investors, which closed on July 11, 2011, providing for the issuance of original issue discount convertible debentures and warrants for an aggregate purchase price of $1,000,000. The debentures have an aggregate principal amount of $1,176,500, and will become due and payable on July 11, 2012. The debentures may be converted at any time at the option of the investors into shares of common stock at a conversion price of $1.75 per share, after giving effect to full-ratchet anti-dilution adjustment, a 1 for 30 reverse stock split and subject to further adjustment as set forth therein. The debentures bears interest at the rate of 5% per annum increasing to 18% in the event of default. Interest is payable quarterly in cash and/or, if certain equity conditions have been met, in shares of our common stock at an interest conversion rate equal to the lesser of $1.75 or 90% of the daily volume weighted average price of our common stock in the 20 trading days prior to the date the quarterly interest payment is due (or the date of delivery of the interest conversion shares if such shares are delivered after the date the quarterly interest payment is due). The warrants are exercisable for an aggregate of 392,170 shares of common stock at the option of the holder for a period of five years at an exercise price of $1.75 per share, after giving effect to full-ratchet anti-dilution adjustment, a 1 for 30 reverse stock split and subject to further adjustment as set forth therein. The warrants may be exercised on a cashless basis if after the six month anniversary of the closing date there is no effective registration statement registering the shares underlying the warrants.

ASC Topic 815 provides guidance applicable to the convertible debentures issued by the Company in instances where the number into which a debenture can be converted is not fixed.  For example, when a convertible debenture converts at a discount to market based on the stock price on the date of conversion, ASC Topic 815 requires that the embedded conversion option of the convertible debentures be bifurcated from the host contract and recorded at their fair value. In accounting for derivatives under accounting standards, the Company recorded a liability of $1,176,500 representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount  representing the imputed interest associated with the embedded derivative. The discount is amortized over the life of the convertible debenture, which resulted in the recognition of $156,645 in interest expense for the period ended March 31, 2012, and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability will be charged to additional paid-in capital.  For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Stock price on the valuation date	$	4.20
Conversion price for the debentures	$	1.75
Dividend yield		0.00	%
Years to Maturity		1
Rick free rate		0.17	%
Expected volatility		65.75	%

The value of the derivative liability at March 31, 2012 was $759,547.

6. OBLIGATIONS UNDER CAPITAL LEASE

On March 1, 2012, the Company entered into a short term capital lease for a six month period with an option to purchase the equipment at the end of the lease. The total cost of the asset is $65,000, which includes a fee of $5,000 that will be paid at the end of the lease. The monthly rental payment is $5,000 per month plus tax. A deposit of $10,000 was paid for first and last month rent. Since the lease is less than a year there are no future payments to disclose and no imputed interest necessary to reduce the minimum lease payments to present value.

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ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

7.      UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES

During November 2011, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $32,500 (the “November Notes”). During December 2011, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $218,750 (the “December Notes”). As a result of an exchange, $20,000 in principal amount of November Notes were exchanged for like principal amount of December Notes. During the three months ended March 31, 2012, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $926,826 (the “January Notes”). As a result of a further exchange, $190,250 in principal amount of December Notes were exchanged for like principal amount of January Notes. Accordingly, as of March 31, 2012, there were November Notes in the aggregate principal amount of $12,500 outstanding, December Notes in the aggregate principal amount of $48,500 outstanding and JanuaryNotes in the aggregate principal amount of $1,117,076 outstanding.

November Notes

The November Notes have a five-year term and are convertible into shares of common stock of the Company at a conversion price of $2.40 per share.  The November Notes are subordinated to the convertible debentures and cannot be repaid or converted into shares of common stock of the Company until the convertible debentures are paid in full. Interest on the November Notes is calculated each quarter on the aggregate unconverted outstanding principal amount of the note, and is payable at the per annum rate of two (2) shares of common stock for each $100 outstanding principal of the note. If the market price per share is less than $2.40 then the interest will be paid in cash at 4.8% of the outstanding principal note. Interest is payable quarterly, upon redemption and at maturity as long as the convertible debentures have been paid in full.

December Notes

The December Notes have a one-year term and are convertible into shares of common stock of the Company at a conversion price of $1.75 per share. The December Notes are subordinated to the convertible debentures and cannot be repaid or converted into shares of common stock of the Company until the convertible debentures are paid in full. If the Company’s convertible debentures continue to be outstanding on July 13, 2012, then, it is obligated to issue to the holders of December Notes such additional number of shares of common stock that are issuable upon conversion of the  December Notes without reducing the outstanding principal due upon the December Notes. The December Notes accrue interest at 8% per annum and is payable on the conversion date and at maturity as long as the convertible debentures have been paid in full. The December Notes are also redeemable by us, at the investor’s option, at maturity at a redemption price of 112% of the outstanding principal plus accrued and unpaid interest.

The December Notes were originally issued with detachable three (3) year warrants to purchase an aggregate of 272,291 shares of common stock at an exercise price of $1.75 (the “December Warrants”) and were subsequently exchanged for 138,720 shares of common stock. The detachable warrants were evaluated for purposes of classification under ASC 480-10, “Distinguishing Liabilites from Equity” (pre-Codification SFAS150, Accounting for Certain Financial Instruments with Characteristics of both Liabilites and Equity). The warrants did not embody any of the conditions for liability classification under the ASC 4801-0 context. The warrants were then evaluated under ASC 815, and were accounted for under the equity classification. The proceeds were then allocated based on the relative fair value of the instruments.

January Notes

The January Notes have a one-year term and are convertible into shares of common stock of the Company at a conversion price of $1.75 per share. In the event the note is converted in full prior to maturity, the holder is entitled to one additional share of common stock for each share converted. The January Notes are subordinated to the debentures and cannot be repaid or converted into shares of common stock of the Company until the debentures are paid in full. The January Notes accrue interest at 8% per annum and are payable on the conversion date and at maturity as long as the Convertible Debentures have been paid in full. The January Notes are also redeemable by the Company, at the holder’s option, at maturity at a redemption price of 112% of the outstanding principal plus accrued and unpaid interest.

The January Notes were issued with shares to purchase an aggregate of 924,059 shares of common stock, including the 138,720 shares issued in exchange of detachable warrants issued together with the December Notes.

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ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2012

7.  UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES (Continued)

The Company evaluated the three notes for a beneficial conversion feature and accounted for the notes under ASC 815 (Statement 133, EITF Issue 07-5,and EITF Issue 00-19). The instrument was not stated at fair value, and could not be settled partially or wholly in cash. The beneficial conversion feature is equal to the difference between the Company’s market price of its’ common stock on the measurement date and the effective conversion price multiplied by the number of shares the holder is entitled to upon conversion.

8. SUBSEQUENT EVENTS

Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855, and reported the following events:

On April 19, 2012, the Company’s Board of Directors authorized the grant to Steve Glovsky, a recently appointed director, of 50,000 shares of common stock in lieu of a previously authorized grant of a five-year warrant to purchase 400,000 shares of our common stock.

On April 25, 2012, the Company’s Board of Directors authorized  the grant of 260,000 purchase warrants to purchase 260,000 shares of common stock at a price

On May 10, 2012, the Company’s Board of Directors authorized to issue an aggregate of 60,000 shares of common stock at $1.75 per share in consideration for consulting services.

On May 11, 2012, the Company’s Board of Directors authorized to issue an aggregate of 57,143 shares of common stock at $1.75 per share in consideration of consulting services

During the subsequent period through May 11, 2012, the Company issued January Notes in the aggregate principal amount of $431,501 with 360,863 shares of common stock. As of May 18, 2012, 114,286 shares have not been issued.

On May 18, 2012, we entered into exchange agreements with the current holders (the “Holders”) of our convertible debentures Pursuant to the terms of the exchange agreements, we have agreed to issue 1,211,072 shares of our common stock in exchange for the cancellation of convertible debentures in the aggregate principal amount of $787,197. In addition, as part of the exchange, we agreed to issue a further 9,671 shares of our common stock to one of the Holders in respect of a prior conversion. We have further agreed to pay to the Holders an aggregate of $5,262 in payment of all accrued and unpaid interest due under the convertible debentures. Also, under the exchange agreements  the Company has also agreed to adjust  the exercise price of warrants issued to the Holders in connection with the convertible debentures (the “Warrants”) to $0.65 per share subject to future adjustment under the terms of the Warrants. The exchange agreements further provide that for the first two months following entry into the agreements, we are prohibited from issuing shares of our common stock or common stock equivalents that would result in a dilutive issuance under the warrants without the prior written consent of the Holders. For the subsequent two months, if we issue shares of our common stock or common stock equivalents that results in a dilutive issuance under the warrants we are required to issue additional exchange shares of common stock, the number of which is dependent upon the exercise price of the Warrants that is in effect immediately following the dilutive issuance.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Form 10-Q contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:

● business strategy;

● financial strategy;

● intellectual property;

● production;

● future operating results; and

● plans, objectives, expectations and intentions contained in this report that are not historical.

All statements, other than statements of historical fact included in this report, regarding our strategy, intellectual property, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved.  These statements may be found under “Management's Discussion and Analysis of Financial Condition and Results of Operations,” as well as in this report generally.  Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors.  In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.

Organizational History

OriginOil, Inc. (“we”, “us”, “our”, the “Company” or “OriginOil”) was incorporated on June 1, 2007 under the laws of the State of Nevada.  We have only been engaged in our current and proposed business operations since June 2007, and to date, we have been primarily involved in research and development activities.  Our principal offices are located at 5645 West Adams Blvd., Los Angeles, California 90016. Our telephone number is (323) 939-6645. Our website address is www.originoil.com.   Our website and the information contained on our website are not incorporated into this quarterly report.

Overview of Business

We are currently developing technologies to help companies produce algae using a cost-effective, high-speed manufacturing process to replace petroleum in various applications such as diesel, gasoline, jet fuel, plastics and solvents, in addition to feed, nutritionals and fertilizer. Algae, unlike other bio-fuel feedstock such as corn and sugarcane, do not destroy vital farmlands and rainforests, disrupt global food supplies or create new environmental problems.

We are developing a number of processes in the areas of algae growth and extraction. Based on our initial commercial transactions, we are primarily focused on algae harvesting.

The OriginOil System is designed to control the harvesting of algae, and intended to result in a concentrate which can be either converted by other companies into bio-oil, bio-gas or bio-carbon for refining into fuel and chemicals, or further separated into lipids and biomass for processing by other companies into valuable products.

At this early stage, to prove our system for wide-scale distribution and licensing, we must build, sell and support our system to companies developing such algae production systems. On March 28, 2011, we stated our intention to provide other technologies and integration services to our early stage customers.

Our long-term business model is based on licensing this technology to distributors, manufacturers, engineering service firms, and specialty operators, as well as fuel refiners, chemical and oil companies. We are not in the business of producing and marketing oil or fuel, based on algae, as an end product, nor of developing sales distribution networks or engaging in volume manufacturing.

We have only been engaged in our current and proposed business operations since June 2007, and to date, we have been primarily involved in research and development activities including the sale of our equipment to companies developing production systems.

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Recent Developments

● On January 13, 2012, we announced that we plan to co-develop an integrated system with the U.S. Department of Energy’s Idaho National Laboratory for direct conversion of raw algae into a renewable crude oil that can be used by existing petroleum refineries.

● On February 3, 2012, we announced that Algae producer Aquaviridis, Inc. has signed a commercial agreement with us to help develop the multi-phase algae production rollout at its Mexicali, Mexico site, a potential model for algae sites throughout the North American Free Trade Agreement (NAFTA) region, with a focus on desert areas of the American Southwest and Mexico.

● On February 7, 2012, we announced that we demonstrated our low-energy Algae Appliance™ to industry executives from a workshop hosted by the National Algae Association at the University of Southern California.

● On February 15, 2012, we announced that we have named Melbourne-based Frontline Engineering Australia as our first certified support partner worldwide.

● On February 24, 2012, we announced a new company study indicating for the first time that algae producers worldwide can now make transportation fuels cost-effectively themselves.

● On March 8, 2012, we announced that we received a firm order from Ennesys to supply a test scale version of our Algae Appliance™ harvester, and our Quantum Fracturing™ CO2 feeding technology for a test of urban algae production near Paris, France. The purchase order for the initial purchase totals $30,000 to be paid in full within ninety (90) days.

●     On March 23, 2012, we announced the introduction of the evaluation-sized Algae Appliance Model 4, a new entry-level, low-cost algae harvester that we believe will make it easier, faster and cheaper for producers and researchers to try and buy our proprietary harvesting technology. Driven by what we believe to be a major design breakthrough, the new price point of the Algae Appliance™ Model 4 is expected to greatly accelerate adoption of OriginOil’s chemical-free, continuous-flow, very low-energy system.

● On April 18, 2012, we announced that our technology developed for algae harvesting has shown promise in reclaiming hydraulic fracturing flowback water.

● On April 25, 2012, we announced that in recent independent third-party testing our algae harvesting process was able to remove 98% of hydrocarbons from a sample of West Texas oil well ‘frac flowback’ water in the first stage alone.

● On May 3, 2012, we announced that we intend to collaborate with Algasol Renewables on the development of an integrated algae growth and harvesting system.

● On May 9, 2012, we announced that we signed a memorandum of understanding with California-based PACE to collaborate with oil field operators in Texas and elsewhere to improve petroleum recovery and water cleaning for re-use at well sites, using a process we originally developed for algae harvesting.

Critical Accounting Policies

The Securities and Exchange Commission ("SEC") defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical within the SEC definition. 

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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.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2011, the amounts reported for cash, prepaid expenses, accounts payable and accrued expenses approximate the fair value because of their short maturities.

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the three months ended March 31, 2012, and the following pronouncements were adopted during the period.

The Company adopted ASC 840 "Accounting for Operating and Capital leases". This pronouncement addresses the accounting for operating and capital leases. If the Company is leasing an asset that is recorded as an operating lease, the Company must disclose the future minimum lease payments for the next five years, as well as the terms of any purchase, escalation, or renewal options. If an asset lease is being recorded as a capital lease, then the Company should present the same information, as well as the amount of depreciation already recorded for these assets. The adoption of this pronouncement did not have a material effect on the financial statements of the Company.

Results of Operation

Results of Operations for the three months ended March 31, 2012 compared to the three ended March 31, 2011.

	Three Months Ended
	March 31, 2012 (Unaudited)		March 31, 2011 (Unaudited)
Revenue	$	538,163	$	102,000
Operating Expenses	$	(1,357,932)	$	910,026
Loss from Operations before Other Income/(Expense)	$	(1,220,094)	$	(810,583)
Other Income/(Expense)	$	(568,298)	$	(2,921)
Net Loss	$	(1,788,392)	$	(813,504)

Revenue and Cost of Sales

Revenue for the three months ended March 31, 2012 and 2011 were $538,163 and $102,000, respectively. Cost of sales for the three months ended March 31, 2012 and 2011 were $386,091 and $0, respectively. The cost of sales in the current period represents the materials and supplies used to produce the product, and outside consultant fees to test the product.

To date we have had minimal revenues due to our focus on product development and testing. Revenues earned were part of a purchase order from MBD Energy for a single step oil extraction and additional piece of equipment.

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Operating Expenses

Operating expenses consist of general and administrative expenses, research and development and depreciation and amortization expense.

General and administrative expenses increased by $391,635 to $1,107,217 for the three months ended March 31, 2012, compared to $715,582 for the three months ended March 31, 2011. The increase in general and administrative expenses was due primarily to an increase in legal fees and marketing expense.

Research and development cost increased by $56,271 to $250,715 for the three months ended March 31, 2012, compared to $194,444 for the three months ended March 31, 2011.  The increase in research and development costs was primarily due to an increase in salaries, consultant fees and outside services.

Net Loss

Our net loss increased by $974,888 to $(1,788,392) for the three months ended March 31, 2012, compared to $(813,504) for the three months ended March 31, 2011. The majority of the increase is due to accounting for non-cash amortization of the debt discount and loss derivative valuation in the amount of $493,675 in other income and expenses, plus the overall increase in the operating expenses. Currently operating costs exceed revenue because sales are not yet sufficient to cover costs.  We cannot assure when or if revenue will exceed operating costs.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

At March 31, 2012 and December 31, 2011, we had cash of $229,733 and $197,868, respectively and working capital deficit of $(1,553,027) and $(1,068,155), respectively.  This increase in working capital deficit was due primarily to an increase in convertible notes. During the first quarter of 2012, we raised an aggregate of  $926,826 in an offering of unsecured subordinated convertible notes and shares. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the year ended December 31, 2011 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.   Our ability to continue as a going concern is dependent upon raising capital from financing transactions.

Net cash used in operating activities was $(878,464) for the three months ended March 31, 2012, compared to $(695,780) for the prior period March 31, 2011. The increase of $(182,684) in cash used in operating activities was due to an decrease in prepaid expenses, work in progress, accounts payable, accrued expenses and deferred income. The net loss includes non-cash expenses of depreciation, stock issued for services, amortization of debenture discount, gain on change in derivative, and stock compensation expense. Currently operating costs exceed revenue because sales are not yet significant.

Net cash flows used in investing activities was $15,000 for the three months ended March 31, 2012, as compared to $0 for the prior period March 31, 2011. The increase in cash used in investing activities was due to an increase in expenditures for tangible assets in the current period associated with equipment under a capital lease.

Net cash flows provided by financing activities was $926,826 for the three months ended March 31, 2012, as compared to $1,012,640 for the prior period March 31, 2011. The decrease in cash provided by financing activities was due to a decrease in debt and equity financing. To date we have principally financed our operations through the sale of our common stock and the issuance of debt.

We do not have any material commitments for capital expenditures during the next twelve months.  Although our proceeds from our offering of unsecured convertible notes and shares together with revenue from operations are currently sufficient to fund our operating expenses, we will need to raise additional funds in the future so that we can expand our operations. Therefore our future operations are dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.

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We have estimated our current average burn, and believe that we have assets to ensure that we can function without liquidation over the next twelve months, due to our cash on hand, growing revenue, and our ability to raise money from our investor base.  Based on the aforesaid, we believe we have the ability to continue our operations for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of operations.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer and Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.

As required by SEC Rule 15d-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure about our internal control over financial reporting.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting during the most recent fiscal quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1.  Legal Proceedings.

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

Item 1A. Risk Factors.  

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

           None that were not previously disclosed.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

(a) Form 8-K Information

The following disclosure would have otherwise been filed on Form 8-K under the headings “Item 1.01 Entry into a Material Definitive Agreement” and “Item 3.02 Unregistered Sales of Equity Securities”:

On May 18, 2012, we entered into exchange agreements with the current holders (the “Holders”) of our original issue discount 5% convertible debentures issued on July 6, 2012 (the “Debentures”). Pursuant to the terms of the exchange agreements, we have agreed to issue 1,211,072 shares of our common stock in exchange for the cancellation of Debentures in the aggregate principal amount of $787,197. In addition, as part of the exchange, we agreed to issue a further 9,671 shares of our common stock to one of the Holders in respect of a prior conversion. We have further agreed to pay to the Holders an aggregate of $5,262 in payment of all accrued and unpaid interest due under the Debentures.

Under the exchange agreements, the Company has also agreed to adjust  the exercise price of warrants previously issued to the Holders in connection with the Debentures (the “Warrants”) to $0.65 per share subject to further adjustment under the terms of the Warrants. The exchange agreements further provide that for the first two months following entry into the agreements, we are prohibited from issuing shares of our common stock or common stock equivalents that would result in a dilutive issuance under the warrants without the prior written consent of the Holders. For the subsequent two months, if we issue shares of our common stock or common stock equivalents that results in a dilutive issuance under the warrants we are required to issue additional exchange shares of common stock, the number of which is dependent upon the exercise price of the Warrants that is in effect immediately following the dilutive issuance.

The exchange agreements also provide for certain restrictions on the number of shares issued in the exchange that can be sold by the Holders from the date of entering into the exchange agreements through December 31, 2012, subject to certain exceptions.

The shares are being issued in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended. No commission or other remuneration was paid or given directly or indirectly for soliciting the exchange under the terms of the exchange agreements.

The foregoing is qualified in its entirety by the form of exchange agreement attached hereto as Exhibit 10.1 which is incorporated herein by reference.

The following disclosure would have otherwise been filed on Form 8-K under the headings “Item 1.01 Entry into a Material Definitive Agreement”, “Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant” and “Item 3.02 Unregistered Sales of Equity Securities”:

As previously disclosed, during November 2011, we issued unsecured convertible promissory notes in the aggregate principal amount of $32,500 (the “November Notes”). During December 2011, we issued unsecured convertible promissory notes in the aggregate principal amount of $218,750 (the “December Notes”) and detachable three (3) year warrants to purchase 250,004 shares of common stock exercisable at $1.75 per share (the “December Warrants”). As a result of an exchange, $20,000 in principal amount of November Notes was exchanged for like principal amount of December Notes and December Warrants to purchase 22,858 shares of our common stock.

During the subsequent period through April 19, 2012, we issued unsecured convertible promissory notes in the aggregate principal amount of $1,358,327.50 (the “January Notes”) together with 1,146,202 shares of our common stock. As a result of a further exchange, $190,250 in principal amount of December Notes was exchanged for like principal amount of January Notes and December Warrants to purchase an aggregate of 217,433 shares of our common stock were exchanged for 138,720 shares of our common stock.

Accordingly, as of April 19, 2012, there were November Notes in the aggregate principal amount of $12,500 outstanding, December Notes in the aggregate principal amount of $48,500 outstanding and January Notes in the aggregate principal amount of $1,548,577.50 outstanding.

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The November Notes have a five-year term and are convertible into shares of our common stock at a conversion price of $2.40 per share. The November Notes are subordinated to the Debentures and cannot be repaid or converted into our shares of common stock until the Debentures are paid in full. Interest on the November Notes is calculated each quarter on the aggregate unconverted outstanding principal amount of the note, and is payable at the per annum rate of two (2) shares of common stock for each $100 outstanding principal of the note. If the market price per share is less than $2.40 then the interest will be paid in cash at 4.8% of the outstanding principal note. Interest is payable quarterly, upon redemption and at maturity as long as the convertible debentures have been paid in full.

The December Notes have a one-year term and are convertible into shares of our common stock at a conversion price of $1.75 per share. The December Notes are subordinated to the Debentures and cannot be repaid or converted into shares of our common stock until the convertible debentures are paid in full. If our Debentures continue to be outstanding on July 13, 2012, then, we are obligated to issue to the holders of December Notes such additional number of shares of common stock that are issuable upon conversion of the  December Notes without reducing the outstanding principal due upon the December Notes. The December Notes accrue interest at 8% per annum and is payable on the conversion date and at maturity as long as the convertible debentures have been paid in full. The December Notes are also redeemable by us, at the investor’s option, at maturity at a redemption price of 112% of the outstanding principal plus accrued and unpaid interest.

The January Notes have a one-year term and are convertible into shares of common stock of the Company at a conversion price of $1.75 per share. In the event the note is converted in full prior to maturity, the holder is entitled to one additional share of common stock for each share converted. The January Notes are subordinated to the Debentures and cannot be repaid or converted into shares of common stock of the Company until the Debentures are paid in full. The January Notes accrue interest at 8% per annum and are payable on the conversion date and at maturity as long as the Debentures have been paid in full. The January Notes are also redeemable by the Company, at the holder’s option, at maturity at a redemption price of 112% of the outstanding principal plus accrued and unpaid interest.

The foregoing is qualified in its entirety by the form of November Note, December Note and January Note attached hereto as Exhibit 10.2, 10.3, and 10.4 respectively and the form of December Warrant attached hereto as Exhibit 10.5, each of which is incorporated herein by reference.

The securities were offered and sold pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act of 1933, as amended and Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

The following disclosure would have otherwise been filed on Form 8-K under the heading “Item 3.02 Unregistered Sales of Equity Securities” and “Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers”:

On May 15, 2012, we mutually agreed with Paul Reep to terminate his position as our Senior Vice President of Technology, effective immediately, and to retain him as a strategic advisor. In connection with his retention as strategic advisor, we issued 60,000 shares of our common stock valued at $1.75 per share, with a restriction on sale or transfer of the shares for one year from the grant.

The shares were issued pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act of 1933, as amended and Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering and the shares are being acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

(b) Director Nomination Procedures

We do not have a standing nominating committee nor are we required to have one. We do not have any established procedures by which security holders may recommend nominees to our Board of Directors, however, any suggestions on directors, and discussions of board nominees in general, is handled by the entire Board of Directors.

Item 6.  Exhibits.

Exhibit Number	Description of Exhibit
10.1	Form of Exchange Agreement between OriginOil, Inc. and holders of Original Issue Discount 5% Convertible Debentures
10.2	Form of November Note
10.3	Form of December Note
10.4	Form of January Note
10.5	Form of December Warrant
31.1	Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1	Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema.*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase.*
101.LAB	XBRL Taxonomy Extension Label Linkbase.*
101.PRE	XBRL Extension Presentation Linkbase.*

* Attached as Exhibit 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statement of Operations, (iii) the Statement of Shareholders’ Equity, (iv) the Statement of Cash Flow, and (v) Notes to Financial Statements tagged as blocks of text. The XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or as part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.  

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ORIGINOIL, INC.
By:	/s/  T Riggs Eckelberry
	T Riggs Eckelberry
	Chief Executive Officer (Principal Executive Officer)
	and Acting Chief Financial Officer (Principal Accounting and Financial Officer)
	May 21, 2012

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EX-10.1

Exhibit 10.1

EXCHANGE AGREEMENT

This EXCHANGE AGREEMENT (the “Agreement”) is entered into as of May 18, 2012, by and between ____________ (the “Holder”), and OriginOil, Inc. a Nevada corporation (the “Company”).

A.Pursuant to that certain Securities Purchase Agreement, dated as of July 6, 2011 (the “Purchase Agreement”), by and among the Holder, the Company and certain other parties, the Holder purchased an Original Issue Discount 5% Convertible Debenture in the current aggregate principal amount of $___________ (the “Debenture”) and a Warrant to purchase _____________ shares of Common Stock (as defined below) (the “Warrant”); and

B.Subject to the terms of this Agreement, the Holder and the Company desire to exchange the Debenture for shares of Common Stock. “Common Stock” means (i) the Company’s shares of common stock, $0.0001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the parties hereto agree as follows:

1.           Issuance of Exchange Shares.

(a)           Simultaneously with the execution and delivery of this Agreement, the Holder shall exchange its Debenture with the Company for, and in exchange therefor the Company shall issue to the Holder, (1) ________ unlegended and freely tradable shares of Common Stock (such _________ shares of Common Stock issued to the Holder pursuant to this Section 1(a) are referred to herein as the “Initial Exchange Shares”) and (2) the Additional Exchange Shares (as defined below). It is expressly understood and agreed that (i) the exchange of the Debenture for the Exchange Shares to be issued by the Company pursuant hereto is being undertaken pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “1933 Act”), and (ii) subject to Section 5(r) below, all obligations and liabilities of the Company under the Debenture will be fully extinguished simultaneously with the execution and delivery of this Agreement. None of the Exchange Shares shall bear any restrictive or other legends, and the Company shall not issue, and the Company shall prohibit all other Persons (as defined below) from issuing, any stop-transfer order, instruction or other restriction with respect to any of the Exchange Shares, provided that nothing contained in this sentence shall be construed as limiting the Company’s rights and remedies in the event of a breach by the Holder of Section 1(b) below. “Exchange Shares” means, collectively, (I) all of the Initial Exchange Shares and (II) all of the Additional Exchange Shares.

(i)           Delivery of Exchange Shares.The Company shall as soon as practicable following the date of this Agreement (but no later than three business days after the date hereof) cause the Company’s transfer agent to electronically transmit the Initial Exchange Shares to the Holder by crediting the balance account of the Holder’s prime broker with The Depository Trust Company through its Deposit/Withdrawal at Custodian system as specified in Exhibit A. The Company shall as soon as practicable following each date on which the Company is required to issue Additional Shares pursuant to Section 1(d)(ii) below (but no later than three business days after the date thereof) cause the Company’s transfer agent to electronically transmit the Additional Exchange Shares required to be so issued to the Holder by crediting the balance account of the Holder’s prime broker with The Depository Trust Company through its Deposit/Withdrawal at Custodian system as specified in Exhibit A.

(ii)           Delivery of Debenture.As soon as practicable following delivery of the Initial Exchange Shares to the Holder in accordance with Section 1(a)(i) (but not later than three days thereafter), the Holder shall deliver to the Company the original Debenture, provided that the failure by the Holder to return the Debenture will not affect the cancellation of the Debenture, which cancellation shall occur simultaneously with the execution of this Agreement by the parties hereto.

(b)           (i)           The Holder agrees solely with the Company that the Holder will not sell on the Trading Market (as defined in the Purchase Agreement) more than 10% of the Exchange Shares in the aggregate during any Trading Period (as defined below) for a sale price of $1.25 per share or less. “Trading Period” means, as applicable, (1) the period commencing on the date hereof and ending on the tenth (10th) Trading Day (as defined in the Purchase Agreement) anniversary of the date hereof, (2) the period commencing on the eleventh (11th) Trading Day anniversary of the date hereof and ending on the twentieth (20th) Trading Day anniversary of the date hereof, and (3) for all periods thereafter, the period beginning on the first (1st) Trading Day immediately following the expiration of the prior period and ending on the tenth (10th) Trading Day anniversary of such first (1st) Trading Day.

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(ii)           Without implication that the contrary would otherwise be true, the failure of the Holder to sell in a Trading Period all of the Exchange Shares permitted to be sold by the Holder pursuant to Section 1(b)(i) in such Trading Period shall not result in an increase in the number of Exchange Shares permitted to be sold by the Holder pursuant to Section 1(b)(i) in any subsequent Trading Period.

(iii)           It is expressly understood and agreed that (1) nothing contained in this Section 1(b) shall limit any sales by the Holder of any of the Exchange Shares on the Trading Market for prices that are greater than $1.25 per share and (2) if the Holder sells, transfers or assigns any Exchange Shares other than on the Trading Market, then (A) the Holder shall, prior to such sale, transfer or assignment (as the case may be), cause the buyer, transferee or assignee (as the case may be) to execute an agreement, in form and substance reasonably satisfactory to the Company, pursuant to which such buyer, transferee or assignee (as the case may be) agrees to be bound by all of the terms and conditions of this Section 1(b) and (B) the terms of such sale, transfer or assignment (including without limitation, the sale price) shall not be publicly disclosed unless required by applicable law or legal process. The Holder further agrees solely with the Company with respect to sales, transfers and assignments of any Exchange Shares that occur other than on the Trading Market the Holder will not sell, transfer or assign any of the Exchange Shares to a buyer, transferee or an assignee (as the case may be) that is a company that either (x) has a class of equity securities registered under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended (the “1934 Act), or (y) is otherwise subject to the reporting requirements of Section 13(a) or 15(d) of the 1934 Act (it being expressly understood and agreed, for clarification purposes and without implication that the contrary would otherwise be true, that the foregoing shall not apply to any sales of Exchange Shares on the Trading Market by the Holder to such a company).

(iv)           Notwithstanding anything contained in this Agreement to the contrary, it is further expressly understood and agreed that all of the Holder’s obligations under all of Section 1(b) hereof shall automatically terminate and be of no further force or effect at 5:00 p.m. (New York time) on December 31, 2012.

(c)            Within three business days after the date hereof, the Company shall pay by wire transfer to the Holder the amount of $______ in payment of all accrued and unpaid interest due under the Debenture from April 1, 2012 up to and through the date hereof.

(d)           (i)           From the date hereof through and including July 18, 2012, neither the Company nor any of its subsidiaries shall (without the prior written consent of the Holder, which may be granted or withheld in the Holder’s sole discretion), directly or indirectly, issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any Common Stock or any Common Stock Equivalent (as defined in the Purchase Agreement) that would result in a Dilutive Issuance (as defined in the Holder’s Warrant (as defined in the Purchase Agreement)) under Section 3(b) of the Holder’s Warrant.

(ii)           From July 19, 2012 through and including September 18, 2012, if the Company or any of its subsidiaries shall, directly or indirectly, issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any Common Stock or any Common Stock Equivalent that results in a Dilutive Issuance under Section 3(b) of the Holder’s Warrant, then, immediately following each Dilutive Issuance, the Company shall issue to the Holder a number of unlegended and freely tradable shares of Common Stock equal to the difference between (1) the quotient of (x) $[________]1 divided by (y) the Exercise Price (as defined in the Holder’s Warrant) in effect immediately following the applicable Dilutive Issuance minus (2) the sum of (A) the Initial Exchange Shares plus (B) the aggregate number of all shares of Common Stock issued to the Holder pursuant to this Section 1(d)(ii) prior to the applicable Dilutive Issuance. All shares of Common Stock issued to the Holder pursuant to this Section 1(d)(ii) are referred to herein as the “Additional Exchange Shares.”

2.           Holding Period. The Company represents, warrants and agrees that for the purposes of Rule 144 of the 1933 Act, the holding period of the Exchange Shares issued hereunder will include, and will be tacked onto, the holding period of the Debenture, and the Company agrees not to take a position contrary thereto or inconsistent therewith. The Holder acknowledges that notwithstanding the unlegended nature of the Exchange Shares, the Holder shall be responsible for its own compliance with Rule 144 in connection with sales thereunder.

3.           Holder’s Representations and Warranties. Holder represents, warrants and covenants to the Company that:

(a)           Ownership of Debenture. The Holder owns the Debenture and all rights thereunder free and clear of any liens, encumbrances, pledges, options or other rights of any kind and description (except for liens, encumbrances, pledges, options and other rights and restrictions imposed by applicable securities laws, the terms of the Debenture and the other Transaction Documents (as defined in the Purchase Agreement)). Other than as contemplated by this Agreement, the Holder has not transferred or otherwise conveyed any interest in the Debenture.

(b)           Authorization, Enforcement. The Holder has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder.  The execution and delivery of this Agreement by the Holder and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Holder and no further action is required by the Holder.  This Agreement has been duly executed by the Holder and constitutes the legal, valid and binding obligation of the Holder enforceable against the Holder in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(c)           No Conflicts. The execution, delivery and performance by the Holder of this Agreement and the consummation by the Holder of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Holder, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Holder is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Holder, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Holder to perform its obligations hereunder.

(d)           Registration Statement. Holder hereby acknowledges that the Exchange Shares are not covered by that certain Registration Statement on Form S-1 registration no. 333-175815.

(e)           Non-Affiliate. Immediately prior to and immediately after execution of this Agreement, the Holder is not, and has not been for the three months prior to the date of this Agreement, an “affiliate” (as defined in Rule 144(a)(1)) of the Company.

(f)            Brokers. There are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Holder or any action taken by the Holder.

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4.   Representations, Warranties, and Covenants of the Company. The Company hereby makes the representations set forth below and covenants and agrees as follows to Holder (in addition to those set forth elsewhere herein):

(a)           Authorization and Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder (including, without limitation, issuing the Exchange Shares in accordance with the terms hereof).  The execution and delivery of this Agreement by the Company, and the consummation by it of the transactions contemplated hereby, have been duly authorized by the Company’s board of directors, and no further filing, consent or authorization is required by the Company, its board of directors or any of its shareholders. This Agreement has been duly executed by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(b)           Issuance of Securities. The issuance of the Exchange Shares is duly authorized and, upon issuance of the Exchange Shares in accordance with the terms of this Agreement, the Exchange Shares will be validly issued, fully paid and non-assessable, free from all preemptive or similar rights, taxes, liens, claims, pledges, mortgages, restrictions, obligations, security interests and other encumbrances of any kind, nature and description (except for those restrictions set forth in Section 1(b) above), with the Holder being entitled to all rights accorded to a holder of Common Stock. The offer and issuance of the Exchange Shares is and will be exempt from registration under the 1933 Act pursuant to the exemption provided by Section 3(a)(9) thereof.

(c)           No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (including, without limitation, the issuance of the Exchange Shares) will not (i) result in a violation of the articles of incorporation of the Company (including, without limitation, any certificate of designation contained therein) or other organizational documents of the Company, any capital stock of the Company or bylaws of the Company, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations of the OTC Bulletin Board) applicable to the Company or by which any property or asset of the Company or any of its subsidiaries is bound or affected, other than, in the case of clause (ii) and (iii) above, violations that could not reasonably be expected to have a Material Adverse Effect (as defined below). The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i) promulgated by the Securities and Exchange Commission (“SEC”) under the 1933 Act. “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole, (ii) the transactions contemplated by this Agreement or (iii) the authority or ability of the Company to perform any of its obligations under this Agreement.

(d)           Consents. The Company is not required to obtain any consent from, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person (as defined below) in order for it to execute, deliver or perform any of its obligations under, or contemplated by, this Agreement, in each case, in accordance with the terms of this Agreement. All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior to the execution of this Agreement have been obtained or effected prior to the execution of this Agreement. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

(e)           Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under its articles of incorporation, bylaws or other organizational document or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to the Holder as a result of the transactions contemplated by this Agreement (including, without limitation, the Company’s issuance of the Exchange Shares and the Holder’s ownership of the Exchange Shares).

(f)           Brokers. There are no solicitation fees, brokerage commissions, finder’s fees or other similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Company or any action taken by Company.

(g)           Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided the Holder or its agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning the Company or any of its subsidiaries, other than the existence of the transactions contemplated by this Agreement. The Company understands and confirms that the Holder will rely on the foregoing representations in effecting transactions in securities of the Company.

(h)           Capitalization. Immediately prior to the date hereof and without giving effect to the transactions contemplated by this Agreement, the authorized capital stock of the Company consists of (i) 16,666,667 shares of Common Stock, of which 9,421,549 are issued and outstanding (excluding for the avoidance of doubt any convertible or exercisable securities), and (ii) 1,666,667 shares of preferred stock, of which no shares are issued and outstanding. The Exercise Price of the Holder’s Warrant is $0.65 as of the date hereof (subject to adjustment pursuant to the terms of the Holder’s Warrant).

(i)           No Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has occurred or exists, or is reasonably expected to occur or exist with respect to the Company, any of its subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced, (ii) could have a material adverse effect on the Holder’s investment or (iii) could have a Material Adverse Effect.

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5.           Miscellaneous.

(a)           Entire Agreement. This Agreement supersedes all other prior oral or written agreements between the Holder, the Company, their affiliates and Persons acting on their behalf solely with respect to the subject matter hereof, and this Agreement contains the entire understanding of the parties solely with respect to the subject matter covered herein; provided, however, nothing contained in this Agreement shall (or shall be deemed to), except as expressly contemplated by Section 1(a) with respect to the extinguishment of all obligations and liabilities under the Debenture and the cancellation of the Debenture, (i) have any effect on any of the Transaction Documents or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its subsidiaries, or any rights of or benefits to the Holder or any other Person, in any of the Transaction Documents, and all of the Transaction Documents shall continue in full force and effect. As a material inducement for the Holder to enter into this Agreement, the Company expressly acknowledges and agrees that (1) no due diligence or other investigation or inquiry conducted by the Holder, any of its advisors or any of its representatives shall affect the Holder’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement and (2) nothing contained in any of the SEC Documents shall affect the Holder’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement.

(b)           Notices.Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

(c)           Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Holder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

(d)           Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

(e)           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. No party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party hereto.

(f)           No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

(g)           Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  If either party shall commence an action, suit or proceeding to enforce any provisions of the Agreement, then the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

(h)           Survival.  The representations, warranties, agreements and covenants contained herein shall survive the consummation of the transactions contemplated by this Agreement. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty.

(i)           Counterparts.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any executed signature page is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such executed signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

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(j)            Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Agreement and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against a drafting party shall not be employed in the interpretation of the Agreement or any amendments thereto.  Each and every reference to share prices, shares of Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock splits, stock dividends, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.

(k)            WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE FOREVER TRIAL BY JURY.

(l)            Disclosure. The Company shall, on or before 8:30 a.m., New York time, on the first (1st) business day after the date hereof file a Current Report on Form 8-K (or at the Company’s option, in lieu thereof, a Quarterly Report on Form 10-Q) describing all the material terms of the transactions contemplated by this Agreement in the form required by the Securities Exchange Act of 1934, as amended (the “Public Filing”). From and after the filing of the Public Filing, the Company shall have disclosed all material, non-public information regarding the Company and its subsidiaries (if any) delivered to the Holder by the Company or any of its subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by this Agreement. The Company shall not, and the Company shall cause each of its subsidiaries and each of its and their respective officers, directors, employees and agents, not to, provide the Holder with any material, non-public information regarding the Company or any of its subsidiaries from and after the filing of the Public Filing without the express prior written consent of the Holder. In the event of a breach of any of the foregoing covenants by the Company, any of its subsidiaries, or any of its or their respective officers, directors, employees and agents (as determined in the reasonable good faith judgment of the Holder), in addition to any other remedy provided herein, the Holder shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, non-public information without the prior approval by the Company, any of its subsidiaries, or any of its or their respective officers, directors, employees or agents. The Holder shall not have any liability to the Company, any of its subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents, for any such disclosure. Subject to the foregoing, neither the Company, its subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Holder, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the Public Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) the Holder shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the Holder, the Company shall not (and shall cause each of its subsidiaries and affiliates to not) disclose the name of the Holder in any filing (other than the Public Filing), announcement, release or otherwise. Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would otherwise be true, the Company expressly acknowledges and agrees that the Holder shall not have (unless expressly agreed to by the Holder after the date hereof in a written definitive and binding agreement executed by the Company and the Holder), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any information regarding the Company or any of its subsidiaries.

(m)            Listing; Blue Sky Laws. The Company shall promptly secure the listing of all of the Exchange Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is listed or designated for quotation (as the case may be) to the extent required under the rules and regulations thereof. The Company shall maintain the Common Stock’s listing or designation for quotation (as the case may be) on the OTC Bulletin Board, The New York Stock Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market. The Company shall timely make all filings and reports relating to the offer and issuance of the Exchange Shares required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “blue sky” laws), and the Company shall comply with all applicable federal, state, local and foreign laws, statutes, rules, regulations and the like relating to the offer and issuance of the Exchange Shares.

(n)            Further Assurances; Expenses. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. [The Company shall reimburse the Holder or its designee(s) for all costs and expenses incurred by it or its affiliates in connection with the transactions contemplated by this Agreement (including, without limitation, all legal fees and disbursements in connection therewith, structuring, documentation and implementation of the transactions contemplated by the Exchange Documents and due diligence in connection therewith) and in connection with its dealings with the Company with respect to this Agreement a non-accountable amount equal to [$16,000][$2,500], which shall be paid by the Company by wire transfer of immediately available funds simultaneously with the execution and delivery of this Agreement.]2 Except as otherwise set forth in this Agreement, each party to this Agreement shall bear its own expenses in connection with the transactions contemplated by this Agreement.

(o)            Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

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(p)            Terms. The Company represents, warrants and covenants that the Company has not entered into, and will not, directly or indirectly, enter into (or provide, grant or enter into any waiver, amendment, termination or the like with respect to), any agreement, understanding, instrument or the like with, or for the benefit of, any current holder of any of the other Debentures (as defined in the Debenture) (each an “Other Holder”) or any of their respective affiliates with or that results in any terms and/or conditions which are more favorable to any such Person than the terms and conditions provided to, or for the benefit of, the Holder. To the extent the Company enters into (or provides, grants or enters into any waiver, amendment, termination or the like with respect to) any, direct or indirect, agreement, understanding, instrument or the like with, or for the benefit of, any Other Holder or any of their respective affiliates that contains or results in any terms and/or conditions which are more favorable to any such Person than the terms and/or conditions provided to, or for the benefit of, the Holder, then the Holder, at its option, shall be entitled to the benefit of such more favorable terms and/or conditions (as the case may be) and this Agreement shall be automatically amended to reflect such more favorable terms or conditions (as the case may be). To the extent the Company after the date hereof, directly or indirectly, enters into (or provides, grants or enters into any waiver, amendment, termination or the like with respect to) any agreement, understanding, instrument or the like with, or for the benefit of, any Other Holder or any of their respective affiliates that contains or results in any terms or conditions which are not identical to the terms and conditions provided to, or for the benefit of, the Holder, then the Company shall immediately notify the Holder of, and contemporaneously with such notification publicly disclose, any such terms to the extent such terms constitute material non-public information. The Company further represents and warrants that (i) except as set forth on Schedule I attached hereto, no consideration has been offered or paid to any Other Holder or any of their respective affiliates with respect to any of the matters addressed in this Agreement, (ii) except as set forth on Schedule I attached hereto, no agreement, understanding, instrument or the like has been entered into with or granted to any Other Holder or any of their respective affiliates with respect to any of the matters addressed in this Agreement that contains any terms or conditions that are different in any respect from any of the terms or conditions contained in this Agreement, (iii) other than the Transaction Documents previously filed with the SEC and except as set forth on Schedule I attached hereto, no agreement, understanding, instrument or the like has been entered into with or granted to any Other Holder or any of their respective affiliates with respect to any other matter and (iv) except as set forth on Schedule I attached hereto, simultaneously herewith all of the Other Holders are also entering into agreements identical to this Agreement (the “Other Exchange Agreements”).

(q)            Independent Obligations. The obligations of the Holder hereunder are several and not joint with the obligations of any Other Holder, and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holder under any of the Other Exchange Agreements or any other similar agreement. Nothing contained herein, and no action taken by the Holder pursuant hereto, shall be deemed to constitute the Holder and the Other Holders as, and the Company acknowledges that the Holder and the Other Holders do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holder or any of the Other Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any matters, and the Company acknowledges that the Holder and the Other Holders are not acting in concert or as a group or entity, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by this Agreement or any other similar agreement. The decision of the Holder to enter into this Agreement has been made by the Holder independently of any Other Holder. The Company and the Holder confirm that the Holder has independently participated with the Company in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose. To the extent that any Other Holder enters into an agreement with the same or similar terms and conditions or pursuant to the same or similar documents, all such matters are solely in the control of the Company, not the action or decision of the Holder, and would be solely for the convenience of the Company and not because it was required or requested by the Holder.

(r)            Termination. Notwithstanding anything contained in this Agreement to the contrary, if the Company does not deliver the Initial Exchange Shares to the Holder in accordance with Section 1(a)(i) above, then, at the election of Holder delivered in writing to the Company at any time after the third business day immediately following the date of this Agreement, this Agreement shall be terminated and be null and void ab initio and the Holder’s Debenture shall automatically be reinstated as if this Agreement never existed.

[Intentionally Blank]

 

1 Insert outstanding principal amount of Debenture immediately prior to execution of this Agreement

 

2 Include only for Cranshire and Gemini

6

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement on the date first written above.

HOLDER:

By: 

Name:

Title:

Address:   ____________________

____________________

____________________

Fax No:      ____________________

THE COMPANY:

OriginOil, Inc.

By: 

Name: T. Riggs Eckelberry

Title: Chief Executive Officer

Address: 5645 W Adams Blvd

Los Angeles, CA 90016

Fax No:  (323) 315 2300

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Schedule I

None, other than:

(i)           Cranshire Capital, L.P. is entitled to expense reimbursement in cash for fees and expenses incurred in connection with Cranshire Capital, L.P.’s separate Exchange Agreement in a non-accountable amount equal to $16,000, which will be wired directly to its counsel.

(ii)           Gemini Master Fund Ltd. is entitled to expense reimbursement in cash for fees and expenses incurred in connection with Gemini Master Fund Ltd.’s separate Exchange Agreement in a non-accountable amount equal to $2,500, which will be wired directly to its counsel.

(iii)           Under its separate Exchange Agreement, the principal amount of Cranshire Capital L.P’s Debenture in the recitals and Section 1(d)(ii) is $194,121.80, the number of shares of Common Stock issuable upon exercise of its Warrant is 98,042, it shall be issued 298,649 Initial Exchange Shares under Section 1(a) thereof and its interest payment under Section 1(c) thereof shall be $1,294.15.

(iv)           Under its separate Exchange Agreement, the principal amount of Kingsbrook Partners Opportunities Master Fund LP’s Debenture in the recitals and Section 1(d)(ii) is $63,650, the number of shares of Common Stock issuable upon exercise of its Warrant is 39,217, it shall be issued 107,594 Initial Exchange Shares under Section 1(a) thereof and its interest payment under Section 1(c) thereof shall be $438.22.

(v)           Under its separate Exchange Agreement, the principal amount of Brio Capital L.P.’s Debenture in the recitals and Section 1(d)(ii) is $235,300, the number of shares of Common Stock issuable upon exercise of its Warrant is 78,434, it shall be issued 362,000 Initial Exchange Shares under Section 1(a) thereof and its interest payment under Section 1(c) thereof shall be $1,568.67.

(vi)           Under its separate Exchange Agreement, the principal amount of Gemini Master Fund, Ltd.’s Debenture in the recitals and Section 1(d)(ii) is $294,125, the number of shares of Common Stock issuable upon exercise of its Warrant is 98,042, it shall be issued 452,500 Initial Exchange Shares under Section 1(a) thereof and its interest payment under Section 1(c) thereof shall be $1,960.83.

NTD: Exclude the applicable provision in (iii), (iv), (v) and (vi) for the Holder to whom this Exchange Agreement applies.

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Exhibit A

DWAC Delivery Instructions

9

EX-10.2

Exhibit 10.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

Issue Date: __________, 201__

$_______________

UNSECURED SUBORDINATED

CONVERTIBLE PROMISSORY NOTE

DUE _______________, 201__

THIS UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued Convertible Promissory Notes of OriginOil, Inc., a Nevada corporation, (the “Company”), having its principal place of business at 5645 West Adams Boulevard, Los Angeles, CA 90016, designated as its Convertible Promissory Note due ____________, 201__ (this note, the “Note” and, collectively with the other notes issued in the Offering, the “Notes”).

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on ___________, 201__1 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.  This Note is subject to the following additional provisions:

Section 1.                      Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.

“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Issue Date” means the date of the first issuance of the Note set forth on the cover page of this Note, regardless of any transfers of the Note and regardless of the number of instruments which may be issued to evidence such Note.

“Offering” means that certain offering of the Company of up to $1,950,000 in aggregate principal of unsecured convertible promissory notes.

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

 

1 Five years from Issue Date.

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“Redemption Amount” means, with respect to any principal amount that is subject to Redemption pursuant to Section 6 herein, the sum of (a) 100% of such principal amount of the Note, and (b) 100% of the accrued and unpaid interest thereon.

“­Release Date” shall mean the date that the entirety of the Senior Indebtedness ceases to be outstanding.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Senior Indebtedness” means the principal of, unpaid interest on, amounts reimbursable, liquidated damages, fees, expenses, costs of enforcement and any other amounts due in respect of those certain Original Issue Discount 5% Convertible Debentures issued on July 11, 2011 having an aggregate principal amount of $841,197.

“Subscription Agreement” means the Subscription Agreement, dated as of ____________, 201__, by and between the Company and the original Holder signatory thereto, as amended, modified or supplemented from time to time in accordance with its terms.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Amex, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

Section 2.                      Interest.

a)Payment of Interest. Interest on the aggregate unconverted and then outstanding principal amount of this Note shall, subject to the following paragraph, accrue and be payable at the per annum rate of two (2) shares of Common Stock for each $100 of outstanding principal of this Note then outstanding (the “Interest Shares”). The Interest Shares shall be issuable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the Release Date, on each Conversion Date (as to the principal amount then being converted), on the Redemption Date (as to the principal amount then being redeemed) and the Maturity Date (each such date, an “Interest Payment Date”).

In the event that on any Interest Payment Date, the closing price of the Common Stock on (a) the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), or (b) if the Common Stock is not then listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent closing bid price per share of the Common Stock so reported is less than $2.40 (subject to adjustment from stock splits, dividends, distributions, recapitalizations and the like) then interest on the aggregate unconverted and then outstanding principal amount of this Note payable on such Interest Payment Date shall be paid in cash at the rate of 4.8% per annum.

b)Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, and other amounts which may become due hereunder, has been made.  The issuance of Interest Shares shall occur pursuant to Section 4(c)(ii) hereof.  Interest shall cease to accrue with respect to any principal amount converted.  Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).

Section 3.                      Registration of Transfers and Exchanges.

a)Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

b)Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Subscription Agreement and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable federal and state securities laws and regulations.

c)Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

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Section 4.                      Conversion.

a)Voluntary Conversion. At any time after the Release Date and until the Note is no longer outstanding, the Note shall be convertible, in whole or in part, into shares of Common Stock (the “Conversion Shares”) at the option of the Holder (subject to the conversion limitations set forth in Section 4(d) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within two (2) Business Days of delivery of such Notice of Conversion.  The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

b)Conversion Price.  The conversion price in effect on any Conversion Date shall be equal to $2.40, subject to adjustment herein (the “Conversion Price”).

c)Mechanics of Conversion.

i.           Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the Conversion Price.

ii.           Delivery of Certificate Upon Conversion. Not later than ten Business Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares representing the number of Conversion Shares being acquired upon the conversion of this Note. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and non-assessable.

iii.           Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

iv.           Transfer Taxes and Expenses.  The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.  The Company shall pay all transfer agent fees required for same-day processing of any Notice of Conversion.

d)Holder’s Conversion Limitations.  The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.  To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

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Section 5.                      Certain Adjustments.

a)Stock Dividends and Stock Splits.  If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)Reorganization, Reclassification, Consolidation, Merger, Sale; Company Not Survivor.  If any capital reorganization, reclassification of the capital stock of the Company, combination, continuation, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition (i.e. license, lease or contractual arrangement) of all or substantially all of the assets to another corporation shall be effected by the Company, then, as a condition of such reorganization, reclassification, combination, continuation, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion of the Note, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon conversion of the Note, had such reorganization, reclassification, combination, continuation, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.   The provisions of this paragraph 5(b) shall similarly apply to successive reorganizations, reclassifications, combinations, continuations, consolidations, mergers, sales, transfers or other dispositions.

c)Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

d)Notice to the Holder.

i.           Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii.           Notice to Allow Conversion by Holder.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, or (D) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or (y) if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Securities and Exchange Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to convert this Note during the twenty day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

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Section 6.                      Redemption.

a)           Redemption at Election of Company.  Subject to the provisions of this Section 6(a), at any time after the later to occur of (i) the Release Date, and (ii) one-year anniversary of the Issue Date, the Company may deliver a notice to the Holder (a “Redemption Notice” and the date such notice is deemed delivered hereunder, the “Redemption Notice Date”) of its irrevocable election to redeem this Note for cash in an amount equal to the Redemption Amount on the fifth Business Day following the Redemption Notice Date (such date, the “Redemption Date”, such five Business Day period, the “Redemption Period” and such redemption, the “Redemption”).  The Redemption Amount is payable in full on the Redemption Date.  The Company covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Redemption Notice through the date all amounts owing thereon are due and paid in full.

b)           Redemption Procedure.  The payment of cash pursuant to a Redemption shall be payable on the Redemption Date. The Holder may elect to convert the outstanding principal amount of the Note pursuant to Section 4 prior to actual payment in cash for any Redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.

Section 7.                      Subordination. Notwithstanding any provision of this Note, to the contrary, the indebtedness evidenced by this Note is expressly subordinated and junior in all respects to the prior payment in full of all of the Company’s Senior Indebtedness.

Section 8.                      Events of Default.

a)“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i.           a default in the payment of the principal amount of this Note or any accrued interest on this Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default is not cured within five Business Days following such due date;

ii.           the Company shall fail to observe or perform any other covenant or agreement contained in this Note which failure is not cured, if possible to cure, within twenty Business Days after notice of such failure sent by the Holder or by any other Holder to the Company;

iii.           the Company shall be subject to a Bankruptcy Event; or

b)             Remedies Upon Event of Default. Upon the occurrence  of an Event of Default  referred to in Section 8(a)(i) and (ii), the  Holder, by ten Business Days’ notice in writing  given to the Company (during which time, the Company may cure such Event of Default),  may declare the entire  principal  amount then  outstanding of, and accrued interest on, this Note to be due and payable  immediately,  and upon any such declaration the same shall become and be due and payable immediately, without presentation, demand,  protest,  or other  formalities of any kind, all of which are expressly waived by the Borrower. Upon the  occurrence of an Event of Default referred to in Section 8(a)(iii), the principal  amount then  outstanding of, and the accrued interest on, this Note shall  automatically  become  immediately due and payable without  presentment, demand,  protest, or other formalities of any kind, all of which are hereby  expressly waived by the Borrower.

Section 9.                      Miscellaneous.

a)Lock-Up. By accepting this Note, the Holder agrees that for a period of the longer of (i) the Release Date, and (ii) the one year anniversary of the Issue Date, the Holder shall not without the prior written consent of the Company, offer, pledge, sell, contract to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, the Conversion Shares or the Interest Shares issued pursuant to this Note, as may otherwise be permitted by Rule 144 promulgated under the Securities Act and consents to the placement of a legend, with respect to the foregoing, on each certificate representing the Conversion Shares and Interest Shares.

b)Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 9(b).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Subscription Agreement.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

c)Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

d)Lost or Mutilated Note.  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

e)Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of this Note (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

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f)Waiver and Amendments.  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.  Any waiver by the Company or the Holder must be in writing. This Note may be modified or amended or the provisions hereof waived with the written consent of the Company and Holders of a majority in principal amount of the then outstanding Notes.

g)Severability.  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

h)Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

i)Headings.  The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

ORIGINOIL, INC.
By:	/s/
	Name
	Title
	Facsimile No. for delivery of Notices: 323-315-2308

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Original Issue Convertible Promissory Note due ______________, 201___ of OriginOil, Inc., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Note to be Converted:

Number of shares of Common Stock to be issued:

Signature:

Name:

Address for Delivery of Common Stock Certificates:

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EX-10.3

Exhibit 10.3 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

Issue Date: __________, 201__

$_______________

UNSECURED SUBORDINATED

CONVERTIBLE PROMISSORY NOTE

DUE _______________, 201__

THIS UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued Convertible Promissory Notes of OriginOil, Inc., a Nevada corporation, (the “Company”), having its principal place of business at 5645 West Adams Boulevard, Los Angeles, CA 90016, designated as its Unsecured Subordinated Convertible Promissory Note due ____________, 201__ (this note, the “Note” and, collectively with the other notes issued in the Offering, the “Notes”).

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on ___________, 201__1 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.  This Note is subject to the following additional provisions:

Section 1.                      Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Subscription Agreement and (b) the following terms shall have the following meanings:

1 Twelve months from Issue Date.

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“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.

“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

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“Issue Date” means the date of the first issuance of the Note set forth on the cover page of this Note, regardless of any transfers of the Note and regardless of the number of instruments which may be issued to evidence such Note.

“Offering” means that certain offering of the Company of up to $1,950,000 in aggregate principal of unsecured convertible promissory notes.

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

“­Release Date” shall mean the date that the entirety of the Senior Indebtedness ceases to be outstanding.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Senior Indebtedness” means the principal of, unpaid interest on, amounts reimbursable, liquidated damages, fees, expenses, costs of enforcement and any other amounts due in respect of those certain Original Issue Discount 5% Convertible Debentures issued on July 11, 2011 having an aggregate principal amount of $841,197.

“Subscription Agreement” means the Subscription Agreement, dated as of ____________, 201__, by and between the Company and the original Holder signatory thereto, as amended, modified or supplemented from time to time in accordance with its terms.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Amex, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

Section 2.                      Interest.

a)Payment of Interest. Interest on the aggregate unconverted and then outstanding principal amount of this Note shall, subject to the following paragraph, accrue and be payable at 8% per annum. Except as otherwise set forth herein, interest shall be payable on each Conversion Date (as to the principal amount then being converted) and the Maturity Date (each such date, an “Interest Payment Date”).

b)Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted.  Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).

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Section 3.                      Registration of Transfers and Exchanges.

a)Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

b)Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Subscription Agreement and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable federal and state securities laws and regulations.

c)Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.                      Conversion.

a)Voluntary Conversion. At any time after the Release Date and until the Note is no longer outstanding, the Note shall be convertible, in whole or in part, into shares of Common Stock (the “Conversion Shares”) at the option of the Holder (subject to the conversion limitations set forth in Section 4(d) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted or paid. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within two (2) Business Days of delivery of such Notice of Conversion.  The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

b)Conversion Price.  The conversion price in effect on any Conversion Date shall be equal to $1.75, subject to adjustment herein (the “Conversion Price”).

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c)Mechanics of Conversion.

i.           Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the Conversion Price.

ii.           Delivery of Certificate. Not later than twenty Business Days after each Conversion Date, the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares representing the number of Conversion Shares being acquired upon the conversion of this Note. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and non-assessable.

iii.           Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

iv.           Transfer Taxes and Expenses.  The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.  The Company shall pay all transfer agent fees required for same-day processing of any Notice of Conversion.

d)Holder’s Conversion Limitations.  The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.  To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

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For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

Section 5.                      Certain Adjustments.

a)Stock Dividends and Stock Splits.  If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of the Notes or in respect of the Additional Shares), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)Reorganization, Reclassification, Consolidation, Merger, Sale; Company Not Survivor.  If any capital reorganization, reclassification of the capital stock of the Company, combination, continuation, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition (i.e. license, lease or contractual arrangement) of all or substantially all of the assets to another corporation shall be effected by the Company, then, as a condition of such reorganization, reclassification, combination, continuation, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion of the Note, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon conversion of the Note, had such reorganization, reclassification, combination, continuation, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.   The provisions of this paragraph 5(b) shall similarly apply to successive reorganizations, reclassifications, combinations, continuations, consolidations, mergers, sales, transfers or other dispositions.

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c)Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

d)Notice to the Holder.

i.           Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii.           Notice to Allow Conversion by Holder.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, or (D) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or (y) if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.

Section 6.                      Preferential Redemption. At the Holder’s option, this Note may be redeemed by the Company in cash on the Maturity Date, in whole or in part, at a redemption price equal to 112% of the outstanding principal of the Note plus accrued, and unpaid interest thereon up to and through the Maturity Date (the “Redemption Price”); provided that (i) the Maturity Date falls on a date that is after the Release Date, and (ii) the Holder notifies the Company in writing of its option to redeem the Note at the Redemption Price (the “Redemption Notice”) at any time before the nine month anniversary from the Issue Date; provided further that if the Holder delivers the Redemption Notice after the nine month anniversary from the Issue Date, then the Company shall have up to 90 days from the date of delivery of the Redemption Notice to redeem the Note at the Redemption Price, even if such date falls after the Maturity Date, it being understood that, in such instance, interest shall cease to accrue on the Note following the Maturity Date.

Section 7.                     Additional Share Issuance.

a)              Additional Shares. If the Senior Debt is outstanding on July 13, 2012 (the “Additional Share Issuance Date”), then the Company shall issue to the Holder such number of shares of Common Stock of the Company as shall equal the then unconverted and outstanding principal due upon the Note divided by the Conversion Price (the “Additional Shares”). Such issuance shall not have the effect of reducing the outstanding principal due upon the Note.

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b)              Delivery of Certificate. Not later than twenty Business Days after the Additional Share Issuance Date, the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Additional Shares. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and non-assessable.

c)              Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the issuance of Additional Shares.  As to any fraction of a share which the Holder would otherwise be entitled to receive upon the issuance of Additional Shares, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

d)              Transfer Taxes and Expenses.  The issuance of certificates for shares of the Common Stock representing the Additional Shares shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the Holder of this Note and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

Section 8.                      Subordination. Notwithstanding any provision of this Note, to the contrary, the indebtedness evidenced by this Note is expressly subordinated and junior in all respects to the prior payment in full of all of the Company’s Senior Indebtedness.

Section 9.                      Events of Default.

a)“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i.           a default in the payment of the principal amount of this Note or any accrued interest on this Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default is not cured within five Business Days following such due date;

ii.           the Company shall fail to observe or perform any other covenant or agreement contained in this Note which failure is not cured, if possible to cure, within twenty Business Days after notice of such failure sent by the Holder or by any other Holder to the Company;

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iii.           the Company shall be subject to a Bankruptcy Event; or

b)             Remedies Upon Event of Default. Upon the occurrence  of an Event of Default  referred to in Section 9(a)(i) and (ii), the  Holder, by ten Business Days’ notice in writing  given to the Company (during which time, the Company may cure such Event of Default),  may declare the entire  principal  amount then  outstanding of, and accrued interest on, this Note to be due and payable  immediately,  and upon any such declaration the same shall become and be due and payable immediately, without presentation, demand,  protest,  or other  formalities of any kind, all of which are expressly waived by the Borrower. Upon the  occurrence of an Event of Default referred to in Section 9(a)(iii), the principal  amount then  outstanding of, and the accrued interest on, this Note shall  automatically  become  immediately due and payable without  presentment, demand,  protest, or other formalities of any kind, all of which are hereby  expressly waived by the Borrower.

Section 10.                      Miscellaneous.

a)Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 10(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Subscription Agreement.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

b)Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

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c)Lost or Mutilated Note.  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

d)Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of this Note (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.

e)Waiver and Amendments.  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.  Any waiver by the Company or the Holder must be in writing. This Note may be modified or amended or the provisions hereof waived with the written consent of the Company and Holders of a majority in principal amount of the then outstanding Notes.

f)Severability.  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

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g)Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

h)Headings.  The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

[Intentionally Blank]

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

ORIGINOIL, INC.

By:__________________________________________

     Name:

     Title:

Facsimile No. for delivery of Notices: 323-315-2308

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Original Issue Convertible Promissory Note due ______________, 201___ of OriginOil, Inc., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:
	Date to Effect Conversion: Principal Amount of Note to be Converted: Number of shares of Common Stock to be issued: Signature: Name: Address for Delivery of Common Stock Certificates:

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EX-10.4

Exhibit 10.4

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

Issue Date: __________, 201__

$_______________

AMENDED AND RESTATED

UNSECURED SUBORDINATED

CONVERTIBLE PROMISSORY NOTE

DUE _______________, 201__

THIS AMENDED AND RESTATED UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued Convertible Promissory Notes of OriginOil, Inc., a Nevada corporation, (the “Company”), having its principal place of business at 5645 West Adams Boulevard, Los Angeles, CA 90016, designated as its Unsecured Subordinated Convertible Promissory Note due ____________, 201__ (this note, the “Note” and, collectively with the other notes issued in the Offering, the “Notes”).

FOR VALUE RECEIVED, the Company promises to pay to  the order of ________________________ or its assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on ___________, 201__1 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.  This Note is subject to the following additional provisions:

Section 1.                      Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Subscription Agreement and (b) the following terms shall have the following meanings:

“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.

“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Issue Date” means the date of the first issuance of the Note set forth on the cover page of this Note, regardless of any transfers of the Note and regardless of the number of instruments which may be issued to evidence such Note.

“Offering” means that certain offering of the Company of up to $1,950,000 in aggregate principal amount of Notes and up to 2,228,572 shares of Common Stock, as such may be amended from time to time, in one or more closings.

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

“­Release Date” shall mean the date that the entirety of the Senior Indebtedness ceases to be outstanding.

“Securi

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ties Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Senior Indebtedness” means the principal of, unpaid interest on, amounts reimbursable, liquidated damages, fees, expenses, costs of enforcement and any other amounts due in respect of those certain Original Issue Discount 5% Convertible Debentures issued on July 11, 2011 having an aggregate principal amount of $797,197.

“Subscription Agreement” means the Subscription Agreement, dated as of ____________, 2012, by and between the Company and the original Holder signatory thereto, as amended, modified or supplemented from time to time in accordance with its terms.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Amex, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

“Trading Day” means a day on which the principal Trading Market of the Company is open for trading.

Section 2.                      Interest.

a)Payment of Interest. Interest on the aggregate unconverted and then outstanding principal amount of this Note shall, subject to the following paragraph, accrue and be payable at 8% per annum. Except as otherwise set forth herein, interest shall be payable on each Conversion Date (as to the principal amount then being converted) and the Maturity Date provided that such dates fall on a date that is after the Release Date.

b)Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted.  Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).

Section 3.                      Registration of Transfers and Exchanges.

a)Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

b)Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Subscription Agreement and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable federal and state securities laws and regulations.

c)Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.                      Conversion.

a)Voluntary Conversion. At any time after the Release Date and until the Note is no longer outstanding, the Note shall be convertible, in whole or in part, into shares of Common Stock (the “Conversion Shares”) at the option of the Holder (subject to the conversion limitations set forth in Section 4(d) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted or paid. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within two (2) Business Days of delivery of such Notice of Conversion.  The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

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b)Conversion Price.  The conversion price in effect on any Conversion Date shall be equal to $1.75, subject to adjustment herein (the “Conversion Price”).

c)Mechanics of Conversion.

i.           Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of Conversion Shares issuable upon conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the Conversion Price; provided that in the event the Note is converted in whole (but not in part) prior to the Maturity Date, for each Conversion Share issued, the Holder shall be issued one additional Conversion Share.

ii.           Delivery of Certificate. Not later than twenty Business Days after each Conversion Date, the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares representing the number of Conversion Shares being acquired upon the conversion of this Note. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and non-assessable.

iii.           Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

iv.           Transfer Taxes and Expenses.  The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.  The Company shall pay all transfer agent fees required for same-day processing of any Notice of Conversion.

d)Holder’s Conversion Limitations.  The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.  To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

Section 5.                      Certain Adjustments.

a)Stock Dividends and Stock Splits.  If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)Reorganization, Reclassification, Consolidation, Merger, Sale; Company Not Survivor.  If any capital reorganization, reclassification of the capital stock of the Company, combination, continuation, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition (i.e. license, lease or contractual arrangement) of all or substantially all of the assets to another corporation shall be effected by the Company, then, as a condition of such reorganization, reclassification, combination, continuation, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion of the Note, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon conversion of the Note, had such reorganization, reclassification, combination, continuation, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.   The provisions of this paragraph 5(b) shall similarly apply to successive reorganizations, reclassifications, combinations, continuations, consolidations, mergers, sales, transfers or other dispositions.

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c)Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

d)Notice to the Holder.

i.           Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii.           Notice to Allow Conversion by Holder.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, or (D) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or (y) if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.

Section 6.                      Preferential Redemption. At the Holder’s option, this Note may be redeemed by the Company in cash on the Maturity Date, in whole or in part, at a redemption price equal to 112% of the outstanding principal of the Note plus 100% of the accrued, and unpaid interest thereon up to and through the Maturity Date (the “Redemption Price”); provided that (i) the Maturity Date falls on a date that is after the Release Date, and (ii) the Holder notifies the Company in writing of its option to redeem the Note at the Redemption Price (the “Redemption Notice”) at any time before the nine month anniversary from the Issue Date; provided further that if the Holder delivers the Redemption Notice after the nine month anniversary from the Issue Date, then the Company shall have up to 90 days from the date of delivery of the Redemption Notice to redeem the Note at the Redemption Price, even if such date falls after the Maturity Date, it being understood that, in such instance, interest shall cease to accrue on the Note following the Maturity Date.

Section 7.                      Subordination. Notwithstanding any provision of this Note, to the contrary, the indebtedness evidenced by this Note is expressly subordinated and junior in all respects to the prior payment in full of all of the Company’s Senior Indebtedness.

Section 8.                      Events of Default.

a)“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i.           a default in the payment of the principal amount of this Note or any accrued interest on this Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default is not cured within five Business Days following such due date;

ii.           the Company shall fail to observe or perform any other covenant or agreement contained in this Note which failure is not cured, if possible to cure, within twenty Business Days after notice of such failure sent by the Holder or by any other Holder to the Company;

iii.           the Company shall be subject to a Bankruptcy Event; or

b)             Remedies Upon Event of Default. Upon the occurrence  of an Event of Default  referred to in Section 9(a)(i) and (ii), the  Holder, by ten Business Days’ notice in writing  given to the Company (during which time, the Company may cure such Event of Default),  may declare the entire  principal  amount then  outstanding of, and accrued interest on, this Note to be due and payable  immediately,  and upon any such declaration the same shall become and be due and payable immediately, without presentation, demand,  protest,  or other  formalities of any kind, all of which are expressly waived by the Borrower. Upon the  occurrence of an Event of Default referred to in Section 9(a)(iii), the principal  amount then  outstanding of, and the accrued interest on, this Note shall  automatically  become  immediately due and payable without  presentment, demand,  protest, or other formalities of any kind, all of which are hereby  expressly waived by the Borrower.

Section 9.                      Miscellaneous.

a)Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 9(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Subscription Agreement.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

b)Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

c)Lost or Mutilated Note.  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

d)Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of this Note (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.

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e)Waiver and Amendments.  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.  Any waiver by the Company or the Holder must be in writing. This Note may be modified or amended or the provisions hereof waived with the written consent of the Company and Holders of a majority in principal amount of the then outstanding Notes.

f)Severability.  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

g)Entire Agreement. This Note sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

h)Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

i)Headings.  The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

[Intentionally Blank]

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1 Twelve months from Issue Date.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

ORIGINOIL, INC.
By:	/s/
	Name
	Title
	Facsimile No. for delivery of Notices: 323-315-2308

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Original Issue Convertible Promissory Note due ______________, 201___ of OriginOil, Inc., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Note to be Converted:

Number of shares of Common Stock to be issued:

Signature:

Name:

Address for Delivery of Common Stock Certificates:

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EX-10.5

Exhibit 10.5

WARRANT

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

Date: ____________, 201__ Warrant No. 2011 PP Q4 - ____

WARRANT TO PURCHASE COMMON STOCK

OF ORIGINOIL, INC.

THIS WARRANT (the “Warrant”) certifies that, for value received, ___________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the third year anniversary of the Initial Exercise Date (the “Expiration Date”) but not thereafter, to subscribe for and purchase from OriginOil, Inc., a Nevada corporation (the “Company”), up to ____________ shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant shall be equal to $1.75, subject to adjustment hereunder (the “Exercise Price”).  This Warrant is one of a series of Warrants (the “Warrants”) issued pursued to the terms of certain Subscription Agreement (the “Subscription Agreement”), dated as of the date hereof, entered into by the Company and the Holder.

1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have the following respective meanings:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“1933 Act” shall mean the Securities Act of 1933, as amended.

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

“Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 “Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust or any other entity or organization, other than the Company or any of its affiliates.

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 “SEC” shall mean the Securities and Exchange Commission.

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by the Board of Directors of the Company.

2. EXERCISE OF WARRANT

2.1 Payment. Subject to compliance with the terms and conditions of this Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part at any time or from time to time, on or before the Expiration Date by the delivery (including, without limitation, delivery by facsimile) of the form of Notice of Exercise attached hereto as Exhibit 1 (the “Notice of Exercise”), duly executed by the Holder, at the address of the Company as set forth herein, and as soon as practicable after such date,

(a) surrendering this Warrant at the address of the Company, and either

(b) providing payment, by check or by wire transfer, of an amount equal to the product obtained by multiplying the number of Warrant Shares being purchased upon such exercise by the then effective Purchase Price (the “Exercise Amount”), or

(c) by electing, by written notice to the Company on the Notice of Exercise duly executed by the Holder, to receive a number of Warrant Shares equal to the quotient obtained by dividing: [(A-B) (X)] by (A), where:

(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

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2.2 Common Stock Certificates; Fractional Shares. As soon as practicable on or after the date of an exercise of this Warrant, the Company shall deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Common Stock issuable upon such exercise. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon an exercise of this Warrant.

2.3 Partial Exercise: Effective Date of Exercise. In case of any partial exercise of this Warrant, the Holder and the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver a new Warrant of like tenor and date for the balance of the Warrant Shares purchasable hereunder. This Warrant shall be deemed to have been exercised on the close of business on the date of delivery of the Notice of Exercise as provided above. The Company acknowledges that the person entitled to receive the Warrant Shares issuable upon exercise of this Warrant shall be treated for all purposes as the holder of record of such shares as of the close of business on the date the Holder is deemed to have exercised this Warrant.

2.4           Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2.4, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2.4 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2.4, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2.4, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2.4 shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2.4 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

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3. TAXES. The Company shall pay all taxes and other governmental charges that may be imposed in respect of the delivery of shares upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the delivery of any certificate for shares of Common Stock in any name other than that of the Holder of this Warrant, and in such case the Company shall not be required to deliver any stock certificate until such tax or other charge has been paid, or it has been established to the Company’s reasonable satisfaction that no tax or other charge is due.

4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF COMMON STOCK. The number of shares of Common Stock deliverable upon exercise of this Warrant (or any shares of stock or other securities or property receivable upon exercise of this Warrant) and the Purchase Price are subject to adjustment upon occurrence of the following events:

4.1  Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 4.1 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

4.2 Adjustment for Dividends or Distributions of Stock or Other Securities or Property. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the Common Stock (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (a) securities of the Company or (b) assets (excluding cash dividends paid or payable solely out of retained earnings), then, in each such case, the Holder of this Warrant on exercise hereof at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the shares of Common Stock (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period giving effect to all adjustments called for by this Section 4.

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4.3 Reclassification. If the Company, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change ‘with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Purchase Price therefore shall be appropriately adjusted, all subject to further adjustment as provided in this Section 4.

4.4 Adjustment for Capital Reorganization. Merger or Consolidation. In case of any capital reorganization of the capital stock of the Company (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another entity, or the sale of all or substantially all the assets of the Company then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Purchase Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4. The foregoing provisions of this Section 4.4 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to the Holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

5. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory the Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company (provided no bond shall be required to be posted), and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will cause to be executed and delivered in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant.

6. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that, absent an effective registration statement filed with the SEC under the 1933 Act, covering the disposition or sale of this Warrant or the Common Stock issued or issuable upon exercise thereof, as the case may be, and registration or qualification under applicable state securities laws, such Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants or Common Stock, as the case may be, unless either (i) the Company has received an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that such registration is not required in connection with such disposition or (ii) the sale of such securities is made pursuant to SEC Rule 144.

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7. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder hereby represents, warrants and covenants that he is an “accredited investor” as that term is defined under Rule 501 of Regulation D, that any shares of stock purchased upon exercise of this Warrant shall be acquired for investment only and not with a view to, or for sale in connection with, any distribution thereof, that the Holder has had such opportunity as such Holder has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Holder to evaluate the merits and risks of its investment in the Company; that the Holder is able to bear the economic risk of holding such shares as may be acquired pursuant to the exercise of this Warrant for an indefinite period; that the Holder understands that the shares of stock acquired pursuant to the exercise of this Warrant will not be registered under the 1933 Act; and that all stock certificates representing shares of stock issued to the Holder upon exercise of this Warrant may have affixed thereto a legend substantially in the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

9. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. In the absence of affirmative action by such Holder to purchase Common Stock by exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder hereof shall cause such Holder hereof to be a shareholder of the Company for any purpose.

10. NOTICES. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, return receipt requested, or by telecopier, or by email or otherwise delivered by hand or by messenger, addressed or telecopied to the person to whom such notice or communication is being given at its address set forth after its signature hereto. In order to be effective, a copy of any notice or communication sent by telecopier or email must be sent by registered or certified mail, postage prepaid, return receipt requested, or delivered personally to the person to whom such notice or communication is being at its address set forth after its signature hereto. If notice is provided by mail, notice shall be deemed to be given three (3) business days after proper deposit with the United States mail, one (1) business day after proper deposit with a nationally recognized overnight courier, or immediately upon personally delivery thereof, to person to whom such notice or communication is being at such address. If notice is provided by telecopier, notice shall be deemed to be given upon confirmation by the telecopier machine of the receipt of such notice at the telecopier number provided below. If notice is provided by email, notice shall be deemed to be given upon confirmation by the sender’s email program of the receipt of such notice at the email address provided after the signature of the person to whom such notice or communication is being delivered. The addresses set forth after the signatures hereto may be changed by written notice complying with the terms of this Section 10.

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11.           LAW GOVERNING. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of this Warrant (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant or the transactions contemplated hereby.

12. NOTICES OF RECORD DATE. In case:

12.1           Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of Section 4, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

12.2           Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear in the Company’s records, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

13. SEVERABILITY. If any term, provision, covenant or restriction of this Warrant is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Warrant shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

14. COUNTERPARTS. For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

ORIGINOIL, INC.

By:__________________________________________

     Name:

     Title:

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EXHIBIT 1

NOTICE OF EXERCISE

(To be executed upon exercise of Warrant)

_________________ WARRANT NO. ___

(1)The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)Payment shall take the form of (check applicable box):

[  ] in lawful money of the United States; or

[ ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)           Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

Name:	___________________
Address:	___________________
Signature:	___________________

Note: The above signature should correspond exactly with the name on the first page of this Warrant Certificate.

If said number of shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher whole number of shares.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, T Riggs Eckelberry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of OriginOil, Inc., for the quarter ended March 31, 2012;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this report is being prepared;

(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 5.  I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.   

May 21, 2012

/s/ T Riggs Eckelberry

T Riggs Eckelberry

Chief Executive Officer (Principal Executive Officer)

and Acting Chief Financial Officer

(Principal Accounting and Financial Officer)

EX-32.2

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OriginOil, Inc.  (the “Company”) on Form 10-Q for the quarter ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, T Riggs Eckelberry, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

 (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

 (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

May 21, 2012	/s/ T Riggs Eckelberry
	T Riggs Eckelberry
	Chief Executive Officer (Principal Executive Officer)
	and Acting Chief Financial Officer (Principal Accounting and Financial Officer)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2012

Summary Of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Revenue Recognition

We recognize revenue upon delivery of equipment, 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.  Title to the equipment is transferred to the customer once the last payment is received. We record revenue as it is received, and the equipment has been fully accepted by the customer. Returns are based upon each rent-to-own agreement, and revenue would be adjusted based on a pro-rata basis on the unused months of quarterly payments. Generally, we extend credit to our customers and do not require collateral.  We do not ship a product until we have either a purchase agreement or rental agreement signed by the customer with a payment arrangement.  This is a critical policy, because we want our accounting to show only sales which has a final payment arrangement.

We also recognize revenue for services associated with the equipment setup, provided it is part of the rent-to-own agreement.

Cash and Cash Equivalent

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Loss per Share Calculations

Loss per Share dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. No shares for employee options or warrants were used in the calculation of the loss per share as they were all anti-dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the three month periods ended March 31, 2012, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

Stock-Based Compensation

Share based payments applies to transactions in which an entity exchanges its equity instruments for goods or services, and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair value approach using an option-pricing model, such as the Black Scholes option valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method was amortized over the respective vesting period of the stock option.

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2012, the balances reported for cash, prepaid expenses, accounts payable, accrued expenses, and derivative liability approximate the fair value because of their short maturities.

We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 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.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2012:

	Total		(Level 1)		(Level 2)		(Level 3)
Assets	$	20,000	$	-	$	-	$	20,000
Total assets measured at fair value	$	20,000	$	-	$	-	$	20,000
Liabilities
Derivative Liability	$	759,547	$	-	$	-	$	759,547
Unsecured promissory notes		591,013		-		-		591,013
Convertible Debenture, net of discount		592,511		-		-		592,511
Total liabilities measured at fair value	$	1,943,071	$	-	$	-	$	1,943,071

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the three month period ended March 31, 2012, and the following pronouncements were adopted:

The Company adopted ASC 840 "Accounting for Operating and Capital leases". This pronouncement addresses the accounting for operating and capital leases. If the Company is leasing an asset that is recorded as an operating lease the Company must disclose the future minimum lease payments for the next five years, as well as the terms of any purchase, escalation, or renewal options. If an asset lease is being recorded as a capital lease, then the Company should present the same information, as well as the amount of depreciation already recorded for these assets. The adoption of this pronouncement did not have a material effect on the financial statements of the Company.

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Basis of Presentation

3 Months Ended

Mar. 31, 2012

Basis Of Presentation

Basis of Presentation

1.  Basis of Presentation

The accompanying unaudited financial statements of OriginOil, 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 period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.  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, 2011.

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.  The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion.  The Company has obtained funds from its shareholders in the first quarter of 2012, and has standing purchase orders from a principal customer. Management believes this funding will continue from its’ current investors and has also obtained funding from new investors. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business operations.

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BALANCE SHEETS (Unaudited) (USD $)	Mar. 31, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash	$ 229,733	$ 197,868
Work in progress		248,443
Prepaid expenses	615,468	300,102
Other receivables	8,650	17,977
TOTAL CURRENT ASSETS	853,851	764,390
PROPERTY & EQUIPMENT
Machinery & equipment	30,992	30,992
Furniture & fixtures	27,056	27,056
Computer equipment	28,824	28,824
Capital lease equipment	65,000
Leasehold improvements	94,914	94,914
[PropertyPlantAndEquipmentGross]	246,786	181,786
Less accumulated depreciation	(140,656)	(126,422)
NET PROPERTY & EQUIPMENT	106,130	55,364
OTHER ASSETS
Investment	20,000	20,000
Patent	180,380	180,380
Trademark	4,467	4,467
Security deposit	14,650	9,650
TOTAL OTHER ASSETS	219,497	214,497
TOTAL ASSETS	1,179,478	1,034,251
CURRENT LIABILITIES
Accounts payable	306,743	342,369
Accrued expenses	108,376	124,417
Deferred income		313,163
Derivative liability	759,547	641,900
Convertible debentures, net of discount of $194,686	592,511	397,213
Unsecured subordinated notes, net of discount of $587,062	591,014	13,483
Current capital lease obligation	48,687
TOTAL LIABILITIES	2,406,878	1,832,545
SHAREHOLDERS' EQUITY
Preferred stock, $0.0001 par value; 1,666,667 authorized preferred shares
Common stock, $0.0001 par value; 16,666,667 authorized common shares 8,867,256 and 7,694,505 shares issued and outstanding	886	770
Additional paid in capital	17,557,189	16,198,019
Common stock subscription payable
Deficit accumulated during the development stage	(18,785,475)	(16,997,083)
TOTAL SHAREHOLDERS' DEFICIT	(1,227,400)	(798,294)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$ 1,179,478	$ 1,034,251

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STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (1,788,392)	$ (813,504)
Adjustment to reconcile net loss to net cash used in operating activities
Depreciation & amortization	14,234	2,557
Common stock and warrants issued for services	231,350	5,000
Stock compensation expense	87,410	110,946
Gain on change in valuation of derivative Liability	156,646
Amortization of debenture discount	337,029
Amortization of beneficial conversion feature	7,232
Original issue discount amortized as interest	44,125
Common stock issued for interest payable	9,892
Changes in Assets and Liabilities
Prepaid expenses	100,173	22,248
Work in progress	248,443
Other receivables	9,327	(39,305)
Deposits	(5,000)
Increase (Decrease) in:
Accounts payable	(1,729)	(34,624)
Accrued expenses	(16,041)	32,659
Deferred income	(313,163)	272
Other payable		17,971
NET CASH USED IN OPERATING ACTIVITIES	(878,464)	(695,780)
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Payments on a capital lease
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on capital lease	(15,000)
Proceeds from unsecured subordinated debt	926,826	1,012,640
Proceeds for issuance of common stock, net of stock issuance cost	(1,497)
NET CASH PROVIDED BY FINANCING ACTIVITIES	910,329	1,012,640
NET INCREASE/(DECREASE) IN CASH	31,865	316,860
CASH BEGINNING OF YEAR	197,868	238,424
CASH END OF YEAR	229,733	555,284
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid		537
Taxes paid
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS
Stock issued for convertible debenture	44,000
Stock issued for interest payable	$ 9,872

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STATEMENTS OF CASH FLOWS (Parenthetical)	3 Months Ended
	Mar. 31, 2012
Statement of Cash Flows [Abstract]
Shares of common stock issued for the convertible debenture	30,856
Shares of common stock issued for interest payable	6,551

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BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	1,666,667	1,666,667
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	16,666,667	16,666,667
Common stock, shares issued	8,867,256	7,694,505
Common stock, shares outstanding	8,867,256	7,694,505
Convertible Debenture
Discount on debt	$ 194,686
Unsecured Subordinated Notes
Discount on debt	$ 587,062

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 18, 2012
Document And Entity Information
Entity Registrant Name	ORIGINOIL INC
Entity Central Index Key	0001419793
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,421,549
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2012

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STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Income Statement [Abstract]
Sales	$ 538,163	$ 102,000
Cost of Goods Sold	386,091
Gross Profit	152,072	102,000
Selling, general and administrative expenses	1,107,217	715,582
Research & development	250,715	194,444
Total Operating Expenses	1,357,932	910,026
Loss before Depreciation and Amortization	(1,205,860)	(808,026)
Depreciation & amortization expense	14,234	2,557
Loss from Operations before Other Income/(Expenses)	(1,220,094)	(810,583)
OTHER INCOME/(EXPENSE)
Foreign exchange loss	(1,182)
Gain/(Loss) on derivative	(156,646)
Amortization of debt discount	(337,029)
Amortization of beneficial conversion feature	(7,232)
Penalties		(2,384)
Interest expense	(66,209)	(537)
TOTAL OTHER INCOME/(EXPENSES)	(568,298)	(2,921)
NET LOSS	$ (1,788,392)	$ (813,504)
BASIC LOSS PER SHARE	$ (0.25)	$ (0.13)
BASIC AND DILUTED	8,194,193	6,369,921

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CONVERTIBLE DEBENTURES

3 Months Ended

Mar. 31, 2012

Convertible Debentures

CONVERTIBLE DEBENTURES

5. CONVERTIBLE DEBENTURES

On July 7, 2011, the Company entered into a securities purchase agreement with certain institutional investors, which closed on July 11, 2011, providing for the issuance of original issue discount convertible debentures and warrants for an aggregate purchase price of $1,000,000. The debentures have an aggregate principal amount of $1,176,500, and will become due and payable on July 11, 2012. The debentures may be converted at any time at the option of the investors into shares of common stock at a conversion price of $1.75 per share, after giving effect to full-ratchet anti-dilution adjustment, a 1 for 30 reverse stock split and subject to further adjustment as set forth therein. The debentures bears interest at the rate of 5% per annum increasing to 18% in the event of default. Interest is payable quarterly in cash and/or, if certain equity conditions have been met, in shares of our common stock at an interest conversion rate equal to the lesser of $1.75 or 90% of the daily volume weighted average price of our common stock in the 20 trading days prior to the date the quarterly interest payment is due (or the date of delivery of the interest conversion shares if such shares are delivered after the date the quarterly interest payment is due). The warrants are exercisable for an aggregate of 392,170 shares of common stock at the option of the holder for a period of five years at an exercise price of $1.75 per share, after giving effect to full-ratchet anti-dilution adjustment, a 1 for 30 reverse stock split and subject to further adjustment as set forth therein. The warrants may be exercised on a cashless basis if after the six month anniversary of the closing date there is no effective registration statement registering the shares underlying the warrants.

ASC Topic 815 provides guidance applicable to the convertible debentures issued by the Company in instances where the number into which a debenture can be converted is not fixed.  For example, when a convertible debenture converts at a discount to market based on the stock price on the date of conversion, ASC Topic 815 requires that the embedded conversion option of the convertible debentures be bifurcated from the host contract and recorded at their fair value. In accounting for derivatives under accounting standards, the Company recorded a liability of $1,176,500 representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount  representing the imputed interest associated with the embedded derivative. The discount is amortized over the life of the convertible debenture, which resulted in the recognition of $156,645 in interest expense for the period ended March 31, 2012, and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability will be charged to additional paid-in capital.  For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Stock price on the valuation date	$	4.20
Conversion price for the debentures	$	1.75
Dividend yield		0.00	%
Years to Maturity		1
Rick free rate		0.17	%
Expected volatility		65.75	%

The value of the derivative liability at March 31, 2012 was $759,547.

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STOCK OPTIONS AND WARRANTS

3 Months Ended

Mar. 31, 2012

Stock Options And Warrants

STOCK OPTIONS AND WARRANTS

4.  STOCK OPTIONS AND WARRANTS

The Company adopted the OriginOil, Inc., 2009 Incentive Stock  Plan (the “Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for Five Hundred Thousand (500,000) shares of Common Stock.  Options granted under the Plan may be either incentive options or nonqualified options and shall be administered by the Company's Board of Directors ("Board").  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (10th) anniversary from the effective date of this option.

During the three months ended March 31, 2012, the Company granted 4,000 stock options during the period. The stock options vest as follows: 1/48 every 30 days thereafter until the remaining stock options have vested. The stock options are exercisable for a period of five years from the date of grant at an exercise price between $4.20and $9.60 per share.

Risk free interest rate		0.95% - 2.04	%
Stock volatility factor		55.16% - 271.95	%
Weighted average expected option life	5 years
Expected dividend yield	None

A summary of the Company’s stock option activity and related information follows:

	3/31/2012
			Weighted
	Number		average
	of		exercise
	Options		price
Outstanding, beginning of period		351,130	$	6.14
Granted		4,000		1.70
Exercised		-		-
Forfeited/Expired		-		-
Outstanding, end of period		355,130	$	6.92
Exercisable at the end of period		87,452	$	4.03
Weighted average fair value of
options granted during the period			$	0.87

The weighted average remaining contractual life of options outstanding issued under the Plan as of March 31, 2012 was as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.60		6,250		2,853		1.25
$	9.60		209		84		1.25
$	9.60		20,000		12,880		2.43
$	8.40		3,334		2,067		2.52
$	9.00		15,000		9,229		2.54
$	6.90		15,002		6,997		3.14
$	7.20		1,667		635		3.48
$	4.50		33,334		11,284		3.65
$	6.00		33,000		8,476		3.73
$	6.90		100,000		19,880		3.96
$	4.20		13,334		1,525		4.30
$	4.80		100,000		10,360		4.34
$	5.15		10,000		932		4.38
$	1.80		4,000		250		4.51
			355,130		87,452

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in the financial statements of operations during the period ended March 31, 2012, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of March 31, 2012 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to March 31, 2012, based on the grant date fair value estimated. We account for forfeitures as they occur. The stock-based compensation expense recognized in the statement of income during the period ended March 31, 2012 and 2011 is $87,410 and $110,946, respectively.

Warrants

A summary of the Company’s warrant activity and related information follows:

Risk free interest rate		1.51% - 2.5	%
Stock volatility factor		63.04% - 257.10	%
Weighted average expected option life	5 years
Expected dividend yield	None

	3/31/2012
			Weighted
			average
			exercise
	Options		price
Outstanding -beginning of year		836,189	$	4.20
Granted		-		-
Exercised		-		-
Forfeited		-		-
Outstanding - end of year		836,189	$	4.20

           At March 31, 2012, the weighted average remaining contractual life of warrants outstanding:

						Weighted
						Average
						Remaining
Exercisable		Warrants		Warrants		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.30		256,672		256,672		2.25
$	10.20		28,335		28,335		2.38
$	9.00		9,168		9,168		2.56
$	8.70		3,334		3,334		2.62
$	8.40		667		667		2.83
$	8.70		5,000		5,000		3.16
$	7.20		33,334		33,334		3.23
$	5.70		7,335		7,335		3.34
$	4.50		3,334		3,334		3.45
$	4.20		8,334		8,334		3.48
$	4.20		33,334		33,334		3.50
$	3.60		8,334		8,334		3.58
$	4.50		33,334		33,334		3.65
$	4.20		13,335		13,335		3.67
$	6.00		166,668		166,668		3.73
$	6.00		33,334		33,334		3.74
$	6.30		8,334		8,334		3.97
$	5.70		4,001		4,001		4.00
$	6.90		33,334		33,334		4.21
$	6.90		33,334		33,334		4.21
$	1.90		80,000		80,000		4.51
$	6.90		33,334		33,334		4.71
			836,189		836,189

The Company did not recognize any warrant compensation expense in the statement of income during the three month period ended March 31, 2012.

The total outstanding purchase warrants as of March 31, 2012, was 2,004,075 to purchase shares of common stock, of which 1,167,886 is not included in the table above.

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2012

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

8. SUBSEQUENT EVENTS

Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855, and reported the following events:

On April 19, 2012, the Company’s Board of Directors authorized the grant to Steve Glovsky, a recently appointed director, of 50,000 shares of common stock in lieu of a previously authorized grant of a five-year warrant to purchase 400,000 shares of our common stock.

On April 25, 2012, the Company’s Board of Directors authorized  the grant of 260,000 purchase warrants to purchase 260,000 shares of common stock at a price

On May 10, 2012, the Company’s Board of Directors authorized to issue an aggregate of 60,000 shares of common stock at $1.75 per share in consideration for consulting services.

On May 11, 2012, the Company’s Board of Directors authorized to issue an aggregate of 57,143 shares of common stock at $1.75 per share in consideration of consulting services

During the subsequent period through May 11, 2012, the Company issued January Notes in the aggregate principal amount of $431,501 with 360,863 shares of common stock. As of May 18, 2012, 114,286 shares have not been issued.

On May 18, 2012, we entered into exchange agreements with the current holders (the “Holders”) of our convertible debentures Pursuant to the terms of the exchange agreements, we have agreed to issue 1,211,072 shares of our common stock in exchange for the cancellation of convertible debentures in the aggregate principal amount of $787,197. In addition, as part of the exchange, we agreed to issue a further 9,671 shares of our common stock to one of the Holders in respect of a prior conversion. We have further agreed to pay to the Holders an aggregate of $5,262 in payment of all accrued and unpaid interest due under the convertible debentures. Also, under the exchange agreements  the Company has also agreed to adjust  the exercise price of warrants issued to the Holders in connection with the convertible debentures (the “Warrants”) to $0.65 per share subject to future adjustment under the terms of the Warrants. The exchange agreements further provide that for the first two months following entry into the agreements, we are prohibited from issuing shares of our common stock or common stock equivalents that would result in a dilutive issuance under the warrants without the prior written consent of the Holders. For the subsequent two months, if we issue shares of our common stock or common stock equivalents that results in a dilutive issuance under the warrants we are required to issue additional exchange shares of common stock, the number of which is dependent upon the exercise price of the Warrants that is in effect immediately following the dilutive issuance.

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OBLIGATIONS UNDER CAPITAL LEASE

3 Months Ended

Mar. 31, 2012

Obligations Under Capital Lease

OBLIGATIONS UNDER CAPITAL LEASE

6. OBLIGATIONS UNDER CAPITAL LEASE

On March 1, 2012, the Company entered into a short term capital lease for a six month period with an option to purchase the equipment at the end of the lease. The total cost of the asset is $65,000, which includes a fee of $5,000 that will be paid at the end of the lease. The monthly rental payment is $5,000 per month plus tax. A deposit of $10,000 was paid for first and last month rent. Since the lease is less than a year there are no future payments to disclose and no imputed interest necessary to reduce the minimum lease payments to present value.

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UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES

3 Months Ended

Mar. 31, 2012

Unsecured Subordinated Convertible Promissory Notes

UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES

7.      UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES

During November 2011, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $32,500 (the “November Notes”). During December 2011, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $218,750 (the “December Notes”). As a result of an exchange, $20,000 in principal amount of November Notes were exchanged for like principal amount of December Notes. During the three months ended March 31, 2012, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $926,826 (the “January Notes”). As a result of a further exchange, $190,250 in principal amount of December Notes were exchanged for like principal amount of January Notes. Accordingly, as of March 31, 2012, there were November Notes in the aggregate principal amount of $12,500 outstanding, December Notes in the aggregate principal amount of $48,500 outstanding and JanuaryNotes in the aggregate principal amount of $1,117,076 outstanding.

November Notes

The November Notes have a five-year term and are convertible into shares of common stock of the Company at a conversion price of $2.40 per share.  The November Notes are subordinated to the convertible debentures and cannot be repaid or converted into shares of common stock of the Company until the convertible debentures are paid in full. Interest on the November Notes is calculated each quarter on the aggregate unconverted outstanding principal amount of the note, and is payable at the per annum rate of two (2) shares of common stock for each $100 outstanding principal of the note. If the market price per share is less than $2.40 then the interest will be paid in cash at 4.8% of the outstanding principal note. Interest is payable quarterly, upon redemption and at maturity as long as the convertible debentures have been paid in full.

December Notes

The December Notes have a one-year term and are convertible into shares of common stock of the Company at a conversion price of $1.75 per share. The December Notes are subordinated to the convertible debentures and cannot be repaid or converted into shares of common stock of the Company until the convertible debentures are paid in full. If the Company’s convertible debentures continue to be outstanding on July 13, 2012, then, it is obligated to issue to the holders of December Notes such additional number of shares of common stock that are issuable upon conversion of the  December Notes without reducing the outstanding principal due upon the December Notes. The December Notes accrue interest at 8% per annum and is payable on the conversion date and at maturity as long as the convertible debentures have been paid in full. The December Notes are also redeemable by us, at the investor’s option, at maturity at a redemption price of 112% of the outstanding principal plus accrued and unpaid interest.

The December Notes were originally issued with detachable three (3) year warrants to purchase an aggregate of 272,291 shares of common stock at an exercise price of $1.75 (the “December Warrants”) and were subsequently exchanged for 138,720 shares of common stock. The detachable warrants were evaluated for purposes of classification under ASC 480-10, “Distinguishing Liabilites from Equity” (pre-Codification SFAS150, Accounting for Certain Financial Instruments with Characteristics of both Liabilites and Equity). The warrants did not embody any of the conditions for liability classification under the ASC 4801-0 context. The warrants were then evaluated under ASC 815, and were accounted for under the equity classification. The proceeds were then allocated based on the relative fair value of the instruments.

January Notes

The January Notes have a one-year term and are convertible into shares of common stock of the Company at a conversion price of $1.75 per share. In the event the note is converted in full prior to maturity, the holder is entitled to one additional share of common stock for each share converted. The January Notes are subordinated to the debentures and cannot be repaid or converted into shares of common stock of the Company until the debentures are paid in full. The January Notes accrue interest at 8% per annum and are payable on the conversion date and at maturity as long as the Convertible Debentures have been paid in full. The January Notes are also redeemable by the Company, at the holder’s option, at maturity at a redemption price of 112% of the outstanding principal plus accrued and unpaid interest.

The January Notes were issued with shares to purchase an aggregate of 924,059 shares of common stock, including the 138,720 shares issued in exchange of detachable warrants issued together with the December Notes.

The Company evaluated the three notes for a beneficial conversion feature and accounted for the notes under ASC 815 (Statement 133, EITF Issue 07-5,and EITF Issue 00-19). The instrument was not stated at fair value, and could not be settled partially or wholly in cash. The beneficial conversion feature is equal to the difference between the Company’s market price of its’ common stock on the measurement date and the effective conversion price multiplied by the number of shares the holder is entitled to upon conversion.

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STATEMENT OF SHAREHOLDERS' DEFICIT (Unaudited) (USD $)	Preferred Stock	Common Stock	Additional Paid-in Capital	Deficit Accumulated during the Development Stage	Total
Beginning balance at Dec. 31, 2011		$ 770	$ 16,198,019	$ (16,997,083)	$ (798,294)
Beginning balance, shares at Dec. 31, 2011		7,694,505			7,694,505
Common stock issued for conversion of debt		3	53,997		54,000
Common stock issued for conversion of debt, shares		30,856			30,856
Common stock issued for services at fair value		40	682,059		682,099
Common stock issued for services at fair value, shares		409,001
Common stock issued with promissory notes at fair value		72	(72)
Common stock issued with promissory notes at fair value, shares		726,343
Common stock issued for conversion of interest payable on debt		1	9,891		9,892
Common stock issued for conversion of interest payable on debt, shares		6,551			6,551
Write down of fair value of debenture converted			38,998		38,998
Original issue discount			44,125		44,125
Beneficial conversion feature on promissory notes			444,259		444,259
Options and warrant compensation expense			87,410		87,410
Stock issuance cost			(1,497)		(1,497)
Net loss				(1,788,392)	(1,788,392)
Ending balance at Mar. 31, 2012		$ 886	$ 17,557,189	$ (18,785,475)	$ (1,227,400)
Ending balance, shares at Mar. 31, 2012		8,867,256			8,867,256

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CAPITAL STOCK

3 Months Ended

Mar. 31, 2012

Capital Stock

CAPITAL STOCK

3. CAPITAL STOCK

During the three months ended March 31, 2012, the Company issued 409,001 shares of common stock at fair value for services that ranged in prices from $1.64 to $1.75 with a fair value of $682,099. Also, the Company issued 30,856 shares of common stock for a partial conversion of a convertible debenture, and 6,551 shares of common stock at fair value of $9,892 for interest due on the convertible debenture for the quarter ended March 31, 2012. In addition the Company signed unsecured promissory notes and issued at fair value 726,343 shares of common stock associated with the notes.