10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

Or

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

For the transition period from   ___________ to ___________

Commission file number: 333-147980

ORIGINOIL, INC.

(Exact name of registrant as specified in charter)

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

5645 West Adams Blvd, Los Angeles, CA 90016

(Address of principal executive offices) (Zip Code)

Registrant's telephone Number: (323) 939-6645

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

¨ Yes x No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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.  x Yes  ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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”, “non-accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨	Accelerated Filer  ¨
Non-accelerated Filer ¨ (Do not check if a smaller reporting company)	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 x No

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $10,710,061 based upon the closing sales price of the registrant’s common stock on June 29, 2012 of $1.10 per share. At April 15, 2013, 23,305,510 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

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TABLE OF CONTENTS

		Page
	PART I
Item 1	Business	3
Item 1A	Rick Factors	12
Item 1B	Unresolved Staff Comments	18
Item 2	Properties	18
Item 3	Legal Proceedings	18
Item 4	Mine Safety Disclosures	19
	PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6	Selected Financial Data	20
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	23
Item 8	Financial Statements and Supplementary Data	23
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	23
Item 9A	Controls and Procedures	23
Item 9B	Other Information	24
	PART III
Item 10	Directors, Executive Officers and Corporate Governance	26
Item 11	Executive Compensation	28
Item 12	Security Ownership of Certain Beneficial Owners and Management	29
	and Related Stockholder Matters
Item 13	Certain Relationship and Related Transactions, and Director Independence	29
Item 14	Principal Accountant Fees and Services	29
Item 15	Exhibits, Financial Statement Schedules	30
SIGNATURES		31

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PART I

This Form 10-K 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,”  “Business,” “Properties,” 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, including, without limitation, the risks outlined under “Risk Factors” and matters described in this report generally.  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.

ITEM 1:  BUSINESS

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 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 Form 10-K.

Overview of Business

OriginOil has developed an energy production process for harvesting algae and cleaning up oil & gas water. Operating at the first stage of extraction, this high-speed and chemical-free process can be embedded in other systems to improve performance.

Originally invented to solve the biggest problem in algae production, it is now finding demand in oil and gas fracking and production water cleanup, an immediate and fast-growing market that desperately needs clean technology solutions.

OriginOil is a pure technology company. We are neither a producer nor a service company. Our technology integrates easily with other industry processes. We are also in the process of pursuing secondary licensing opportunities outside of energy, including aquaculture. We plan to embed our technology into larger systems through licensing and joint ventures.

To develop the energy and ancillary markets, we sell smaller-scale equipment such as the Algae Appliance™. However, we are not in the business of developing sales distribution networks or engaging in volume manufacturing, and our long-term business model is based on licensing our technology to distributors, manufacturers, engineering service firms, and specialty operators, as well as fuel refiners, chemical and oil companies. 

We have only been engaged in our business operations since June 2007, and to date, we have been primarily involved in research and development activities, and sales of pilot and demonstration equipment, beginning in June of 2010.

Industry Overview and OriginOil’s System

The Algae Industry

Algae can take many forms, such as seaweed (macro-algae) and kelp. And there is an existing algae industry that uses legacy fermentation-style technologies for nutritional uses.

But for commodities such as fuel, chemicals, fertilizer and feed, a new industry that is led by companies such as Sapphire Energy, Aurora and Algenol, micro-algae is used as found in outdoor ponds. Much of the world's petroleum is actually made up of this algae that decomposed over hundreds of millions of years. But by drilling for, extracting, and burning that oil now, we are releasing the CO2 that was absorbed long ago. This "carbon positive" effect is what causes global warming and the acidification of lakes, rivers and oceans. By contrast, instead of waiting hundreds of millions years for algae to become oil, algae can be transformed into energy and other products in a matter of days, and with a beneficial carbon-neutral effect.

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According to the Algae Biofuels Production Technologies Worldwide Market Research Report, the algae market was $217 million in 2010. It is forecast to reach $1.6 billion by 2015 – of which one-third will be in new technologies.

But first the algae must be removed from the water it lives in, and the process of dewatering and processing algae cells for final products has long represented a challenge - and a final hurdle for the algae-to-oil industry.

Algae is a tiny organism in a great amount of water – as much as 1000:1 ratio of water to algae. Mechanical methods are energy-intensive and often ineffective. Commonly used chemical solvents such as benzene, ether or hexane are toxic and require special handling. Such practices increase operating costs and make it harder to site algae production systems.

In OriginOil's Algae Appliance, the flowing algae biomass is processed for harvesting using low-wattage, frequency-tuned electromagnetic pulses and other non-chemical methods. We believe that overcoming this final hurdle for the algae industry will enable low-energy, environmentally-safe and viable, industrialized algae production for fuel, chemicals, fertilizer, feed, and even replacing older technologies being used for today’s high-cost nutritional products.

Figure 1: The role of the Algae Appliance in the algae production process.

The Oil and Gas Industry

For economic and environmental reasons, recycling of produced and frac flowback water is the trend of the future.  The industry practice of disposal is becoming less tenable as regulatory issues increase and water treatment technologies become more effective and less expensive.

These are fast-growing markets: the frac water cleanup market is forecast to grow nine‐fold to $9 billion in 2020, a 28% annual growth rate (Lux Research), while in addition, the total value of the produced water market is set to grow from $5.0 billion in 2010 to $9.9 billion in 2025 – a compound annual growth rate of 4.7%.

The produced water treatment equipment market is set to grow from $693 million in 2010 to $2.9 billion in 2025 – a compound annual growth rate of 10.1%. (Global Water Intelligence).

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An innovative entry into this market of opportunity, OriginOil’s process, CLEAN-FRAC™, represents a new generation of water treatment that is chemical free, low energy and beneficial to the environment.

The design goal of CLEAN-FRAC is to generate significant cost savings by minimizing new water purchasing and reducing transportation and disposal expenses, and to address sustainability concerns by helping to bring about large scale reductions in the quantity of disposed material and usage of our scarce water resources.

By design, CLEAN-FRAC synergistically combines electro-coagulation and electrolysis. The CLEAN-FRAC system can be used as the first stage of a multi-stage process to achieve water reuse for water flooding, or new frac water or simply as a high-speed, chemical-free way to recover oil and organics prior to recycling or disposal.

Testing of OriginOil’s CLEAN-FRAC system has shown that organics, as measured by Chemical Oxygen Demand (COD), are reduced by as much as 98% and total suspended solids (TSS) are reduced by as much as 99%.

Following initial lab testing successes in April of 2012, OriginOil signed two Original Equipment Manufacturers (OEMs) in the 4th Quarter of 2012, granting non-exclusive rights to integrate CLEAN-FRAC into their own end-to-end cleanup systems. The first was PACE spinoff PearlH2O, and the second was Calgary-based LH Innovations.

In February 2013, CLEAN-FRAC successfully completed its first field testing on produced water at an oil well in Lost Hills near Bakersfield, California; and in March, OriginOil launched two weeks of demonstrations for operators and service companies in the Eagle Ford shale region near San Antonio, and for industry analysts and reporters in Houston, Texas. Guest operators and service companies remarked on the clarity of the effluent water and the amount of “sludge” separated from the water.

The company is now helping PearlH20 deploy a one barrel per minute integrated frack water cleanup system that uses its CLEAN-FRAC process as the first stage. The deployment of the mobile container-based system is initially slated for the 3rd Quarter of 2013 in the Bakersfield area.

Figure 2: Artist's rendering of the CLEAN-FRAC Model 60K

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The Aquaculture Industry

In 2010, the fast-growing global aquaculture industry farmed 60 million tons of fish with a market value of more than $119 billion according to the FAO’s World Review of Fisheries and Aquaculture; but heavy toxin levels limit growth and are unhealthy for the fish and the environment.

Based on initial testing, OriginOil believes its technology could help the aquaculture industry reduce toxin levels and also adopt algae as fish feed on a wide scale.

Building on its initial successful lab results, OriginOil announced in February 2013 that it has agreed to develop a cooperative partnership with WeFeedUs, a Carlisle, Pennsylvania-based aquaculture company, to test and validate OriginOil’s proprietary water decontamination and algae harvesting technologies for aquaculture systems in the field.

In the test, OriginOil researchers used a lab-scale proprietary system to process water with total ammonia content of approximately 30 parts per million (ppm), more than a dozen times the limit for optimal fish production. In the test, the process reduced this high ammonia content to less than 0.25 ppm in three minutes without the use of chemicals, or more than a 99% reduction.

While this opportunity is in the nascent stage and does not figure in its competitive planning, OriginOil is interested in pursuing this market as a secondary licensing opportunity outside the energy industry, and believes that numerous other markets exist as “spokes” for its hub technology, branded as Solids Out of Solution™ (SOS).

Figure 3: Solids Out of Solution: OriginOil's hub technology.

Distribution Plan

OriginOil is currently marketing its Algae Appliance and CLEAN-FRAC systems at the demonstration scale, as a way to penetrate markets and prove the technology for these markets, and create future customers.

This process is intended to lead to wide distribution of our technology through OEM (Original Equipment Manufacturer) and licensing deals with distributors, manufacturers, engineering service firms, and specialty operators, as well as fuel refiners, and chemical and oil companies.

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OriginOil’s OEM/licensing model, offers, in our view, a host of potential advantages, including:

● limited capital requirements;

● no capital cost for volume manufacturing, no time or expense wasted on building distribution channels;

● collaboration with major players instead of competing with them;

● opportunity to make the core Solids out of Solution technology a de facto standard in the multiple industries where it has application.

 Competitors

Our achievement of business success will be based on the validity of our technology which can only be determined after we have a complete and validated industrial process with a larger number of commercial-scale customers and licensees. At that time, we can begin to assess competitive issues, including our position in the industry and methods of competition.

The Algae Industry

Companies in the new algae fuels industry tend to organize themselves as integrated producers and to keep their intellectual property to themselves.  Our strategy, on the other hand, is to share our technology widely.

With respect to our focus in algae harvesting technology, we are aware that Algae Ventures, Cavitation Technologies, Diversified Technologies, Evodos, New Oil Resources, Open Algae LLC, Phycal, SRS Energy (aka Solution Recovery Services), Unitel Technologies, Inc., Pall Energy Group, Alfa Laval and Smartflow Technologies, among others, offer competing or possibly complementary technologies.  

We believe that OriginOil has one or more advantages over some of the potential competitors, in that our process is free of the use of any chemicals, is highly scalable on a continuous flow process, and may be significantly lower in energy consumption. We believe our technology may, in some cases, complement these companies’ offerings, however there is no guarantee that our technology will produce more efficiently or cost-effectively than these other technologies.

The market for the manufacture, marketing and the sale of algae processing equipment is highly competitive. Such competition could drive up the cost of retaining qualified engineers, chemists and other key employees, as well as other operating expenses. These companies may have greater success in the recruitment and retention of qualified employees, as well as in conducting their own algae production and/or harvesting operations, which may give them a competitive advantage. In addition, actual or potential competitors may be strengthened through the acquisition of additional assets and interests. If we or our customers are unable to compete effectively or adequately respond to competitive pressures, this may materially adversely affect our results of operation and financial condition.

The Oil and Gas Industry

Historically the solution to the treatment of produced and frac flowback water has primarily been disposal in injection wells.  Many technologies existed for the “filtering” of these waters and were used in certain situations driven by particular needs.  More recently, because of environmental concerns and regulatory requirements these “filtering” technologies are being used to replace or at least minimize disposal.  The growing trend, in fact the mantra, in the industry is the recycling of the produced and frac flowback waters for use in water flooding, enhanced oil recovery, new hydraulic fracturing operations, irrigation and even drinking water.  As the technologies have developed and the cost of disposal has risen, recycling is becoming the economic choice.

The “filtering” technologies range from simple decanting to distillation.  These technologies are used to create a multi-stage process to remove contaminants to the extent that is necessary to meet the quality standards necessary for the planned reuse.  The first stage of any of these multi-stage processes, which includes OriginOil’s CLEAN-FRAC technology, is to remove oil and suspended solids from the water stream.  Subsequent stages could remove the heavy metals, scaling chemicals, salts and other natural and introduced chemicals.  Many of the subsequent or downstream processes are in fact complementary to CLEAN-FRAC and offer significant opportunity.

CLEAN-FRAC synergistically utilizes the technologies of electro-coagulation and electrolysis.  Other companies using similar technologies include:  Halliburton, Bosque, Ecolotron. Quantum-ionics, Kaselco and Ecosphere.  Other technologies also compete with CLEAN-FRAC, but are differentiated by their use of chemical coagulants, batch operation or high level of consumables. . Those include:  Aqua-Tech, Aqua-Pure, Myclex, Osmonics, Filterboxx, MECO, Layne and Altela.

We believe OriginOil’s CLEAN-FRAC technology has many advantages over some of the potential competitors, in that our process is free of the use of any chemicals, is highly scalable on a continuous flow process, and may be significantly lower in energy consumption.  However there is no guarantee that our technology will produce more efficiently or cost-effectively than these other technologies.

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As with algae processing equipment, the market for the manufacture, marketing and the water treatment processing equipment for oil and gas is highly competitive. Such competition could drive up the cost of retaining qualified engineers, chemists and other key employees, as well as other operating expenses. These companies may have greater success in the recruitment and retention of qualified employees, as well as in conducting their own algae production and/or harvesting operations, which may give them a competitive advantage. In addition, actual or potential competitors may be strengthened through the acquisition of additional assets and interests. If we or our customers are unable to compete effectively or adequately respond to competitive pressures, this may materially adversely affect our results of operation and financial condition.

The Aquaculture Industry

As it is in technology development stage, the Aquaculture industry does not figure in our competitive planning.

Suppliers and Customers

OriginOil currently manufacturers its demonstration equipment in-house, with engineering support from PACE Engineering of Fountain Valley, California. Additionally, the company has chosen Clean Water Technology as its contract manufacturer for larger scale demonstration systems, where required.

Given the number of potential industries in which Solids Out of Solution can be applied, it is manifestly impossible for OriginOil to enter into each market and exploit it effectively. Therefore, OriginOil’s market strategy is to build and sell demonstration units only. For larger systems, it seeks OEMs, who will embed the technology in their own end-to-end systems, and ultimately, master licensees for each industry of application.

Algae

MBD Energy

OriginOil’s first sale of a pilot system for algae harvesting was to Melbourne-based MBD Energy, who ordered a series of larger systems, culminating in a full set of Single Step Extraction systems for its Tarong Power Station proof of concept plant.

However on September 25, 2012, we filed a complaint in the US District Court Central District of California against MBD to protect our intellectual property asserting among, other things, breach of contract, conversion, fraudulent non-disclosure and unfair competition by MBD. On December 20, 2012, we entered into a Settlement Agreement with Mutual Releases and Covenants (the “Settlement Agreement”) with MBD pursuant to which we agreed to a final settlement and release of claims in connection with the complaint.

Under the Settlement Agreement, MBD agreed, among other things, to withdraw its patent application that related to certain company technology and provide us with certain assurances of non-infringement of our technology and we agreed, among other things, to file a dismissal of the complaint, which was entered on March 1, 2013, and to withdraw our notice of default of the Master Project Agreement (“MPA”) previously entered into with MBD. The Settlement Agreement provided for a continuation of the commercial relationship of the parties and that the MPA will terminate in its entirety on June 30, 2013. The parties have agreed to review their relationship further at that time. The Settlement Agreement also provides for a standard mutual release, denial of liability and covenant not to sue.

As called for in the Settlement Agreement, OriginOil will provide updated demonstration systems for MBD’s research site at James Cook University (JCU Upgrade), and at its proof of concept site at Tarong Power Station (Tarong Upgrade). The JCU demonstration system is expected to be delivered in the 2nd Quarter 2013. Upon completion of the Tarong Upgrade, the parties agree to discuss whether a future commercial relationship may be entered into, as originally envisioned in the MPA.

Additional Sales

Currently, we are marketing the Algae Appliance Model 4, a test level system. In 2012, we sold and delivered two such systems, the first to our joint venture Ennesys and the second to an undisclosed customer. In addition, we loaned an Algae Appliance to a university for a research program.

In the first Quarter of 2013, we agreed to ship three Algae Appliances, one of which was shipped in the 1st Quarter for testing by a customer, the other two to be shipped in the 2nd Quarter, subject to non-refundable deposits.

Oil and Gas

Unlike the algae market which requires research or test scale equipment, the oil and gas market requires commercial scale equipment. Due to these requirements of scale, OriginOil is going directly to the licensing of its’ Solid’s Out of Solution technology, which is embedded in the CLEAN-FRAC system, to Original Equipment Manufacturers (OEMs).  These OEMs will build the commercial units that will integrate CLEAN-FRAC and provide all the necessary deployment tools.  To date, OriginOil has signed OEM Agreements for licensing with two companies:  PearlH2O on October 16, 2012 and LH Opportunity Group on November 22, 2012.

PearlH2O, a subsidiary of PACE Engineering, has designed and is to begin construction of an integrated one barrel per minute system in the 2nd Quarter of 2013 with installation planned in 3rd Quarter of 2013.  The system, which utilizes CLEAN-FRAC as its’ first stage, is designed to treat frac flowback water to allow it to be recycled as new frac water.

LH Opportunity Group, which is based in Calgary, is focusing on the development of a CLEAN-FRAC system for the treatment of tailing pond water from oil sands production.

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Government and Environmental Regulation

We are not aware of any existing or probable government regulations that would negatively impact on our operations.  As a licensor and/or provider of equipment to operators of algae production facilities and water treatment processing we are not subject to government regulations of algae production, other than normal safety standards and certifications (such as UL or CE) for manufactured goods.However, our prospective customers are subject to local, state and federal laws and regulations governing environmental quality and pollution control. To date, our compliance with government regulations has had no material effect on our operations, capital, earnings, or competitive position, and the cost of such compliance has not been material. We are unable to assess or predict at this time what effect additional regulations or legislation could have on our activities.

We are part of a new and emerging biofuels industry that may become subject to economic and other regulations that may have an adverse effect on the entire industry and subsequently our business. For example, the cost of biofuels has historically been higher than petroleum, therefore the lack of governmental subsidies for biofuels may limit the demand and marketability of our technology.

Our long-term business model is based on licensing our technology to distributors, manufacturers, engineering firms, specialty operators, as well as, fuel refiners, chemical and oil companies, for building, installing and operating algae production systems in varied applications for bio-fuels, bio-chemicals, and animal feed and human nutritional feedstocks; integrated water cleanup systems in oil and gas; and other applications such as aquaculture.  We are not in the business of producing and marketing end products, nor of developing sales distribution networks or engaging in volume manufacturing. As a result, we are not currently required to obtain government approval for the production, distribution, and/or use of our technology.

Intellectual Property

OriginOil’s business is also based on developing a strong intellectual property portfolio and establishing a network of OEM distributors and core technology licensees.  We have filed the following patent and trademark applications with the U.S. Patent and Trademark Office and World Intellectual Property Organization: 

1.   On July 28, 2007, to protect the intellectual property rights for “Algae Growth System for Oil Production”, a utility patent application was filed with the USPTO. The inventors listed on the patent application are Nicholas Eckelberry and Riggs Eckelberry, our founders. We are listed as the assignee. On January 29, 2009 the application published with the publication number US 2009-0029445 A1.

2.   On May 23, 2008, to protect the intellectual property rights for “Apparatus And Method For Optimizing Photosynthetic Growth In a Photo Bioreactor”, a utility patent application was filed with the USPTO. The inventors listed on the patent application are Steven Shigematsu and Nicholas Eckelberry. We are listed as the assignee. On November 26, 2009 the application published with the publication number US 2009-0291485 A1.

3.   On July 26, 2009, to protect the intellectual property rights for “Procedure For Extraction Of Lipids From Algae Without Cell Sacrifice”, a provisional patent application was filed with the USPTO. The inventors listed on the patent application are Paul Reep and Michael Green. We are listed as the assignee. This application was re-filed as a provisional application on August 13, 2010.

4.   On April 20, 2010, to protect the intellectual property rights for “Systems, Apparatus and Methods for Obtaining Intracellular Products and Cellular Mass and Debris from Algae and Derivative Products and Process Use Thereof”, a PCT application was filed with the USPTO. The inventors are Nicholas Eckelberry, Michael Green, and Scott Fraser. We are listed as the assignee. On October 10, 2010 the application published with the publication number WO/2010/123903.

5.   On June 18, 2010, to protect the intellectual property rights for “Bio-Energy Reactor”, a provisional patent was filed with the USPTO. The inventors listed on the patent application are Michael Green, and Nicholas Eckelberry. On December 22, 2011, the application was published with the publication number US 2011-0308962 A1. We are listed as the assignee.

6.   On October 17, 2010, to protect the intellectual property rights for “Methods and Apparatus for Dewatering, Flocculation and Harvesting of Algae Cells”, a provisional patent application was filed with the USPTO. The inventors listed on the patent application are Michael Green, Nicholas Eckelberry, Scott Fraser and Brian Goodall. We are listed as the assignee. On May 24, 2012, the application was published with the publication number US 2012-0129244 A1. The application was converted to a utility application on October 14, 2011.

7.   On October 19, 2010, to protect the intellectual property rights for “Methods and Apparatus for Dewatering, Flocculation and Harvesting Algae Cells”, a provisional patent application was filed with the USPTO. The inventors listed on the patent application are Michael Green, Nicholas Eckelberry, Scott Fraser, and Brian Goodall. We are listed as the assignee. The application was converted to a utility application on October 18, 2011. On April 28, 2011, the application was published with the publication number US 2011-0095225 A1.

8.   On October 19, 2010, to protect the intellectual property rights for “Systems and Methods for Extracting Non-Polar Lipids from an Aqueous Algae Slurry and Lipids Produced There from” a PCT application was filed with the Korean Receiving Office. The inventors are Nicholas Eckelberry, Michael Green, and Scott Fraser. We are listed as the assignee. On April 28, 2011, the application published with the publication number WO/2011/133181.

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9.   On March 18, 2011, to protect the intellectual property rights for “Enhancing Algae Growth by Reducing Competing Microorganisms in a Growth Medium” a provisional patent application was filed with the USPTO. The inventors listed on the patent application are Michael Green, Scott Fraser, Nicholas Eckelberry, and Jose Sanchez Pina. We are listed as the assignee.

10.   On May 20, 2011, to protect the intellectual property rights for “Systems and Methods for Monitoring and Controlling Process Chemistry Associated with Biomass Growth, Oil Product and Oil Separation in Aqueous Mediums”, a provisional patent application was filed with the USPTO. The inventors listed on the patent application are Paul Reep and Gavin Grey. We are listed as the assignee.

11.   On June 16, 2011, to protect the intellectual property rights for “Bio-Energy Reactor”, a Utility Patent Application was filed with the USPTO. The inventors listed on the patent application are Michael Green and Nicholas Eckelberry. . On April 28, 2011 the application published with the publication number US 2011-0095225 A1. We are listed as the assignee.

12.   On August 10, 2011, to protect the intellectual property rights for “Procedure for Extracting of Lipids from Algae without Cell Sacrifice”, a Utility Patent Application was filed with the USPTO. The inventors listed on the patent application are Michael Green and Paul Reep. We are listed as the assignee.

13.   On August 12, 2011, to protect the intellectual property rights for “Procedure for Extracting of Lipids from Algae Without Cell Sacrifice”, a PCT Application was filed with the Korean Receiving Office. The inventors listed on the patent application are Michael Green and Paul Reep. On February 16, 2012 the application published with the publication number WO/2012/021831. We are listed as the assignee.

14.   On September 7, 2011, to protect the intellectual property rights for “Apparatuses, Systems and Methods for Increasing Contact Between Solutes and Solvents in an Aqueous Medium”, a provisional patent application was filed with the USPTO. The inventors listed on the patent application are Nicholas Eckelberry, Gavin Gray, Jose L Sanchez Pina and Maxwell Roth. We are listed as the assignee.

15.   On October 10, 2011, to protect the intellectual property rights for “Systems and Methods For Increasing Growth Of Biomass Feedstocks”, a provisional patent application was filed with the USPTO. The inventors listed on the patent application are Nicholas Eckelberry, Jose L Sanchez Pina and Michael Green. We are listed as the assignee.

16.   On October 14, 2011, to protect the intellectual property rights for “Systems and Methods For Developing Terrestrial and Algal Biomass Feedstocks and Bio-Refining the Same”, a provisional patent application was filed with the USPTO. The inventor listed on the patent application was Paul Reep. We are listed as the assignee.

17.   On October 14, 2011, to protect the intellectual property rights for “Systems, Methods And Apparatuses For Dewatering, Flocculating And Harvesting Algae Cells”, a utility patent application was filed with the USPTO. The inventors listed on the patent application are Michael Green, Scott Frasier, Brian Goodall and Nickolas Eckelberry.  On May 24, 2012 the application published with the publication number US 2012/0129244 A1. We are listed as the assignee.

18.   On October 18, 2011, to protect the intellectual property rights for “Systems, Methods and Apparatuses For Dewatering, Flocculating and Harvesting Algae Cells”, a PCT application was filed with the Korean Receiving Office. The inventors listed on the patent application are Michael Green, Scott Frasier, Brian Goodall and Nickolas Eckelberry.  On April 26, 2012 the application published with the publication number WO/2012/054404. We are listed as the assignee.

19.   On November 11, 2011, to protect the intellectual property rights for our company logo “O”, a trademark application was filed with the USPTO. On February 11, 2013 the trademark was issued with Certificate Number 4,284,801.

20.   On November 11, 2011, to protect the intellectual property rights for our company logo “OriginOil”, a trademark application was filed with the USPTO. On February 11, 2013 the trademark was issued with Certificate Number 4,284,800.

21.   On January 30, 2012, to protect the intellectual property rights for “Systems and Methods for Harvesting and Dewatering Algae”, a provisional patent application was filed with the USPTO. The inventor listed on the patent application is Nicholas Eckelberry. We are listed as the assignee.

22.   On March 12, 2012, to protect the intellectual property rights for “Enhancing Algae Growth by Reducing Competing Microorganisms in a Growth Medium” a utility patent application and PCT applications were filed with the Korean Receiving Office. The inventors listed on the patent application are Michael Green, Scott Fraser, Nicholas Eckelberry, and Jose Sanchez Pina. We are listed as the assignee. On November 27, 2012, the application published with the publication number WO/2012/129031.

23.   On April 17, 2012, to protect the intellectual property rights for “Solute Extraction From an Aqueous Medium Using a Modular Device”, a provisional patent application was filed with the USPTO. The inventor listed on the patent application is Nicholas Eckelberry. We are listed as the assignee.

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24.   On May 18, 2012, to protect the intellectual property rights for “Modular Systems and Methods for Extracting a Contaminant from a Solution”, a provisional patent application was filed with the USPTO. The inventor listed on the patent application is Nicholas Eckelberry. We are listed as the assignee.

25.   On May 18, 2012, to protect the intellectual property rights for “Monitoring Systems for Biomass Processing Systems”, a utility patent application was filed with the USPTO. The inventors listed on the patent application are Paul Reep and Gavin Grey. We are listed as the assignee.

26.   On May 21, 2012, to protect the intellectual property rights for “Monitoring Systems for Biomass Processing Systems”, a PCT application was filed with the Korean Receiving Office. The inventors listed on the patent application are Paul Reep and Gavin Grey. We are listed as the assignee.

27.   On September 6, 2012, the Australian Patent Office issued patent 2010239380 titled “Systems, Apparatus and Methods for Obtaining Intracellular Products and Cellular Mass and Debris from Algae and Derivative Products and Process of Use Thereof”. This application was nationalized from PCT application PCT/US2010/031756.

28.   On September 7, 2012, to protect the intellectual property rights for “Increasing Contact Between Solutes and Solvents in an Aqueous Medium”, a utility patent application was filed with the USPTO. The inventors listed on the patent application are Nicholas Eckelberry, Gavin Grey, Jose Sanchez Pina, and Maxwell Roth. We are listed as the assignee.

29.   On September 9, 2012, to protect the intellectual property rights for “Systems and Methods for Increasing Growth of Biomass Feedstocks” a utility patent application was filed with the USPTO. The inventors listed on the patent application are Nicholas Eckelberry, Mike Green, and Jose Sanchez Pina. We are listed as the assignee.

30.   On October 10, 2012, to protect the intellectual property rights for “Systems and Methods for Increasing Growth of Biomass Feedstocks” a PCT application was filed with the Korean Receiving Office. The inventors listed on the patent application are Nicholas Eckelberry, Mike Green, and Jose Sanchez Pina.  We are listed as the assignee.

31.   On October 15, 2012, to protect the intellectual property rights for “Systems and methods for Developing Terrestrial and Algal Biomass Feedstocks and Bio-refining the Same”, a utility patent application was filed with the USPTO. The inventor listed on the patent application is Paul Reep. We are listed as the assignee.

32.   On October 18, 2012, to protect the intellectual property rights for “Systems and methods for Extracting Non-polar Lipids from an Aqueous Algae Slurry and Lipids Produced There from”, a utility patent application was filed with the USPTO. The inventors listed on the patent application are Nicholas Eckelberry, Michael Green and Scott Fraser. We are listed as the assignee.

33.   On October 19, 2012, to protect the intellectual property rights for “Systems and methods for Extracting Non-polar Lipids from an Aqueous Algae Slurry and Lipids Produced There from” a national stage application was filed with the EPO. The inventors listed on the patent application are Nicholas Eckelberry, Michael Green and Scott Fraser. We are listed as the assignee.

34.   On January 29, 2013, to protect the intellectual property rights for “Systems and Methods for Harvesting and Dewatering Algae” a utility patent application was filed with the USPTO. The inventor listed on the patent application is Nicholas Eckelberry. We are listed as the assignee.

35. On January 30, 2013 to protect the intellectual property rights for “Systems and Methods for Harvesting and Dewatering Algae”, a PCT application was filed with the Korean Receiving Office. The inventor listed on the patent application is Nicholas Eckelberry. We are listed as the assignee.

In 2008 we abandoned the pursuit of two provisional patent filings filed in relating to “In-Line Lysing And Extraction System For Microorganisms” and “Renewable Carbon Sequestering Method of Producing Pollution Free Electricity”. 

In 2009 we abandoned the pursuit of a provisional patent related to “Modular Portable Photobioreactor System”.

In 2010 we abandoned the pursuit of utility patent application related to “Device and Method for Separation, Cell Lysing and Flocculation of Algae From Water” and provisional patent application “Methods and Apparatus for Growing Algae on a Solid Surface”.

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In 2011 we abandoned the pursuit of provisional patent application related to “Algae Growth Lighting and Control System”.

In 2012 we abandoned the pursuit of provisional patent filings related to “Multi-Plane Growth Apparatus and Method”, “Systems and Methods for Monitoring and Controlling Algae Growth and Harvesting Cellular Mass and Intracellular Products”, “Method for Extracting Intracellular Products from Microorganisms Using Gas Embolism”, “Algae Harvest Appliance”, “A System, Method And Apparatus To Produce Dewatered And Densified Algae Biomass” and foreign rights for “Bio-Energy Reactor”.

None of these patents are required for our business or products and we are focusing our efforts on the patent applications listed above.

Research and Development

During the years ended December 31, 2012 and 2011, we invested approximately $980,170, and $1,145,749, respectively, on research and development of our technologies.  Research and development costs include activities related to development and innovations in the core Solids Out of Solution™ (SOS) technology, fabrication and improvement of commercial products such as the Algae Appliance™ and CLEAN-FRAC™, development of firmware and process automation, development of new applications in industries such as aquaculture, technical support of customers, agents, joint venture partners and licensees, and miscellaneous research.

Employees

As of April 15, 2013, we have 10 full-time employees.  We have not experienced any work stoppages and we consider relations with our employees to be good. 

ITEM 1A:  RISK FACTORS

Risks Relating to Our Business

We have a limited operating history which makes it difficult to evaluate our business and prospects.

We were formed in June 2007 and are currently developing a new technology that has not yet gained market acceptance. As such, we have a limited operating history upon which you can base an evaluation of our business and prospects. Since we have not been profitable, there are substantial risks, uncertainties, expenses and difficulties that we are subject to. To address these risks and uncertainties, we must do among the following:

·   Successfully execute our business strategy;

·   Respond to competitive developments; and

·   Attract, integrate, retain and motivate qualified personnel;

There can be no assurance that at this time we will operate profitably or that we will have adequate working capital to meet our obligations as they become due. Investors must consider the risks and difficulties frequently encountered by early stage companies, particularly in rapidly evolving markets. We cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.

We have a history of losses and can provide no assurance of our future operating results.

We currently have limited product revenues, and may not succeed in commercializing any products which will generate product or licensing revenues. Until recently, our primary activity has been research and development. We have experienced net losses and negative cash flows from operating activities since inception and we expect such losses and negative cash flows to continue in the foreseeable future. As of December 31, 2012 and 2011, we had working capital (deficit) of ($936,099) and $(1,068,155), respectively, and shareholders' equity (deficit) of $(540,896) and $(798,294), respectively.  For the years ended December 31, 2012 and 2011, we incurred net losses of $(10,570,029) and $(5,649,043).  As of December 31, 2012, we had an aggregate accumulated deficit of $(27,567,112).  We may never achieve profitability.  The opinion of our independent registered public accountants on our audited financial statements as of and for the year ended December 31, 2012 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 and future sales.

We will need significant additional capital, which we may be unable to obtain.

Revenues generated from our operations are not presently sufficient to sustain our operations. Therefore, we will need to raise additional capital to continue our operations. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. We may be required to pursue sources of additional capital through various means, including debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition. Our ability to obtain needed financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.

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We have incurred substantial indebtedness.

As of April 15, 2013, we have convertible notes with outstanding principal and accrued but unpaid interest of approximately $1,229,995. All such debt is payable within the following twelve months. Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of the indebtedness. Our indebtedness, combined with other financial obligations and contractual commitments, could:

·make it more difficult for us to satisfy our obligations with respect to the indebtedness and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in events of default under the loan agreements and instruments governing the indebtedness;

·require us to dedicate a substantial portion of our cash flow from operations to payments on  indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, research and development and other corporate purposes;

·increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to competitors that have relatively less indebtedness;

·limit our flexibility in planning for, or reacting to, changes in business and the industry in which we operate;

·limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, research and development and other corporate purposes; and

·in the case of convertible debt that is converted into equity, result in a reduction in the overall percentage  holdings of our stockholders, put downward pressure on the market price of our common stock, result in adjustments to conversion and exercise prices of outstanding notes and warrants and obligate us to issue additional shares of common stock to certain of our stockholders.

We may incur significant additional indebtedness in the future. If we incur a substantial amount of additional indebtedness, the related risks that we face could become more significant. Additionally, the terms of any future debt that we may incur may impose requirements or restrictions that further affect our financial and operating flexibility or subject us to other events of default.

Our revenues are dependent upon acceptance of our technology and products by the market; the failure of which would cause us to curtail or cease operations.

We believe that most of our future revenues will come from the sale or license of our technology and systems. As a result, we will continue to incur substantial operating losses until such time as we are able to generate revenues from the sale or license of our technology and systems. There can be no assurance that businesses and prospective customers will adopt our technology and systems, or that businesses and prospective customers will agree to pay for or license our technology and systems. In the event that we are not able to develop a customer base that purchases or licenses our technology and systems, or if we are unable to charge the necessary prices or license fees, our financial condition and results of operations will be materially and adversely affected.

We will need to increase the size of our organization, and may experience difficulties in managing growth.

We are a small company with a minimal number of employees. With the start of our planned principal activities, we expect to experience a period of significant expansion in headcount, facilities, infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate managers. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.

We may not be able to successfully develop and commercialize our technology and systems which would result in continued losses and may require us to curtail or cease operations.

We are currently commercializing our technology. We are unable to project when we will achieve profitability, if at all. As is the case with any new technology, we expect the research and development process to continue. We cannot assure that our engineering resources will be able to develop our technology and systems fast enough to meet market requirements. We can also not assure that our technology and systems will gain market acceptance and that we will be able to successfully commercialize the technologies. The failure to successfully develop and commercialize the technologies would result in continued losses and may require us to curtail or cease operations.

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Our ability to produce and distribute commercially viable bio-fuel and clean-up frac flowback water on a commercially viable basis is unproven, which could have a detrimental effect on our ability to generate or sustain revenues.

The technologies we will use to transform algae into a new form of oil and to clean up frac flowback water have never been utilized on a full-scale commercial basis. Our technology and systems, while intended to create a new bio-fuel feedstock for many products such as diesel, gasoline, jet fuel, plastics and solvents, is in fact a new bio-fuel that may never achieve technical or commercial viability and our frac flowback water treatment technology was only recently developed. All of the tests conducted to date by us with respect to the technology have been performed in a limited scale or small commercial scale environment and the same or similar results may not be obtainable at competitive costs on a large-scale commercial basis. We have never utilized technology under the conditions or in the volumes that will be required for us to be profitable and cannot predict all of the difficulties that may arise. Accordingly, our technology may not perform successfully on a commercial basis and may never generate any revenues or be profitable.

If a competitor were to achieve a technological breakthrough, our operations and business could be negatively impacted.

There currently exist a number of businesses that are pursuing the use of algae, bacteria and other micro-crops and other methods for creating biomass and other alternative fuels. Should a competitor achieve a research and development, technological or biological breakthrough where production costs are significantly reduced, or if the costs of similar competing products were to fall substantially, we may have difficulty attracting customer licensees. In addition, competition from other technologies considered “green technologies” could lessen the demand for the end-products produced by our technology. Furthermore, competitors may have access to larger resources (capital or otherwise) that provide them with an advantage in the marketplace, which could result in a negative impact on our business.

Any competing technology that produces biomass of similar quality, at a superior growth rate and more cost efficient than ours, could render our technology obsolete. In addition, because we do not have any issued patents for all but one of our patent applications, we may not be able to preclude development of even directly competing technologies using the same methods, materials and procedures as we use to achieve our results. Any of these competitive forces may inhibit or materially adversely affect our ability to attract customer licensees, or to obtain royalties or other fees from our customer licensees. This could have a material adverse effect on our business, prospects, results of operation and financial condition.

Our long-term success depends on future royalties paid to us by licensees, and we face the risks inherent in a royalty-based business model.

We intend to generate revenue through the licensing of our technology and systems, and our long-term success depends on future royalties paid to us by prospective customer licensees. The amount of royalty payments we may receive is expected to be based upon the revenues generated by our prospective customer licensees’ operations, and so we will be dependent on the successful operations of our prospective customer licensees for a significant portion of our revenues. We face risks inherent in a royalty-based business model, many of which are outside of our control, including those arising from our reliance on the management and operating capabilities of our customer licensees and the cyclicality of supply and demand for end-products produced using our technology. Should our prospective customer licensees fail to achieve sufficient profitability in their operations, our royalty payments would be diminished and our results of operations, cash flows and financial condition could be adversely affected, and any such effects could be material.

We rely on strategic partners.

We rely on strategic partners to aid in the development and marketing of our technology and processes. Should our strategic partners not regard us as significant to their own businesses, they could reduce their commitment to us or terminate their relationship with us, pursue competing relationships or attempt to develop or acquire products or services that compete with the end-products produced using our technology. Any such action could materially adversely affect our business.

A lack of government subsidies for the biofuels industry may hinder the usefulness of our technology.

Our business model is based on licensing our technology to distributors, manufacturers, engineering service firms, specialty operators, as well as, fuel refiners, chemical and oil companies, for building, installing and operating algae production systems in varied applications for bio-fuels, bio-chemicals, and animal feed and human nutritional feedstocks.  We are not in the business of producing and marketing oil or fuel, based on algae, as an end product, nor of building machinery for customers to build refining plants.  As a result, our business is not currently subject to government regulation for the production, distribution, and/or use of its technology.

We are however part of a new and emerging biofuels industry that may be subject to economic and other regulations that may have an adverse effect on the entire industry and subsequently our business. For example, the cost of biofuels has historically been higher than petroleum, therefore the lack of governmental subsidies for biofuels may limit the demand and marketability of our technology. There is no assurance that the biofuels industry, or any industry we market to, will have the need or the financial ability to use our technology. If government regulations on the electrical industry or fossil fuel industry were enacted, it may affect the outlook for oil from algae.

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If we lose key employees and consultants or are unable to attract or retain qualified personnel, our business could suffer.

Our success is highly dependent on our ability to attract and retain qualified scientific, engineering and management personnel. We are highly dependent on our management, including T. Riggs Eckelberry, who has been critical to the development of our technology and business. The loss of the services of Mr. Eckelberry would have a material adverse effect on our operations. We do not have an employment agreement with Mr. Eckelberry. Accordingly, there can be no assurance that he will remain associated with us. His efforts will be critical to us as we continue to develop our technology and as we attempt to transition to a company with profitable company commercialized products and services. If we were to lose Mr. Eckelberry, or any other key employees or consultants, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies.

Competition from other companies in our market and from producers of other alternative fuels may affect the market for our technology.

If prices of energy on the commodities markets, including oil and bio-diesel, rise, as they have in recent years, competition from other alternative fuels will likely increase. Additionally, new companies are constantly entering the market, thus increasing the competition. This could also have a negative impact on us or our customers’ ability to obtain additional capital from investors. Larger foreign owned and domestic companies which have been engaged in the alternative energy business for substantially longer periods of time may have access to greater financial and other resources. These companies may have greater success in the recruitment and retention of qualified employees, as well as in conducting their own fuel manufacturing and marketing operations, which may give them a competitive advantage. In addition, actual or potential competitors may be strengthened through the acquisition of additional assets and interests. If we or our customers are unable to compete effectively or adequately respond to competitive pressures, this may materially adversely affect our results of operation and financial condition.

Risks Related to Our Intellectual Property

If we fail to establish, maintain and enforce intellectual property rights with respect to our technology, our financial condition, results of operations and business could be negatively impacted.

Our ability to establish, maintain and enforce intellectual property rights with respect to the technology that we intend to license will be a significant factor in determining our future financial and operating performance. We seek to protect our intellectual property rights by relying on a combination of patent, trade secret and copyright laws. We also use confidentiality and other provisions in our agreements that restrict access to and disclosure of our confidential know-how and trade secrets.

We have filed patent applications with respect to many aspects of our technologies. However, we cannot provide any assurances that any of these applications will ultimately result in issued patents or, if patents are issued, that they will provide sufficient protections for our technology against competitors. Although we have filed patent applications for some of our core technologies, we do not currently hold any issued patents other than one issued patent in Australia and we may face delays and difficulties in obtaining these patents, or we may not be able to obtain such patents at all. 

Outside of these patent applications, we seek to protect our technology as trade secrets and technical know-how. However, trade secrets and technical know-how are difficult to maintain and do not provide the same legal protections provided by patents. In particular, only patents will allow us to prohibit others from using independently developed technology that are similar. If competitors develop knowledge substantially equivalent or superior to our trade secrets and technical know-how, or gain access to our knowledge through other means such as observation of our technology that embodies trade secrets at customer sites which we do not control, the value of our trade secrets and technical know-how would be diminished.

While we strive to maintain systems and procedures to protect the confidentiality and security of our trade secrets and technical know-how, these systems and procedures may fail to provide an adequate degree of protection. For example, although we generally enter into agreements with our employees, consultants, advisors, and strategic partners restricting the disclosure and use of trade secrets, technical know-how and confidential information, we cannot provide any assurance that these agreements will be sufficient to prevent unauthorized use or disclosure. In addition, some of the technology deployed at customer sites in the future, which we do not control, may be readily observable by third parties who are not under contractual obligations of non-disclosure, which may limit or compromise our ability to continue to protect such technology as a trade secret.

In addition, on September 25, 2012, we filed a complaint in the US District Court Central District of California against MBD Energy Limited to protect our intellectual property. MBD is our first pilot customer who previously purchased from us test scale algae processing equipment as well as larger scale units. On December 20, 2012, we entered into a settlement agreement with MBD pursuant to which we agreed to a final settlement and release of claims in connection with the complaint.  On March 1, 2013, an order was entered dismissing the action without prejudice.

Monitoring and policing unauthorized use and disclosure of intellectual property is difficult. If we learned that a third party was in fact infringing or otherwise violating our intellectual property, we may need to enforce our intellectual property rights through litigation. Litigation relating to our intellectual property may not prove successful and might result in substantial costs and diversion of resources and management attention.

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From our customer licensee’s standpoint, the strength of the intellectual property under which we intend to grant licenses can be a critical determinant of the value of these licenses. If we are unable to secure, protect and enforce our intellectual property, it may become more difficult for us to attract new customers.  Any such development could have a material adverse effect on our business, prospects, financial condition and results of operations.

Although we have filed patent applications for some of our core technologies, we do not currently hold any issued patents other than one issued patent in Australia and we may face delays and difficulties in obtaining these patents, or we may not be able to obtain such patents at all.

Patents are a key element of our intellectual property strategy. We have over thirty currently pending patent applications in the United States and abroad but, to date, other than one issued patent in Australia, no patents have issued from these applications. It may take a long time for any patents to issue from the applications, and we cannot provide any assurance that any patents will ultimately be issued or that any patents that do ultimately issue will issue in a form that will adequately protect our commercial advantage.

Our ability to obtain patent protection for our technologies is uncertain due to a number of factors, including that we may not have been the first to make the inventions covered by our pending patent applications or to file patent applications for these inventions.

Further, changes in U.S. and foreign patent law may also impact our ability to successfully prosecute our patent applications. For example, the United States Congress and other foreign legislative bodies may amend their respective patent laws in a manner that makes obtaining patents more difficult or costly. Courts may also render decisions that alter the application of patent laws and detrimentally affect our ability to obtain patent protection. 

Even if patents do ultimately issue from our patent applications, these patents may not provide meaningful protection or commercial advantage. In the US, patents only provide protection for a 20-year period starting from the filing date and the longer a patent application takes to issue the less time there is to enforce it. Further, the claims under any patents that issue from our applications may not be broad enough to prevent others from developing technologies that are similar or that achieve similar results. It is also possible that the intellectual property rights of others will bar us from licensing our technology and bar us or our future licensees from exploiting any patents that issue from our pending applications. Numerous U.S. and foreign issued patents and pending patent applications owned by others exist in the fields in which we have developed and are developing our technology. These patents and patent applications might have priority over our patent applications and could subject our patent applications to invalidation. Finally, in addition to those who may claim priority, any patents that issue from our applications may also be challenged by our competitors on the basis that they are otherwise invalid or unenforceable.

We may face claims that we are violating the intellectual property rights of others.

We may face claims, including from direct competitors, other energy companies, scientists or research universities, asserting that our technology or the commercial use of such technology infringes or otherwise violates the intellectual property rights of others. We have not conducted infringement, freedom to operate or landscape analyses, and as a result we cannot be certain that our technologies and processes do not violate the intellectual property rights of others. We expect that we may increasingly be subject to such claims as we begin to earn revenues and our market profile grows.

We may also face infringement claims from the employees, consultants, agents and outside organizations we have engaged to develop our technology. While we have sought to protect ourselves against such claims through contractual means, we cannot provide any assurance that such contractual provisions are adequate, and any of these parties might claim full or partial ownership of the intellectual property in the technology that they were engaged to develop.

If we were found to be infringing or otherwise violating the intellectual property rights of others, we could face significant costs to implement work-around methods, and we cannot provide any assurance that any such work-around would be available or technically equivalent to our current technology. In such cases, we might need to license a third party’s intellectual property, although any required license might not be available on acceptable terms, or at all. If we are unable to work around such infringement or obtain a license on acceptable terms, we might face substantial monetary judgments against us or an injunction against continuing to license our technology, which might cause us to cease operations.

In addition, even if we are not infringing or otherwise violating the intellectual property rights of others, we could nonetheless incur substantial costs in defending ourselves in suits brought against us for alleged infringement. Also, if any license agreements provide that we will defend and indemnify our customer licensees for claims against them relating to any alleged infringement of the intellectual property rights of third parties in connection with such customer licensees’ use of our technologies, we may incur substantial costs defending and indemnifying any customer licensees to the extent they are subject to these types of claims. Such suits, even if without merit, would likely require our management team to dedicate substantial time to addressing the issues presented. Any party bringing claims might have greater resources than we do, which could potentially lead to us settling claims against which we might otherwise prevail on the merits.

Any claims brought against us or any customer licensees alleging that we have violated the intellectual property of others could have negative consequences for our financial condition, results of operations and business, each of which could be materially adversely affected as a result.

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Risks Related to Our Common Stock

Our common stock could be further diluted as the result of the issuance of additional shares of common stock, convertible securities, warrants or options.

In the past, we have issued common stock, convertible securities (such as convertible debentures and notes) and warrants in order to raise money, some of which have anti-dilution and other similar protections. We have also issued options and warrants as compensation for services and incentive compensation for our employees and directors. We have shares of common stock reserved for issuance upon the exercise of certain of these securities and may increase the shares reserved for these purposes in the future. Our issuance of additional common stock, convertible securities, options and warrants could affect the rights of our stockholders, result in a reduction in the overall percentage holdings of our stockholders, could put downward pressure on the market price of our common stock, could result in adjustments to conversion and exercise prices of outstanding notes and warrants, and could obligate us to issue additional shares of common stock to certain of our stockholders.

There may be a limited public market for our securities.

Trading in our common stock continues to be conducted on the electronic bulletin board in the over-the-counter market. As a result, an investor may find it difficult to dispose of or to obtain accurate quotations as to the market value of our common stock, and our common stock may be less attractive for margin loans, for investment by financial institutions, as consideration in future capital raising transactions or other purposes.

We may be unable to list our common stock on NASDAQ or on any securities exchange.

Our common stock currently does not meet all of the requirements for initial listing on a registered stock exchange. Although we may apply to list our common stock on NASDAQ or the NYSE Amex in the future, we cannot assure you that we will be able to meet the initial listing standards, including the minimum bid price per share and minimum capitalization requirements, or that we will be able to maintain a listing of our common stock on either of those or any other trading venue. Until such time as we qualify for listing on NASDAQ, the NYSE Amex or another trading venue, we expect our common stock will continue to trade on electronic bulletin board in the over-the-counter market.

The price of our common stock is volatile, which may cause investment losses for our stockholders.

The market for our common stock is highly volatile, having ranged in the last twelve months from a low of $0.42 to a high of $1.85 on the OTCBB. The trading price of our common stock on the OTCBB is subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, and general economic and market conditions. In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to our market or relating to us could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of our stock price may cause investment losses for our shareholders. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities. If securities class action litigation is brought against us, such litigation could result in substantial costs while diverting management’s attention and resources.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements.  Mr. Eckelberry, our Chief Executive Officer and Chairman, previously sold an aggregate of 224,461 shares under a pre-arranged stock trading plan with a broker and beneficially owns 1,113,075 shares of our common stock. Any substantial sales of our common stock pursuant to Rule 144 may have a material adverse effect on the market price of our common stock.

Our stock is subject to the penny stock rules, which impose significant restrictions on broker-dealers and may affect the resale of our stock.

Our common stock has been subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The SEC generally defines penny stock to be any equity security that has a market price less than US$5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the SEC; issued by a registered investment company; excluded from the definition on the basis of price (at least US$5.00 per share) or the registrant’s net tangible assets; or exempted from the definition by the Commission. Our common stock is considered to be a “penny stock.” The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.” As our common stock is considered to be “penny stock,” trading in our common stock will be subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. This may reduce the liquidity and trading volume of our shares.

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Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our common shares.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our common stock.  We are required to establish and maintain appropriate internal controls over financial reporting.  Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations.  In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors.  Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed and our stock price could decline.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm.  The standards that must be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.  We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis.  It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis.  In addition, although attestation requirements by our independent registered public accounting firm are not presently applicable to us we could become subject to these requirements in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal controls over financial reporting.  In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.

We do not intend to pay dividends.

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

ITEM 1B:  UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2:  PROPERTIES

Our principal offices are located at 5645 West Adams Blvd., Los Angeles, CA 90016. We rent 7,500 square feet of space in a corporate building at a current monthly rent of $10,528.78. Our lease expires August 31, 2016.

ITEM 3:  LEGAL PROCEEDINGS

On September 25, 2012, we filed a complaint (the “Complaint”) in the US District Court Central District of California against MBD Energy Limited (“MBD”) to protect our intellectual property asserting among, other things, breach of contract, conversion, fraudulent non-disclosure and unfair competition by MBD. On December 20, 2012, we entered into a Settlement Agreement with Mutual Releases and Covenants (the “Settlement Agreement”) with MBD pursuant to which we agreed to a final settlement and release of claims in connection with the Complaint. On March 1, 2013, an order was entered dismissing the action without prejudice.

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Under the Settlement Agreement, MBD has agreed, among other things, to withdraw its patent application that related to certain of our technology and provide us with certain assurances of non-infringement of our technology and we agreed, among other things, to file a dismissal of the Complaint and to withdraw our notice of default of the Master Project Agreement (“MPA”) previously entered into with MBD. The Settlement Agreement provides for a continuation of the commercial relationship of the parties and that the MPA will terminate in its entirety on June 30, 2013. The Settlement Agreement also provides for a standard mutual release, denial of liability and covenant not to sue.

From time to time we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently 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 4:  MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5:  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the OTC Bulletin Board under the symbol “OOIL”.

For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions. Where applicable, the prices set forth below give retroactive effect to our one-for-thirty reverse stock split which became effective on August 11, 2011.

	Fiscal Year 2011
	High		Low
First Quarter	$	8.10	$	5.40
Second Quarter	$	6.00	$	3.30
Third Quarter	$	5.90	$	1.95
Fourth Quarter	$	2.48	$	1.53

	Fiscal Year 2012
	High		Low
First Quarter	$	1.95	$	1.50
Second Quarter	$	1.85	$	0.73
Third Quarter	$	1.28	$	0.82
Fourth Quarter	$	0.99	$	0.76

The market price of our common stock, like that of other technology companies, is highly volatile and is subject to fluctuations in response to variations in operating results, announcements of technological innovations or new products, or other events or factors. Our stock price may also be affected by broader market trends unrelated to our performance.

Holders

As of April 12, 2013, we had approximately 411 holders of record of our common stock.  This number does not include beneficial owners whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

Dividend Policy

We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

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Equity Compensation Plan Information

On July 1, 2009, we instituted the OriginOil 2009 Incentive Stock Plan (the “2009 Plan”), after approval by the Board of Directors and a majority of our shareholders.  The purpose of the 2009 Plan is to retain executives and selected employees and consultants and reward them for making contributions to the success of the Company.  These objectives are accomplished by making long-term incentive awards under the 2009 Plan thereby providing participants with a proprietary interest in our growth and performance. Under the 2009 Plan, 500,000 shares of our common stock were reserved for use.  The 2009 Plan shall be administered by our Board of Directors. 

On May 25, 2012, we instituted the OriginOil 2012 Incentive Stock Plan (the “2012 Plan”), after approval by the Board of Directors and a majority of our shareholders.  Like the 2009 Plan, the purpose of the 2012 Plan is to retain executives and selected employees and consultants and reward them for making contributions to the success of the Company.  These objectives are accomplished by making long-term incentive awards under the 2012 Plan thereby providing participants with a proprietary interest in our growth and performance. Under the 2012 Plan, 1,000,000 shares of our common stock were reserved for use.  The 2012 Plan shall be administered by our Board of Directors. 

The following table summarizes information as of the close of business on December 31, 2012 about the 2009 Plan and 2012 Plan.

Plan category	Number of securities to be issued upon exercise of outstanding options (a)			Weighted-average exercise price of outstanding options  (b)			Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		465,294		$	1.67			534,706
Equity compensation plans not approved by security holders			0			N/A			N/A
Total			465,294		$	1.67			534,706

During the years ended December 31, 2012 and 2011, we granted 384,000 and 223,334 stock options, respectively.  The stock options granted during 2012 and 2011 vest as follows: 1/48 every 30 days thereafter until the remaining stock options have vested, and are exercisable for a period of four years from the date of grant at an exercise price between $0.89 and $7.20 per share.  At December 31, 2012, 75,732 options are exercisable by their holders.

Recent Sales of Unregistered Securities

 None

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None

ITEM 6:  SELECTED FINANCIAL DATA

N/A

ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview of Business

OriginOil has developed an energy production process for harvesting algae and cleaning up oil and gas water.  Operating at the first stage of extraction, this high-speed and chemical-free process can be embedded in other systems to improve performance.  Originally invented to solve the biggest problem in algae production, it is now finding demand in oil and gas fracking and production water cleanup, an immediate and fast-growing market that desperately needs clean technology solutions.  OriginOil is a pure technology company.  We are neither a producer nor a service company.  We intend to embed our technology into the systems others build and sell through joint ventures, private labeling and licensing agreements.

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Algae Harvesting Application

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.

Oil and Gas Water Cleanup Application

When applied to the oil and gas industry, OriginOil’s process is used continuously to remove oils, suspended solids, insoluble organics and bacteria from produced or ‘frac flowback’ water. Testing has shown that OriginOil’s process can reduce Total Organic Carbon (TOC) by as much as 98% in the first pass.

Business Model For All Applications

At this early stage, to prove our systems for wide-scale distribution and licensing, we must build, sell and support our system to companies making use of such systems.

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 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. While continuing to engage in research and development, we have begun to make our first licensing agreements.

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. 

 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 December 31, 2012, 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 year ended December 31, 2012, and the Company adopted certain pronouncements during the period.  (See Notes to Financial Statements, No. 2, Summary of Significant Accounting Policies, Recently Issued Accounting Pronouncements.)

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OOIL

Results of Operations for the year ended December 31, 2012 compared to the year ended December 31, 2011.

	Year Ended
	December 31, 2012		December 31, 2011
Revenue	$	588,163	$	180,000
Cost Of Goods Sold		401,647		57,102
Operating Expenses, Depreciation and Amortization		5,936,090		5,370,697
Loss from Operations before Other Income/(Expense)		(5,749,574)		(5,247,799)
Other Income/(Expense)		(4,820,455)		(401,244)
Net Loss	$	(10,570,029)	$	(5,649,043)

Revenue and Cost of Sales

Revenue for the year ended December 31, 2012 and 2011 was $588,163 and $180,000, respectively. Cost of sales for the year ended December 31, 2012 and 2011 was $401,647 and $57,102, respectively. The increase in revenue and cost of sales was due to an increase in equipment sold and the related material supplies and consultant fees for equipment production.

To date we have had minimal revenues due to our focus on product development and testing.  In addition, we are not focused on immediate sales of equipment, beyond demonstration equipment, but on licensing or private labeling type transactions, which we believe has the potential to yield stronger long term revenue.

Operating Expenses

Selling and General Administrative Expenses

SG&A expenses increased by $728,822 to $4,942,275 for the year ended December 31, 2012 compared to $4,213,453 for the year ended December 31, 2011.  The increase in SG&A expenses was due primarily to an increase of $938,676 for investor relations and marketing of which approximately $894,173 was for non-cash stock compensation expense.

 Research and Development Cost

R&D cost decreased by $165,579 to $980,170 for the year ended December 31, 2012 compared to $1,145,749 for the year ended December 31, 2011.   The decrease in overall R&D costs was primarily due to a decrease in employee salaries and outside services for algae appliances and fracking research.

Net Loss

Our net loss increased by $(4,920,986) to $(10,570,029) for the year ended December 31, 2012 compared to $(5,649,043) for the year ended December 31, 2011. The majority of the increase is due to accounting for the net change in non-cash amortization of the debt discount, and loss derivative valuation in the amount of ($2,622,411), an increase in loss on settlement of debt in the amount of ($1,634,989) a decrease in non-cash stock and warrant compensation of ($194,671), and investor relations and marketing of ($938,676) offset by a decrease in general admin expenses of $150,769.  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 December 31, 2012 and December 31, 2011, we had cash of $507,355 and $197,868, respectively and working capital deficit of $(936,099) and $(1,068,155), respectively.  This decrease in working capital deficit was due primarily to a decrease in convertible debt and deferred income.

During the first two quarters of 2012, we raised an aggregate of $1,479,578 in an offering of unsecured convertible notes, a subscription payable, and securities exchange agreement.  From June 29, 2012 through December 28, 2012 we raised $1,576,893 in an offering of shares of our common stock and warrants.  From June 1, 2012 through March 31, 2013, we raised an aggregate of $865,000 in an offering of unsecured convertible notes.  From March 4, 2013 through April 12, 2013 we raised $537,532 in an offering of shares of our common stock and warrants.

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The opinion of our independent registered public accounting firm on our audited financial statements as of and for the year ended December 31, 2012 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 and future sales.

Net cash used in operating activities was $(3,102,421) for the year ended December 31, 2012, compared to $(3,728,294) for the prior period December 31, 2011. The decrease of $(625,873) in cash used in operating activities was due to the net decrease in prepaid expenses, work in progress, accounts payable and deferred income, plus the increase in accounts receivable, accrued expenses, and net loss.  Currently operating costs exceed revenue because sales are not yet significant.

Net cash flows used in investing activities was $(173,065) for the year ended December 31, 2012 as compared to $(147,687) for the prior period December 31, 2011. The net increase in cash used in investing activities was due to an increase in patent expenditures and research equipment.

Net cash flows provided by financing activities was $3,584,973 for the year ended December 31, 2012, as compared to $3,835,425 for the prior period December 31, 2011. The decrease in cash provided by financing activities was due to a decrease in 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 shares of common stock and warrants 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.

We have estimated our current average burn, and believe that we have assets to ensure that we can function without liquidation over the next nine 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 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A:  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Based on an assessment, our principal executive officer and principal financial officer have now concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal year ended December 31, 2012 were effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are (i) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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Management’s annual report on internal control over financial reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal accounting and financial officer), and effected by our board of directors, management and other personnel, 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.  Our internal control over financial reporting includes those policies and procedures that:

●           pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

●           provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and

●           provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

We have assessed the effectiveness of our internal control over financial reporting as of December 31, 2012.  In making this assessment, we used the criteria set forth in the Internal Control over Financial Reporting-Guidance for Smaller Reporting Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on our assessment, we believed that, as of December 31, 2012, our internal control over financial reporting is effective at a reasonable assurance level based on these criteria.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to a permanent exemption from the auditor’s attestation requirement provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that requires the company to provide only management’s report in this annual report.

Disclosure controls are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in internal controls

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the year ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B:  OTHER INFORMATION

Exchange of Warrants

The following disclosure would have otherwise been filed on Form 8-K under the heading “Item 3.02 Unregistered Sales of Equity Securities”:

During the month of March 2013, holders of warrants exercisable for 254,911 shares of our common stock were exchanged on a cashless basis for 254,911 shares of our common stock.

The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act since, among other things, the transactions did not involve a public offering. 

CEO Bonus

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 0r Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers”:

In recognition of T. Riggs Eckelberry’s contributions in 2012 as our Chief Executive Officer, on April 12, 2013, the Board of Directors awarded to Mr. Eckelberry a cash bonus of $40,000 and issued to him a five-year option to purchase 759,645 shares of our common stock exercisable at $0.43 per share.

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The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act 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. 

Common Stock and Warrant Offering

The following disclosure would have otherwise been filed on Form 8-K under the heading “Item 3.02 Unregistered Sales of Equity Securities”:

As previously disclosed in our Current Report on Form 8-K filed with the SEC on March 19, 2013, on February 15, 2013, we commenced a private placement offering, as subsequently amended, of up to 12,000,000 shares of common stock together with up to four series of warrants to purchase up to an aggregate of 48,000,000 shares of common stock.

From March 20, 2013 to April 15, 2013, we sold to accredited investors and to a non-U.S. person 2,286,000 shares of our common stock together with one-year warrants to purchase an aggregate of 2,000,000 shares of our common stock, three-year warrants to purchase an aggregate of 2,000,000 shares of our common stock and five-year warrants to purchase an aggregate of 4,000,000 shares of our common stock for aggregate gross proceeds of $371,500.  Each of the warrants is exercisable at a price per share of $0.15 subject to adjustment for stock splits, dividends, distributions, recapitalizations and the like.

The securities offered will not be and have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This Annual Report on Form 10-K shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.

Except as set forth below, the securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act 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 Company issued securities to one non- U.S. person in an offshore transaction relying on Regulation S.

Conversion of Notes

The following disclosure would have otherwise been filed on Form 8-K under the heading “Item 3.02 Unregistered Sales of Equity Securities”:

On February 4, 2013, a holder of a convertible promissory note, known in our filings as the “January Notes” or “January 2012 Notes” converted an aggregate outstanding principal amount of $100,000, plus unpaid interest of $7,467 into an aggregate of 245,639 shares of our common stock.

On March 20, 2013, a holder of a convertible promissory note issued on June 20, 2012, converted an aggregate principal and interest amount of $90,796 into 255,000 shares of our common stock.

On April 12, 2013, holders of original issuance discount convertible promissory notes issued in October 2012 in the aggregate principal amount of $125,000 plus interest and extension fees of $233,066 were converted into an aggregate of 1,432,285 shares of our common stock.

The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act since, among other things, the transactions did not involve a public offering.

Consultant Issuance

The following disclosure would have otherwise been filed on Form 8-K under the heading “Item 3.02 Unregistered Sales of Equity Securities”:

On March 26, 2013, we issued to a consultant 100,000 shares of our common stock in lieu of cash consideration and agreed to issue up to 120,000 shares of our common stock to such consultant in lieu of cash consideration.

The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act 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.

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PART III

ITEM 10:  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each. There are no family relationships among any of our directors and executive officers.

Name	Age	Position
T. Riggs Eckelberry	61	Chief Executive Officer, Chairman of the Board of Directors, Secretary, Treasurer, President and Acting Chief Financial Officer.
Ivan Ivankovich	46	Director
Steven Glovsky	49	Director
Anthony Fidaleo	54	Director

T. Riggs Eckelberry - Chief Executive Officer, Chairman of the Board of Directors, Secretary, Treasurer, President and Acting Chief Financial Officer.

Mr. Eckelberry has served as our Chief Executive Officer, Chairman, Secretary, Treasurer, President and Acting Chief Financial Officer since our inception in June 2007. Mr. Eckelberry, co-inventor of the Company’s technology, brings his veteran technology management skills to the alternative energy sector. In 2007, he developed and launched OriginOil. As President and COO of CyberDefender Corporation from 2005 to 2006, he was instrumental in building the company and its innovative product line, helping to achieve initial funding and a public company filing at the end of 2006. Previously, as founder and President of TechTransform, a technology consulting firm, he specialized in high tech launches and turnarounds, helping to turn around YellowPages.com in 2004, resulting in its sale for $100 million to SBC/BellSouth, and in 2003 helping to make Panda Software a key player in the US market as the General Manager of its US unit. During the high tech boom of the 1990s, he was responsible for the global brand success of the software product, CleanSweep; as Chief Operating Officer of MicroHouse Technologies, he drove record sales and a modernization of the company’s technology, helping to achieve a successful sale of the company to Earthweb; and as VP Marketing of venture-backed TriVida, he was a key member of the team that commercialized the company’s technology and achieved the sale of this technology company to BeFree, Inc. (now part of ValueClick: VCLK).  As one of the founders of the Company and a recognized expert in the algae oil area, Mr. Eckelberry’s experience and qualifications are essential to the Board of Directors.

Ivan Ivankovich - Director

Mr. Ivankovich has served as our director since our inception in June 2007. Ivan Ivankovich has over 20 years of financial and operational expertise. Since 2006 to present, he has served as consultant and advisor to several technology companies. From 2005 to 2006, he served as the managing director of VisionPoint Capital, a boutique investment bank, advising clients in the middle market. From 2003 to 2005, he served as the Chief Financial Officer of YellowPages.com, an on-line directory of national and local merchants. Prior to YellowPages.com, from 2001 to 2003, he served as Vice President of Portfolio Operations at Platinum Equity, a global acquisition firm where he managed and operated certain of its portfolio companies. Over the years, he also served as a senior financial executive for venture-backed companies such as, HealthAllies and TriVida Corporation, which was acquired by Befree Inc. (now part of ValueClick: VCLK). He started his career with Ernst & Young in their audit practice in Los Angeles. A Certified Public Accountant and a member of the California Society of CPAs, he earned his B.A. in Business Economics with an emphasis in accounting from the University of California, Santa Barbara.  Mr. Ivankovich’s financial experience is invaluable to the Company and necessary to the function of the Board of Directors at this point in its development.

Steven Glovsky – Director

            Mr. Glovsky has served as our director since April 2012. Mr. Glovsky is currently a consultant of a robotics company that designs and builds mobile robots for use in manufacturing. Prior to that from 2008 until 2009, he served as Director of Enrollment for Adult Studies at Aquinas College, managed by the Institute for Professional Development (a division of Apollo Group (NASDAQ:APOL). From 2000 until 2008, Mr. Glovsky served as a consultant to a number of technology and media companies, where he advised the Chief Executive Officers and Division Managers on strategic, product, business and financial matters; including MaxPreps, Inc. (acquired by CBS), a leading online sports publisher, Adstar, Inc. (NASDAQ: ADST), a technology company in the publishing industry and Titan (NYSE:TTN - acquired by L-3 Communications), a leading provider of information and communications products, solutions, and services to government entities. Among his responsibilities at AdStar, Mr. Glovsky managed the initial set up and implementation of Sarbanes-Oxley and SAS70 regulatory requirements. Prior to this Mr. Glovsky was a Senior Manager at Arthur Andersen in the turnaround and bankruptcy practice. Mr. Glovsky also spent five years in the banking industry at Bank of America where he managed an employee compensation program for 6,000+ employees and Security Pacific National Bank where he built and managed compensation programs for four operating divisions. Mr. Glovsky is a non-practicing attorney of law. He received his Juris Doctor from the University of Southern California Law Center and Bachelor of Arts from Tufts University. Mr. Glovsky’s financial experience qualifies him to serve as a director.

26

Anthony Fidaleo – Director

Mr. Fidaleo has served as our director since June 2012. Mr. Fidaleo has run his own accounting and consulting practice since 1992, primarily as an acting Chief Financial Officer or Senior Consultant for publicly traded companies ranging from start-ups to Fortune 500’s.  From November 2005 to February 2009 Mr. Fidaleo was the Chief Financial Officer, Chief Operating Officer, Executive Vice President and Member of the Board of Directors and Operating Committee for iMedia International, Inc. an early stage publicly traded interactive content solutions company.  Mr. Fidaleo is a California CPA (inactive) and was in public accounting from 1982 through 1992, primarily with BDO Seidman, LLP where he attained the level of audit senior manager. Mr. Fidaleo holds a B.S. degree in Accounting from California State University at Long Beach. Mr. Fidaleo’s financial experience qualifies him to serve as a director.

Election of Directors

Our directors are elected by the vote of a majority in interest of the holders of our voting stock and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified. The Board of Directors may also appoint additional directors to fill vacancies up to the maximum number permitted under our by laws.

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business.  The directors must be present at the meeting to constitute a quorum.  However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

Board Independence

We currently have four directors serving on our Board of Directors. We are not a listed issuer and, as such, are not subject to any director independence standards. Using the definition of “independent director,” as defined by Section 5605(a)(2) of the rules of the Nasdaq Stock Market, Ivan Ivankovich, Steve Glovsky and Anthony Fidaleo, would be considered an independent director.

Committees of the Board of Directors

We have established an audit committee and compensation committee however we have not yet nominated any members to such committees, which we intend to do in the near future. To date, our entire board has performed all of the duties and responsibilities which might be contemplated by a committee.

Audit Committee. The audit committee will be composed of three independent directors, one of whom that meets the requirements of an “Audit Committee Financial Expert.”  The audit committee's duties will be to recommend to the board of directors the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles.  The audit committee will review the scope and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls.  The audit committee will at all times to be composed exclusively of directors who are, in the opinion of the board of directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.

Compensation Committee. The compensation committee will be composed of at least two independent directors.  The compensation committee will review and approve our compensation policies, including compensation of executive officers.  The compensation committee will also review and administer our stock option plans, and recommend and approve grants of stock options under that plan.

We do not have a standing nominating committee nor are we required to have one. We do not currently 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.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the Board of Directors or compensation committee of any other entity that has one or more of its executive officers serving as a member of our Board of Directors.

Code of Ethics

We have adopted a code of business conduct and ethics that applies to all our directors, officers (including our chief executive officer, chief financial officer and any person performing similar functions) and employees. We have made our Code of Ethics available on our website at www.originoil.com.

Board Leadership Structure and Role in Risk Oversight

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in our best interests and our shareholders to combine these roles. Mr. Eckelberry has served as our Chairman since our inception in 2007. Due to the small size and early stage of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions combined. Our Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks.

27

Our Board of Directors focuses on the most significant risks facing us and our general risk management strategy, and also ensures that risks undertaken by us are consistent with the Board’s appetite for risk. While the Board oversees our risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing us.

ITEM 11:  EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the cash compensation (including cash bonuses) paid or accrued by us to our Chief Executive Officer for the years ended 2012 and 2011:

Name and Principal Position	Year	Salary		Bonus		Stock Awards		Option Awards	Non-Equity Incentive Plan Compensation	Non-qualified Deferred Compensation Earnings	All Other Compensation	Total
		($)		($)		($)(1)		($)	($)	($)	($)	($)
T. Riggs Eckelberry, Chairman of the Board, Acting	2012		260,000		130,000	-		-	-	-	-		390,000
CFO, President, Secretary & Treasurer and CEO	2011		263,667		104,000	-		-	-	-	-		367,667
Paul Reep,	2012		45,000		15,000		102,000	-	-	-	-		162,000
Former Senior VP of Technology (2)	2011		95,462		30,000		-	-	-	-	-		125,462

___________

(1)   Reflects the aggregate grant date fair value of stock awards granted during the relevant fiscal year calculated in accordance with FASB ASC Topic 718. See Note 3 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

(2)   On May 15, 2012, we accepted Paul Reep’s resignation and appointed him an advisor to the Company. He received 60,000 shares of compensation in compensation for past and future contributions.

Outstanding Equity Awards at Fiscal Year-End

There were no outstanding unexercised options, unvested stock and/or equity incentive plan awards issued to our named executive officers as of December 31, 2012.

Employment Agreements

We currently do not have an employment agreement with our Chief Executive Officer, Mr. Eckelberry, who is paid an annual salary of $260,000. Bonus payments, if any, are determined by the Board of Directors. For the year ended 2012, our Chief Executive Officer had been awarded bonuses payments of $130,000.

In recognition of Mr. Eckelberry’s contributions in 2012 as our Chief Executive Officer, the Board of Directors issued to Mr. Eckelberry a five-year option to purchase 759, 645 shares of our common stock exercisable at $0.43 per share.

Independent members of our Board of Directors, acting as a compensation committee, reviewed the compensation policies and practices relating to the compensation provided to our employees to determine whether such policies and practices are reasonably likely to have a material adverse effect on the Company.  Based on such review, we determined that any risks associated with our compensation policies and practices were not reasonably likely to have a material adverse effect on us.  In reaching that conclusion, the directors considered, among other factors, that salary and annual bonus programs, the two primary methods of compensation provided to our employees, were appropriately mitigated because salary levels and bonuses are generally discretionary in nature and considered on an annual basis.  In addition, we considered the overall level of our pay practices, including our incentive compensation awards and practices, in making this determination.

Employee Benefit Plans

Beginning June 1, 2008, we implemented a company health plan for our employees.

Compensation of Directors

Except as set forth below, our current directors presently do not receive monetary compensation for their service on the Board of Directors.  Directors may receive compensation for their services in the future and reimbursement for their expenses as shall be determined from time to time by resolution of the Board of Directors.

The following table reflects all compensation awarded to or earned by our directors for the fiscal year ended December 31, 2012.

Name	Fees Earned	Stock Awards		Options Awards	Non-Equity Incentive Plan Compensation	Nonqualified Deferred Compensation Earnings	All Other Compensation	Total
	($)	($)(1)		($)	($)	($)	($)	($)
T. Riggs Eckelberry	-	-		-	-	-	-	-
Ivan Ivankovich	-	-		-	-	-	-	-
Steve Glovsky (2)	-		87,500	-	-	-	-		87,500
Anthony Fidaleo (3)	-		50,500	-	-	-	-		50,500

___________

(1) Reflects the aggregate grant date fair value of stock awards granted during the relevant fiscal year calculated in accordance with FASB ASC Topic 718. See Note 3 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

(2)   In connection with the appointment of Mr. Glovsky to the Board effective April 9, 2012, Mr. Glovsky was issued 50,000 shares of our common stock.

(3)   In connection with the appointment of Mr. Fidaleo to the Board effective June 8, 2012, Mr. Fidaleo was issued 50,000 shares of our common stock.

28

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information as of April 15, 2013 regarding the beneficial ownership of our common stock, by (i) each person or entity who, to our knowledge, owns more than 5% of our common stock; (ii) our executive officers; (iii) each director; and (iv) all of our executive officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s address is c/o OriginOil, Inc., 5645 W Adams Blvd., Los Angeles, CA 90016. Shares of common stock subject to options, warrants, or other rights currently exercisable or exercisable within 60 days of April 15, 2013, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the stockholder holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other stockholder.

Name and Title of Beneficial Owner	Number of Shares Beneficially Owned	Percentage of Shares
T. Riggs Eckelberry, Chief Executive Officer, Chairman, Secretary, Treasurer, President and Acting Chief Financial Officer (1)	1,872,720	7.8	%
Ivan Ivankovich, Director (2)	108,335	*
Steve Glovsky, Director	50,000	*
Anthony Fidaleo, Director	50,000	*
Eng Cheh Hong (3)	2,420,657	10.4	%
Directors and executive officers as a group (4 persons)	2,081,055	8.7	%

 _______

* Less than 1%

(1)   Includes 759,645 shares of common stock issuable upon exercise of stock options at a price of $0.43 per shares.

(2)   Includes a warrant to purchase 33,333 shares of our common stock at a price of $9.30 per share, and a warrant to purchase 66,667 shares of our common stock at a price of $6.00 per share.

(3)   Subject to certain exceptions, we are prohibited from effecting an exercise of the warrants beneficially owned by Mr. Hong to the extent that, as a result of the exercise, the holder of the warrants beneficially owns more than 4.99% in the aggregate of the outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon such exercise, which may be increased upon 61 days’ prior written notice to 9.99%.  The number of shares and the percentage, as the case may be, in this table is reflective of this ownership limitation and accordingly 9,123,077 shares of our common stock issuable upon exercise of warrants beneficially owned by Mr. Hong have been excluded. In the event, this ownership limitation were not in effect, Mr. Hong would beneficially own 35.6% of the outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon exercise of the warrants.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Except as set forth in Item 11 under “Executive Compensation”, there has not been, nor is there any proposed transaction where we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. 

ITEM 14:  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed by our principal accountant for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2012 and 2011 were $74,012 and $81,946 respectively.

29

Tax Fees

There were no fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2012 and 2011.

All Other Fees

There were no other fees billed for products or services provided by our principal accountant for the fiscal years ended December 31, 2012 and 2011.

ITEM 15:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

SEC Ref. No.
3.1	Articles of Incorporation (1)
3.2	Certificate of Change (2)
3.3	By-laws (1)
10.1	Settlement Agreement dated December 20, 2012 between OriginOil, Inc. and MBD Energy Limited (3)*
10.2	OEM License Agreement dated November 26, 2012 between OriginOil, Inc. and LH Opportunities Group Ltd (3)*
10.3	OEM License Agreement dated October 16, 2012 between OriginOil, Inc. and Pearl H20, LLC (3)*
10.4	Stock Option Agreement dated April 12, 2013 between OriginOil, Inc. and T. Riggs Eckelberry*
31	Certification of Chief Executive Officer pursuant to Sec. 302 of the Sarbanes-Oxley Act of 2002 (4)*
32	Certification of Chief Executive Officer pursuant to 18 U.S.C. SECTION 1350 (4)*
101	The following materials from OriginOil Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 are formatted in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statement of Shareholders' Equity/ (Deficit), (iv) the Consolidated Statements of Cash Flow, and (iv) Notes to Consolidated Financial Statements tagged as blocks of text. (4)

*Filed herewith

(1) (2)	Incorporated by reference to the Company’s From SB-2 filed with the SEC on December 11, 2007. Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on July 20, 2011.
(3)	Certain confidential information contained in this exhibit was omitted by means of redacting a portion of the text and replacing it with [...]. This exhibit has been filed separately with the Commission without the redaction pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities Exchange Act of 1934.
(4)	In accordance with Item 601of Regulation S-K, this Exhibit is hereby furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.
(5)	In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

30

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on April 16, 2013.

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

Pursuant to the requirements of the Securities Act of 1933, this registration statement or amendment has been signed below by the following persons in the capacities and on the dates indicated.

Date: April 16, 2013	By:	/s/ T Riggs Eckelberry
		T Riggs Eckelberry
		Chief Executive Officer, President, Acting Chief Financial Officer, Secretary, Treasurer and Chairman of the Board

Date: April 16, 2013	By:	/s/ Ivan Ivankovich
		Ivan Ivankovich
		Director

Date: April 16, 2013	By:	/s/ Steve Glovsky
		Steve Glovsky
		Director

Date: April 16, 2013	By:	/s/ Anthony Fidaleo
		Anthony Fidaleo
		Director

31

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

OriginOil, Inc.

Los Angeles, California

We have audited the accompanying balance sheets of OriginOil, Inc. as of December 31, 2012 and 2011, and the related statements of operations, shareholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of OriginOil, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As disclosed in Note 1 to the financial statements, the Company has deficit working capital, deficit shareholders’ equity, and has negative cash flows from operations.  This raises substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ HJ Associates & Consultants, LLP

HJ Associates & Consultants, LLP

Salt Lake City, Utah

April 16, 2013

F-1

ORIGINOIL, INC.

BALANCE SHEETS

	December 31, 2012			December 31, 2011
ASSETS
CURRENT ASSETS
Cash	$	507,355		$	197,868
Accounts receivable		25,000			-
Work in process		35,666			248,443
Prepaid expenses		186,978			300,102
Other receivables		1,200			17,977
TOTAL CURRENT ASSETS		756,199			764,390
PROPERTY & EQUIPMENT
Machinery & equipment		32,670			30,992
Furniture & fixtures		27,056			27,056
Computer equipment		28,824			28,824
Leasehold improvements		94,914			94,914
		183,464			181,786
Less accumulated depreciation		(140,067	)		(126,422	)
NET PROPERTY & EQUIPMENT		43,397			55,364
OTHER ASSETS
Investment		20,000			20,000
Patents		317,689			180,380
Trademark		4,467			4,467
Security deposit		9,650			9,650
TOTAL OTHER ASSETS		351,806			214,497
TOTAL ASSETS	$	1,151,402		$	1,034,251
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	353,200		$	342,369
Accrued expenses		376,846			124,417
Deferred income		-			313,163
Derivative liability		355,526			641,900
Convertible debenture		-			397,213
Convertible promissory notes, net of discount of $237,965		435,365			-
Unsecured notes payable, net of discount of $38,639		171,361			13,483
TOTAL LIABILITIES		1,692,298			1,832,545
SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value;
25,000,000 authorized preferred shares		-			-
Common stock, $0.0001 par value;
250,000,000 authorized common shares
17,967,545 and 7,694,505 shares issued and outstanding		1,797			770
Additional paid in capital		27,024,419			16,198,019
Accumulated deficit		(27,567,112	)		(16,997,083	)
TOTAL SHAREHOLDERS' DEFICIT		(540,896	)		(798,294	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	1,151,402		$	1,034,251

The accompanying notes are an integral part of these financial statements

F-2

ORIGINOIL, INC.

STATEMENTS OF OPERATIONS

	Years Ended
	December 31, 2012			December 31, 2011
Sales	$	588,163		$	180,000
Cost of Goods Sold		401,647			57,102
Gross Profit		186,516			122,898
Operating Expenses
Selling and general and administrative expenses		4,942,275			4,213,453
Research and development		980,170			1,145,749
Total Operating Expenses		5,922,445			5,359,202
Loss before Depreciation and Amortization		(5,735,929	)		(5,236,304	)
Depreciation & amortization expense		13,645			11,495
Loss from Operations before Other Income/(Expenses)		(5,749,574	)		(5,247,799	)
OTHER INCOME/(EXPENSE)
Interest income		1			2
Foreign exchange loss		(3,096	)		-
Loss on settlement of debt		(1,634,989	)
Loss on change in derivative		(737,185	)		445,173
Penalties		-			(2,384	)
Interest expense		(2,445,186	)		(844,035	)
TOTAL OTHER INCOME/(EXPENSES)		(4,820,455	)		(401,244	)
NET LOSS	$	(10,570,029	)	$	(5,649,043	)
BASIC LOSS PER SHARE	$	(0.92	)	$	(0.81	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		11,474,316			7,014,861

The accompanying notes are an integral part of these financial statements

F-3

ORIGINOIL, INC.

STATEMENT OF SHAREHOLDERS' DEFICIT

									Additional
	Preferred stock				Common stock				Paid-in			Accumulated
	Shares		Amount		Shares		Amount		Capital			Deficit			Total
Balance at December 31, 2010		-	$	-		6,153,656	$	615	$	11,708,841		$	(11,348,040	)	$	361,416
Share adjustment due to reverse split		-		-		126		-		-			-			-
Common stock issued for cash and subscription payable
(price per share $2,40)		-		-		1,187,382		119		2,665,056			-			2,665,175
Cashless exercise of warrants		-		-		62,718		6		(6	)		-			-
Common stock issued for conversion of debt
(price per share $2.40)		-		-		139,711		14		335,289			-			335,303
Common stock issued for conversion of interest payable on debt
(price per share $2.40)		-		-		8,411		1		15,954			-			15,955
Common stock issued for services at fair value
(price per share between $1.90 -$6.00)		-		-		142,501		15		370,438			-			370,453
Write down of fair value of debenture converted		-		-		-		-		89,426			-			89,426
										-
Original issue discount		-		-		-		-		(92,662	)		-			(92,662	)
Beneficial conversion feature on promissory notes		-		-		-		-		240,107			-			240,107
Options and warrant compensation expense		-		-		-		-		946,576			-			946,576
Stock issuance cost		-		-		-		-		(81,000	)		-			(81,000	)
Net loss for the year ended December 31, 2011		-		-		-		-		-			(5,649,043	)		(5,649,043	)
Balance at December 31, 2011		-		-		7,694,505		770		16,198,019			(16,997,083	)		(798,294	)
Common stock issued for cash and subscriptions payable
(prices per share of $0.65 and $1.75)		-		-		2,426,003		243		1,576,649			-			1,576,892
Common stock issued for conversion of debt
(prices per share of $0.65 to $1.75)		-		-		2,980,036		298		3,561,488			-			3,561,786
Common stock issued for conversion of interest payable on debt
(price per share $0.875)		-		-		96,791		10		88,842			-			88,852
Common stock issued for services at fair value
(price per share  between $0.77 -$1.75)		-		-		1,246,558		124		1,683,924			-			1,684,048
Common stock issued with unsecured subordinated debt at fair value		-		-		1,411,351		141		(141	)		-			-
Common stock issued with for settlement of debt at fair value		-		-		1,850,019		185		1,605,457			-			1,605,642
Cashless exercise of  common stock purchase warrants		-		-		262,281		26		(26	)		-			-
Original issue discount for convertible debenture		-		-		-		-		92,662			-			92,662
Beneficial conversion feature on promissory notes		-		-		-		-		1,479,578			-			1,479,578
Options and warrant compensation expense		-		-		-		-		739,464			-			739,464
Stock issuance cost		-		-		-		-		(1,497	)		-			(1,497	)
Net loss for the year ended December 31, 2012		-		-		-		-		-			(10,570,029	)		(10,570,029	)
Balance at December 31, 2012		-	$	-		17,967,544	$	1,797	$	27,024,419		$	(27,567,112	)	$	(540,896	)

The accompanying notes are an integral part of these financial statements

F-4

ORIGINOIL, INC.

STATEMENTS OF CASH FLOWS

	Years Ended
	December 31, 2012			December 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(10,570,029	)	$	(5,649,043	)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation & amortization		13,645			11,495
Common stock and warrants issued for services		1,617,538			258,691
Stock compensation expense		739,464			934,135
(Gain)/Loss on change in valuation of derivative liability		737,185			(445,173	)
Debt discount and beneficial conversion feature recognized as interest expense		2,174,910			734,857
Loss on settlement of debt		1,634,989			-
Original issue discount amortized as interest		92,662			83,838
Common stock issued for interest payable on debt		88,852			15,955
Loss on impairment of intangible assets		34,078			-
Changes in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable		(25,000	)		-
Prepaid expenses		179,635			(64,913	)
Work in progress		212,777			(248,443	)
Other receivables		16,777			(3,959	)
Deposits		-			-
Increase (Decrease) in:
Accounts payable		10,830			262,089
Accrued expenses		252,429			77,475
Deferred income		(313,163	)		313,163
Other payable		-			(8,461	)
NET CASH USED IN OPERATING ACTIVITIES		(3,102,421	)		(3,728,294	)
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Purchase of investment		-			(20,000	)
Purchase of fixed assets		(1,678	)		(32,140	)
Patent expenditures		(171,387	)		(95,547	)
NET CASH USED IN INVESTING ACTIVITIES		(173,065	)		(147,687	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from unsecured subordinated debt		1,479,578			251,250
Proceeds from convertible promissory notes		530,000			-
Proceeds from convertible debenture		-			1,000,000
Proceeds for issuance of common stock and subscription payable, net of stock issuance cost		1,575,395			2,584,175
NET CASH PROVIDED BY FINANCING ACTIVITIES		3,584,973			3,835,425
NET INCREASE/(DECREASE) IN CASH		309,487			(40,556	)
CASH BEGINNING OF PERIOD		197,868			238,424
CASH END OF PERIOD	$	507,355		$	197,868
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	5,262		$	9,185
Taxes paid	$	-		$	-

SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS

   During the year ended December 31, 2012, the Company issued 6,551  shares of common stock for interest paid in the amount of $9,892; 1,411,351 shares ofcommon  stock were issued upfront with promissory notes; 262,281 shares of common stock were issued through a cashless exercise for 474,333 stock purchase warrants; issued 2,980,037 shares of common stock for conversion of debt at fair  value of $2,362,023; issued 1,850,019 for settlement of debt at fair value of $1,605,642. Also, the Company had a loss on settlement of convertible notes in the amount of $1,199,762. During the year ended December 31, 2011, the Company issued 98,043  shares of common stock for convertible debentures in the amount of 235,300.   Also, the Company issued 62,718 shares of common stock for 95,238 common stock purchase warrants.

The accompanying notes are an integral part of these financial statements

F-5

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

1.      ORGANIZATION AND LINE OF BUSINESS

Organization

OriginOil, Inc. (the "Company") was incorporated in the state of Nevada on June 1, 2007.  The Company, based in Los Angeles, California, began operations on June 1, 2007 to develop and market a renewable oil technology. The Company began planned principle operations in December, 2010 and thus has exited the development stage.

Line of Business

OriginOil is a pure technology company and has developed an energy production process for harvesting algae and cleaning up oil & gas water.  The Company’s technology integrates easily with other industry processes and can be embedded into larger systems through licensing and joint ventures.

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 2013, and is deriving revenue from sales of demonstration scale machines.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 along with future sales will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business operations.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of OriginOil, Inc. 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 transferees 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.

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.

Property and Equipment

Property and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives:

Leasehold improvements	2 years
Computer equipment	5 Years
Furniture & fixtures	7 Years
Machinery & equipment	10 Years

Depreciation expense for the years ended December 31, 2012 and 2011, was $13,645 and $11,495, respectively.

F-6

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 December 31, 2012 and 2011, the balances reported for cash, prepaid expenses, accounts payable, and accrued expenses, 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 1measurements) 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 December 31, 2012:

	Total		(Level 1)		(Level 2)		(Level 3)
Other Asset
Investment	$	20,000	$	-	$	-	$	20,000
Total assets measured at fair value	$	20,000	$	-	$	-	$	20,000
Liabilities
Derivative Liability	$	355,526	$	-	$	-	$	355,526
Unsecured Promissory Notes, net of discount		171,361		-		-	$	171,361
Convertible Debenture, net of discount		435,365		-		-		435,365
Total liabilities measured at fair value	$	962,252	$	-	$	-	$	962,252

Investments

Certificate of Deposits with banking institutions are short-term investments with initial maturities of more than 90 days. The carrying amount of these investments is a reasonable estimate of fair value due to their short-term nature.

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 or consulting 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 years ended December 31, 2012 and 2011, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded  7,554,616 and  2,004,074 warrants for the years ended December 31, 2012 and 2011, respectively.

.

	For the year ended
	December 31,
	2012			2011
(Loss) to common shareholders (Numerator)	$	(10,570,029	)	$	(5,649,043	)
Basic and diluted weighted average number of common shares outstanding (Denominator)		11,474,316			7,014,861

F-7

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company uses the liability method of accounting for income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law.  The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.

Research and Development

Research and development costs are expensed as incurred.  Total research and development costs were $980,170 and $1,145,749 for the years ended December 31, 2012 and 2011, respectively.

Advertising Costs

The Company expenses the cost of advertising and promotional materials when incurred.  There were no advertising costs for the years ended December 31, 2012 and 2011, respectively.

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 will be 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 would then be amortized over the respective vesting period of the stock option. The adoption of share based compensation has no material impact on our results of operations.

Work-in-Process

The Company recognizes cost for work-in-process on internal projects to ensure that costs are capitalized on balance sheet accounts during the project. Cost is recognized when revenue is posted to a profit and loss account by temporarily capitalizing cost in the balance sheet. The WIP is calculated at the cost of materials and labor related to the construction of equipment, including algae appliances, sold to customers

Concentration of Credit Risk

As of December 31, 2012 and 2011, the Company bank deposits in excess of Federally insured limits of $252,270 and $0 respectively.

Accounts Receivable

An allowance for uncollectible accounts receivable is established by charges to operations for amounts required to maintain an adequate allowance, in management's judgment, to cover anticipated losses from customer accounts and sales returns. Such accounts are charged to the allowance when collection appears doubtful. Any subsequent recoveries are credited to the allowance account.

Reclassification

Certain expenses for the period ended December 31, 2011 were reclassified to conform to the expenses for the period ended December 31, 2012.

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the year ended December 31, 2012, and adopted the following pronouncements:

The Company adopted accounting pronouncement ASC TOPIC 605 for “Revenue Recognition”, to recognize revenue when earned. An entity’s revenue earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing operation and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.  The adoption of this pronouncement did not have a material effect on the Company's financial statements.

The Company adopted accounting pronouncement ASC TOPIC 855 for “Subsequent Events”, whereby an entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. The adoption of this pronouncement did not have a material effect on the Company’s financial statements.

The Company adopted ASC TOPIC 730 accounting pronouncement for “Research and Development Costs” associated with materials, equipment, and facilities. The cost of materials and equipment or facilities that are acquired or constructed for research and development activities and that have alternative future uses shall be capitalized as tangible assets when acquired or constructed. The cost of such materials consumed in research and development activities and the depreciation of such equipment or facilities used in those activities are research and development costs. However, the costs of materials, equipment, or facilities that are acquired or constructed for a particular research and development project and that have no alternative future uses and therefore no separate economic values are research and development costs at the time the costs are incurred.

F-8

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements (Continued)

The Company adopted ASC 815 "Accounting for Derivative Instruments and Hedging Activities". This pronouncement addresses the accounting for derivative instruments including certain derivative instruments embedded in other contracts, and hedging activities. Derivative instruments that meet the definition of assets and liabilities should be reported in the financial statements at fair value, and any gain or loss should be recognized in current earnings.  The adoption of this pronouncement did have a material effect on the financial statements of the Company.

3. CAPITAL STOCK

As of June 30, 2012, the Company increased the total number of authorized shares of common stock to 250,000,000 shares and increased the total number of authorized shares of preferred stock to 25,000,000 shares.

During the year ended December 31, 2012, the Company issued 1,222,557 shares of common stock at fair value for services that ranged in prices from $0.79 to $1.75 with a fair value of $1,642,048; issued 12,001 shares of common stock for settlement of accounts payable in the amount of $21,000, and also issued an additional 12,000 shares for services with a fair value of $21,000; issued 1,241,929 shares of common stock in exchange for cancellation of the convertible debentures in the aggregate amount of $841,197, and also issued an additional 9,670 shares of common stock at a fair value of $6,286, associated with the conversion of a convertible debenture; issued 1,728,438 shares of common stock for conversion of debt with a fair value of $1,514,540; issued 90,240 shares of common stock for conversion of interest payable on debt at a fair value of $78,961; issued 1,850,019 shares of common stock for settlement of debt at a fair value of $1,605,642; issued 262,281 shares of common stock for stock through a cashless exercise of 493,943 stock purchase warrants; issued 6,551 shares of common stock at fair value of $9,892 for interest due on the convertible debentures; received proceeds for issuance of common stock in the amount of $1,576,896 to purchase 2,426,003 shares of common stock at a price of $0.65 together with one (1) year warrants to purchase an aggregate of 2,346,772 shares of common stock and three (3) year warrants to purchase an aggregate of 1,230,776 shares of common stock, plus five (5) year warrants to purchase an aggregate of 1,920,548 shares of common stock. In addition, the Company issued unsecured promissory notes in the aggregate principal amount of $1,669,828, with an issuance of 1,411,351 shares of common stock associated with the notes.

During the year ended December 31, 2011, the Company issued through a private placement 1,187,382 shares of common stock at a price of $2.40 per share for $2,665,175 in cash; issued 142,501 shares of common stock for services at a fair value of $370,453, converted $335,303 of the convertible debentures into 139,711 shares of common stock at a conversion price of $1.75. There were 490,212 shares of common stock issued with the debenture of which 480,684 were outstanding as of December 31, 2011. The Company further issued 8,411 shares of common stock for the interest payable of $15,955 associated with the convertible debentures. In addition, there was a cashless exercise of 95,238 warrants into 62,718 shares of common stock;

4.      STOCK OPTIONS AND WARRANTS

On May 25, 2012, the Board of Directors adopted the OriginOil, Inc., 2012 Incentive Stock Option 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 One Million (1,000,000) 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 years ended December 31, 2012 and 2011, the Company granted 384,000 and 223,334 stock options, respectively. 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 periods ranging from  four or ten years from the date of grant at an exercise price between $0.89 and $7.20 per share

	2012			2011
Risk free interest rate		0.87 - 1.58	%		0.95% - 2.04	%
Stock volatility factor		69.93 - 70.25	%		55.16% - 271.95	%
Weighted average expected option life	4-10 years			5 years
Expected dividend yield	None			None

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

F-9

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

4.      STOCK OPTIONS AND WARRANTS (Continued)

	2012						2011
				Weighted						Weighted
	Number			average			Number			average
	of			exercise			of			exercise
	Options			price			Options			price
Outstanding, beginning of period		351,130		$	6.14			498,297		$	7.20
Granted		384,000			0.90			223,334			5.72
Exercised		-			-			-			-
Forfeited/Expired		(269,836	)		(6.40	)		(370,501	)		(7.17	)
Outstanding, end of period		465,294		$	1.67			351,130		$	6.14
Exercisable at the end of period		75,732		$	3.08			66,455		$	4.37
Weighted average fair value of
options granted during the period				$	0.68					$	5.72

 The weighted average remaining contractual life of options outstanding issued under the plan as of December 31, 2012 as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.60		6,250		3,634		2.73
$	6.90		209		84		2.73
$	7.20		1,667		949		2.73
$	4.50		33,334		17,535		2.90
$	6.00		16,500		7,346		2.98
$	4.20		13,334		4,037		3.54
$	5.15		10,000		2,815		3.63
$	1.70		4,000		1,002		3.75
$	0.89		60,000		7,500		9.50
$	0.89		200,000		20,833		9.58
$	0.89		120,000		10,000		9.67
			465,294		75,735

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 year ended December 31, 2012, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of December 31, 2012 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to December 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 years ended December 31, 2012 and 2011 is $241,164 and $380,425, respectively.

Warrants

During the years ended December 31, 2012 and 2011, the Company granted 6,361,918 and 192,337 warrants issued for services and with private placements and debt, respectively,  valued using the Black Scholes pricing model.

	2012			2011
Risk free interest rate		.62% - .86	%		1.51% - 2.5	%
Stock volatility factor		68.56% - 70.61	%		63.04% - 257.10	%
Weighted average expected option life	5 years			5 years
Expected dividend yield	None			None

During the years ended December 31, 2012 and 2011, the Company issued warrants for services and with private placements and debt. A summary of the Company’s warrant activity and related information follows:

F-10

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

4.      STOCK OPTIONS AND WARRANTS (Continued)

	Year End						Year End
	December 31, 2012						December 31, 2011
				Weighted						Weighted
				average						average
				exercise						exercise
	Options			price			Options			price
Outstanding -beginning of year		836,188		$	4.20			733,832		$	4.20
Granted		6,361,918			0.66			192,337			3.30
Exercised		-			-			-			-
Forfeited		(100,002	)		(4.10	)		(89,980	)		-
Outstanding - end of year		7,098,104		$	0.79			836,188		$	4.20

At December 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		223,338		223,338		1.50
$	10.20		28,335		28,335		1.63
$	9.00		9,168		9,168		1.81
$	8.70		3,334		3,334		1.87
$	8.40		667		667		2.08
$	8.70		5,000		5,000		2.41
$	5.70		7,334		7,334		2.59
$	4.50		3,334		3,334		2.70
$	4.20		8,334		8,334		2.73
$	4.20		33,334		33,334		2.74
$	3.60		8,334		8,334		2.83
$	4.50		33,334		33,334		2.90
$	4.20		13,335		13,335		2.91
$	6.00		133,334		133,334		2.98
$	6.00		33,334		33,334		2.99
$	6.30		8,334		8,334		3.21
$	5.70		4,001		4,001		3.25
$	6.90		33,334		33,334		3.46
$	6.90		33,334		33,334		3.71
$	1.90		80,000		80,000		3.76
$	6.90		33,334		33,334		3.96
$	1.47		260,000		260,000		4.32
$	0.65		280,000		280,000		4.61
$	0.65		20,000		20,000		4.80
$	0.65		50,000		50,000		4.83
$	0.89		100,000		100,000		4.83
$	0.65		5,651,918		5,651,918		0.99 - 4.99
			7,098,104		7,098,104

Warrants with a fair value of $498,300 and $553,710 determined using the Black Scholes pricing model, was recognized in the statement of income for the years ended December 31, 2012 and 2011, respectively.

In addition to the warrants mentioned above, during the year ended December 31, 2012, 493,943 purchase warrants were exercised through a cashless exercise to purchase 262,281 shares of common stock, and 217,435 purchase warrants were forfeited or cancelled. The number of outstanding stock purchase warrants to purchase shares of common stock as of December 31, 2012, was 1,446,186 for services, and 6,108,430 for investors stock purchase warrants for a total of 7,554,616.

F-11

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

5.      INTANGIBLE ASSETS

Intangible assets that have finite useful lives continue to be amortized over their useful lives, and are reviewed for impairment when warranted by economic condition. In 2012, the Company wrote off $34,078 of capitalized patent costs as these patent applications were abandoned during the year.

	2012		2011
Patents	$	317,689	$	180,380
Trademarks		4,467		4,467
	$	322,156	$	184,847

As of December 31, 2012 and 2011, the patents are in the process of being approved, and will be amortized over their useful lives once approved.

6. EQUITY INVESTMENT

On April 29, 2011, the Company invested $20,000 for a 22.5% equity ownership in Ennesys SAS, which is an engineering company that will commercialize, design, install and eventually operate, by itself or via subcontractors, complete algae growth systems. As of December 31, 2012, the equity ownership was 10.84%

7.  INCOME TAXES

The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010.

Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain.Included in the balance at December 31, 2012 and 2011, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.  Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the periods ended December 31, 2012 and 2011, the Company did not recognize interest and penalties.

8. DEFERRED TAX BENEFIT

At December 31, 2012, the Company had net operating loss carry-forwards of approximately $15,128,000, which expire at dates that have not been determined. No tax benefit has been reported in the December 31, 2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2012 and 2011 due to the following:

F-12

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

8. DEFERRED TAX BENEFIT (continued)

	2012			2011
Book income	$	(4,228,000	)	$	(2,259,617	)
State taxes		300			-
Depreciation		(5,700	)		(4,129	)
Meals and Entertainment		2,500			3,803
Related party accruals		95,600			-
R&D		26,200			(36,752	)
Accrued compensated absences		(12,700	)		-
Non deductible stock compensation		978,300			524,016
Other non deductable expenses		1,855,900
Valuation Allowance		1,287,600			1,772,679
Income tax expense	$	-		$	-

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax liabilities consist of the following components as of December 31, 2012 and 2011.

	2012			2011
Deferred tax assets:
NOL carryover	$	6,051,100		$	4,646,838
R & D carryover		308,500			242,968
Contributions carryover		2,000			1,980
Accrued vacation payable		14,600			27,232
Related party accrual		111,600			-
Depreciation		-			18,689
Deferred tax liabilites:
Depreciation		(25,200	)		-
Less Valuation Allowance		(6,462,600	)		(4,937,707	)
Net deferred tax asset	$	-		$	-

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.

9. CONVERTIBLE DEBENTURE

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 had an aggregate principal amount of $1,176,500, and became due and payable on July 11, 2012. The debentures were convertible 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 bore interest at the rate of 5% per annum increasing to 18% in the event of default. Interest was 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 were delivered after the date the quarterly interest payment is due). The warrants outstanding as of  December 31, 2012 are exercisable for an aggregate of 215,692 shares of common stock at the option of the holder for a period of five years at an exercise price of $0.44 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.

F-13

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

9. CONVERTIBLE DEBENTURE (continued)

On May 18, 2012, the debentures’ remaining principal amount of $841,197 was converted into 1,241,929 shares of common stock, with payments of interest in both cash and common stock consisting of $5,262 and issuance of 6,551 of common stock at a fair value of $9,892.

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 was amortized over the life of the convertible debenture, which was converted during the period and resulted in the recognition of $249,298 in interest expense for the year ended December 31, 2012.

10. 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 2011 Notes”). During December 2011, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $218,750 (the “December 2011 Notes”). As a result of an exchange, $20,000 in principal amounts of the November 2011 Notes were exchanged for like principal amounts of the December 2011 Notes. During the year ended December 31, 2012, the Company issued unsecured convertible promissory notes in the aggregate principal amounts of $1,479,578 (the “January 2012 Notes”). As a result of a further exchange, $190,250 in principal amounts of the December 2011 Notes was exchanged for like principal amounts of the January 2012 Notes.  As of December 31, 2012, there were an aggregate principal amount of $210,000 of the January 2012 Notes outstanding.

During the month of November 2012, holders of the November, December, and January Notes converted an aggregate principal amount of $1,520,828, plus unpaid accrued interest of $78,690 for 1,828,348 shares of common stock of the Company.

November 2011 Notes

The November 2011 Notes had an aggregate principal amount of $12,500 with a five-year term and were convertible into shares of common stock of the Company at a conversion price of $2.40 per share.  Interest on the November 2011 Notes was calculated each quarter on the aggregate unconverted outstanding principal amount of the note, and was 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 was less than $2.40 then the interest was paid in cash at 4.8% of the outstanding principal note. Interest was payable quarterly, upon redemption and/or at maturity.  During the year ended December 31, 2012, note holders converted $12,500 of principal into shares of common stock.  The aggregate principal amount outstanding at December 31, 2012 was $0.

December 2011 Notes

The December 2011 Notes had an aggregate principal amount of $48,500 with a one-year term and were convertible into shares of common stock of the Company at a conversion price of $1.75 per share. Also, the December 2011 Notes had detachable three (3) year warrants to purchase 54,858 shares of common stock.  The December 2011 Notes accrued interest at 8% per annum and were payable on the conversion date and/or at maturity. The December 2011 Notes were 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. During the year ended December 31, 2012, note holders converted $48,500 of principal into shares of common stock.  The aggregate principal amount outstanding at December 31, 2012 was $0.

The December 2011 Notes were originally issued with detachable three (3) year warrants to purchase an aggregate of 272,282 shares of common stock at an exercise price of $1.75 (the “December Warrants”), and 217,433 were subsequently exchanged for 133,005 shares of common stock. The detachable warrants were evaluated for purposes of classification under ASC 480-10, “Distinguishing Liabilities from Equity”. The warrants did not embody any of the conditions for liability classification under the ASC 480-10 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.

F-14

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

January 2012 Notes

The January 2012 Notes had an aggregate principal amount of $1,669,828 with a one-year term and were convertible into shares of common stock of the Company at a conversion price of $1.75 per share. In addition, the Company issued upfront shares of common stock in the amount of 1,411,351, which included the amount from the December exchange during the period. In the event the note was converted in full prior to maturity, the holder was entitled to one additional share of common stock for each share converted. The January 2012 Notes accrued interest at 8% per annum and were payable on the conversion date and/or at maturity. The January 2012 Notes were 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. During the year ended December 31, 2012, note holders converted $1,269,578 of principal into shares of common stock.  The aggregate principal amount outstanding at December 31, 2012 was $210,000.

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

The notes were issued with a discount, which is amortized over the life of the note. The Company recorded amortization of the debt discount of $1,629,016 in interest expense for the year ended December 31, 2012.

11.   SECURITIES PURCHASE AGREEMENT

On June 20, 2012, the Company entered into a securities purchase agreement with an investor providing for the issuance of a promissory note (the “Note”) in an aggregate principal amount of $400,000 and warrants to purchase an aggregate of up 615,384 shares of the Company’s common stock for an aggregate purchase price of $100,000 in a private placement. At closing, which took place simultaneously with execution of the securities purchase agreement, the Company issued the Note with an outstanding principal sum of $100,000 together with a warrant to purchase 153,846 shares of the Company’s common stock.

Under the terms of the securities purchase agreement, the investor has the option to purchase an additional $300,000 in principal under the Note and receive further warrants to purchase an aggregate of up to 461,538 shares of the Company’s common stock.

The Note originally matures six months from the date of each purchase made under the Note, and bears interest at a rate of 10% per annum, which increased to 15% when the Note was not repaid by September 18, 2012. The Note was originally convertible into shares of the Company’s common stock at a conversion price of $0.65. The warrants may be exercised at any time for a period of four years from the date of issuance at an exercise price of $0.65. On February 15, 2013, the note was amended and the maturity date was extended until July 21, 2013 and the amendment of the conversion price of the Note to the lesser of $0.65 or 70% of the average of the three lowest closing prices in the 25 trading days previous to a conversion, subject to, at the election of the Company, a conversion floor of $0.4375 per share. If the Company elects to enforce the conversion floor it is required to make a cash payment to cover the conversion loss in an amount as set forth in the amendment. The conversion floor terminates in the event the Company issues or enters into an agreement providing for the issuance of shares at a price below the conversion floor. The conversion floor has since terminated.

On February 20, 2013, the lender funded a further $100,000 under the securities purchase agreement, bringing the total outstanding principal due under the Note to $200,000. Simultaneous therewith, the Company issued to the lender a Warrant to purchase 153,846 shares of the Company's common stock.

The note was issued with a discount, which is amortized over the life of the note. The Company recorded amortization of the debt discount of $76,122 in interest expense for the year ended December 31, 2012.

ASC Topic 815 provides guidance applicable to the convertible debt issued by the Company in instances where debt has embedded conversion options and net settlement. For example, when a convertible debt 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 debt 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 $76,122 representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount of $76,122 representing the imputed interest associated with the embedded derivative. The discount was amortized over the life of the convertible debt, and resulted in the recognition of $76,122 in interest expense for the year ended December 31, 2012.

The derivative liability is adjusted periodically according to the Company’s stock price fluctuations. For purpose of determining the fair market value of the derivative liability for the embedded conversion,  the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Risk free interest rate		.0% - .16	%
Stock volatility factor		29.13% - 80.29	%
Weighted average expected option life	6 months
Expected dividend yield	None

The value of the derivative liability at December 31, 2012 was $26,538.

F-15

ORIGINOIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 and 2011

12.    CONVERTIBLE PROMISORY NOTES

During the year ended December 31, 2012, the Company issued convertible promissory notes (the “OID Notes”) to various investors in an aggregate principal amount of $430,000, with an Original Issue Discount (OID) of $143,330.  The OID Notes were originally convertible into the common stock of the Company at conversion prices ranging from $0.4375 to $0.65. The maturity dates of the Notes are ninety (90) days from their effective date, with a one-time interest charge of $57,330, which will be amortized over ninety (90) days and recorded as interest expense.  If the Notes are not repaid on maturity, then the maturity date shall be automatically extended for up to three further 30 day periods and an extension fee of 25% of the then outstanding principal, interest and other fees shall be added to the principal amount of the Notes at the end of each 30 day period that the Notes are still outstanding. The Notes provide that if shares issuable upon conversion of the Notes are not timely delivered then the Company shall be subject to a penalty of $2,000 per day until share delivery is made. The Notes include customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment.

In addition, it shall constitute an event of default under the Notes if the Company shall not be DTC eligible or the Company shall be delinquent in its filings with the SEC. In the event of default under the Notes, the Company shall be required to repay an amount in cash equal to the greater of (i) the outstanding principal amount of the Note plus accrued and unpaid interest divided by the then conversion price of the Notes multiplied by Company’s lowest trade price at the time of demand or payment, or (ii) 150% of the outstanding principal amount of the Notes plus accrued and unpaid interest and other fees due thereon. In addition, in an event of default, the Notes bear interest at 25% per annum. The Company also granted to the purchasers of the Notes piggyback registration rights, under which the Company is required to include all shares issuable upon conversion of the Note in any future registration statement filed by the Company subject to customary exceptions.

As the result of most favored nations protection accorded to holders of OID Notes in note issuances subsequent to December 31, 2012, the OID Notes are convertible into shares of the Company’s common stock at a conversion price of the lesser of $0.4375 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 70% of the average of the three lowest closing prices in the 25 trading days previous to a conversion, subject to, at the election of the Company, a conversion floor of $0.4375.  The conversion floor terminates in the event the Company issues or enters into an agreement providing for the issuance of shares at a price below the conversion floor. The conversion floor has since terminated.  In addition, as the result of the most favored nations protection, for as long as OID Notes or such other subsequent notes are outstanding, if the Company issues any security with terms more favorable than the terms of the OID Notes or such other subsequent notes or a term was not similarly provided to the purchaser of the OID Notes or such other subsequent notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the OID Notes and such other subsequent notes.  Subsequent to December 31, 2012, OID Notes in the aggregate principal of $125,000 plus interest and extension fees of $233,066 have converted into 1,432,285 shares of the Company’s common stock. (See Subsequent Events)

ASC Topic 815 provides guidance applicable to the convertible debt issued by the Company in instances where debt has embedded conversion options and net settlement. For example, when a convertible debt 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 debt 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 $264,085 representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount of $264,085 representing the imputed interest associated with the embedded derivative. The discount was amortized over the life of the convertible debt, and resulted in the recognition of $96,992 in interest expense for the year ended December 31, 2012.

The derivative liability is adjusted periodically according to the Company’s stock price fluctuations. For purpose of determining the fair market value of the derivative liability for the embedded conversion,  the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Risk free interest rate		.01% - .11	%
Stock volatility factor		6.41% - 30.96	%
Weighted average expected option life	3 months
Expected dividend yield	None

The value of the derivative liability at December 31, 2012 was $218,680.

13 SUBSEQUENT EVENTS

Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855.

On February 4, 2013, holder of convertible note, known in our filings as “January 2012 Notes”, converted an aggregate outstanding principal amount of $100,000, plus unpaid interest of $7,467 into an aggregate of 245,639 shares of common stock.

From February 4, 2013 to February 12, 2013, the Company issued original issue discount convertible promissory notes to accredited investors in an aggregate principal amount of $133,333 for an aggregate purchase price of $100,000 in a private placement.  The Notes provide for a one-time interest charge of 10% of the aggregate principal amount of the Notes. The Notes may be converted into shares of the Company’s common stock at a conversion price of $0.4375 (subject to adjustment for stock splits, dividends, combinations and other similar transactions).  The Notes mature 90 days from the date of issuance. If the Company does not repay the Notes on maturity, then the maturity date shall be automatically extended for up to three further 30 day periods and an extension fee of 25% of the then outstanding principal, interest and other fees shall be added to the principal amount of the Notes at the end of each 30 day period that the Notes are still outstanding. All other terms referenced in Number 12 “CONVERTIBLE PROMISSORY NOTES” are applicable herein as well.

On February 20, 2013, the Company received additional funds totaling $100,000 under a prior securities purchase agreement with lender bringing the total outstanding principal due under the Note to $200,000.  Simultaneous therewith, the Company issued to the lender a Warrant to purchase 153,846 shares of the Company's common stock. As of March 20, 2013, the Lender converted an aggregate principal and interest amount of $90,796 into 255,000 shares of common stock under prior securities purchase agreement.

During the month of March 2013, the company issued 254,911 shares of common stock in exchange for 254,911 purchase warrants.

From March 18, 2013 to March 19, 2013, the Company issued original issue discount convertible promissory notes to accredited investors in an aggregate principal amount of $113,333 for an aggregate purchase price of $85,000 in a private placement. The Notes provide for a one-time interest charge of 10% of the aggregate principal amount of the Notes. The Notes may be converted into shares of the Company’s common stock at a conversion price of the lesser of $0.4375 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 70% of the average of the three lowest closing prices in the 25 trading days previous to a conversion, subject to, at the election of the Company, a conversion floor of $0.4375. . All other terms referenced in Number 12 “CONVERTIBLE PROMISSORY NOTES” are applicable herein as well.

On February 15, 2013, the Company commenced a private placement offering of up to 12,000,000 shares of common stock together with up to three series of warrants to purchase up to an aggregate of 36,000,000 shares of common stock.  As of April 12, 2013, the Company sold to accredited investors and to two non-U.S. persons 2,950,126 shares of its common stock together with one-year warrants to purchase an aggregate of 2,400,000 shares of its common stock, three-year warrants to purchase an aggregate of 2,400,000 shares of its common stock and five-year warrants to purchase 4,000,000 shares of its common stock for aggregate gross proceeds of $537,532.  Each of the warrants is exercisable at a price per share between $0.15 and $0.25 subject to adjustment for stock splits, dividends, distributions, recapitalizations and the like.

On April 12, 2013, in recognition of the CEO’s contributions to the Company in 2012, the Board of Directors awarded to the CEO a cash bonus of $40,000 and issued to him a five-year option to purchase 759,645 shares of common stock exercisable at $0.43 per share.

On April 12, 2013, holders of original issuance discount convertible promissory notes  issued in October 2012 in the aggregate principal amount of $125,000 plus interest and extension fees of $233,066 were converted into an aggregate of 1,432,285 shares of common stock.

During the subsequent period through April 15, 2013, the Company issued 200,004 shares of common stock for services at fair value of $104,694.

F-16

EX-10.1

Exhibit 10.1

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO RULE 24B-2 AND ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST. COPIES OF THIS EXHIBIT CONTAINING THE OMITTED INFORMATION HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED PORTIONS OF THIS DOCUMENT ARE MARKED WITH A […].

THIS SETTLEMENT AGREEMENT, WITH MUTUAL RELEASES AND COVENANTS (Settlement Agreement) is dated 20 December, 2012

PARTIES:

ORIGINOIL INC. of 5645 West Adams Boulevard, Los Angeles, California 90016 USA (OriginOil)

MBD ENERGY LIMITED (ACN 117957383) of 456 Victoria Parade, East Melbourne VIC 3002 Australia (MBD)

INTRODUCTION:

A   On or about 19 April 2010, OriginOil and MBD entered into a written “Mutual Non-Disclosure Agreement” (the “NDA”). In or about September 2010, MBD and OOIL executed a written “Master Project Agreement” with an Effective Date of 1 June 2010 (the “MPA”).

B   On 25 September 2012, OriginOil filed a complaint in the United States District Court, Central District of California against MBD (Complaint, in proceeding no. CV12-8278 (Proceeding).

C   On 27 September 2012, OriginOil issued a notice of default to MBD (Notice of Default) under clause 2.2.3 of the MPA .

D   The Proceedings have not been served on MBD. However, MBD has been provided a copy of the Complaint. MBD asserts that it rejects the validity of OriginOil’s Notice of Default and denies the allegations made in the Complaint.

E   The parties have agreed to settle the Proceeding and bring the MPA and NDA to an end as at 30 June 2013 in consideration for and upon the terms and conditions contained in this Settlement Agreement, without concession of liability or of the contentions of either party.

IT IS AGREED:

1   SETTLEMENT

1.1   Obligations of MBD

MBD agrees:

(a)   not to undertake research and development activities using or that relates to the equipment MBD has purchased from OriginOil under the MPA (Equipment), unless the parties have agreed to do so in writing.  Any agreement to conduct research and development on the Equipment will include terms and conditions outlining the ownership and use of any intellectual property created by this research and development;

(b)   it has not relied on or been provided by OriginOil or any other party or relied on or used any of OriginOil’s intellectual property, as set out in Appendix A, other than the Equipment, to conduct any of its research and development;

(c)   on or before 13 January 2013 to withdraw its Patent Application PCT/AU2011/000828 (Patent) and provide satisfactory evidence thereof to OriginOil.  MBD abandons any claims to the intellectual property regarding the flocculation and lysing functions of the Patent;

(d)   to despatch to OriginOil the Patent documentation by no later 31 January 2013, and represents    to its knowledge and belief on the basis of reasonable enquiries that there is no other such Patent documentation in its possession, custody or control that has not been provided to OriginOil;

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(e)   […]

(f)   to nominate a representative who will reach reasonable agreement with the OriginOil nominated representative on specifications and intended performance of the Equipment from the work to be done under this Settlement Agreement, […] (the Conditions) at least 2 weeks prior to Equipment arriving at the JCU Facility;

(g)   to provide access to and reasonable co-operation with OriginOil’s personnel when they attend the JCU Facility to upgrade the OriginOil equipment (JCU Upgrade), […]

(i)   […]

(ii)   […]

(h)   to provide access to and reasonable co-operation with OriginOil’s personnel when they attend the Tarong site (Tarong Facility) to upgrade the OriginOil equipment now on site there, known as the Tarong Mobile System (Tarong Upgrade) […]

(i)   […]

(ii)   […]

(iii)   […]

(iv)   […]

(v)   […]

(vi)   to pay to OriginOil the sum of $20,725.71 when OriginOil demonstrates to MBD’s commercially-reasonable satisfaction that the Tarong Upgrade meets the Conditions.

(i)   […]

(j)   […]

1.2   MBD further agrees to return the Patent documentation to OriginOil, and to provide written confirmation, no later than 21 days after execution of this Settlement Agreement, that all copies not returned to OriginOil have been destroyed, no matter the format, electronic or otherwise, of such copies.  Service and operation manuals of the Equipment will be retained by MBD for operational and servicing requirements of the Equipment.

1.3   Obligations of OriginOil

OriginOil agrees to:

(a)   […]

(b)   […]

(c)   […]

(d)   […]

(e)   […]

(f)   use reasonable efforts to ensure that the JCU Upgrade meets The Conditions, following which use reasonable efforts to ensure that the Tarong Upgrade meets The Conditions.

(g)   dismiss  the Proceeding in accordance with Section 6.

(h)   […]

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1.4   Contingencies Relating to The Conditions

(a)   From the date of execution of this Settlement Agreement until six months after the Conditions have been met to MBD’s commercially reasonable satisfaction for the JCU Upgrade, or 30 June 2013 , 2013, whichever comes sooner, the parties agree not to lay claim for monies owed, beyond the commitments made in this Settlement Agreement.

(b)   In the event OriginOil, using reasonable efforts, is not able to demonstrate by 30 June , 2013 that the Conditions for the JCU Upgrade and Tarong Upgrade have been met to MBD’s commercially-reasonable satisfaction, then the parties agree that neither party will owe the other party as a result of the Conditions not being met, including as follows:

(i)    MBD shall not be required to pay the sum identified in Section 1.1(h)(vi).

(ii)   OriginOil shall not be required to refund to MBD any prior payments by MBD or deposited by MBD and held by OriginOil.

2.      FUTURE RELATIONSHIP POST-SETTLEMENT AND POST-UPGRADES.

2.1.  MPA’s amendment and revised termination date

(a)   For purposes of this Settlement Agreement, OOIL Technology is comprised of the Equipment, together with the inventions listed under the heading “OriginOil Technology” in Appendix A attached hereto insofar as they are in respect of the Equipment.

(b)   MBD confirms it currently has no patent applications in process or in planning in the area of micro-algae harvesting or the use of electromagnetic fields for growth management, harvesting or concentration purposes, except for the Patent which it is abandoning pursuant to Section 1.1(c) above.  For purposes of this Settlement Agreement, MBD Technology is comprised of two patents that relate to growing algae (but not in the area of micro-algae harvesting or the use of electromagnetic fields for growth management, harvesting or concentration purposes), which patents have been developed by MBD and have not relied on any information or intellectual property of OriginOil. MBD has other Technology none of which is based on any OriginOil Technology.

(c)   The Parties agree that the MPA will terminate in its entirety on 30 June, 2013 notwithstanding any termination provision to the contrary in the MPA.

2.2.  NDA termination

The NDA will terminate effective 30 June, 2013.

2.3.  Future relationship

Upon completion of the Tarong Upgrade, the parties agree to discuss whether a future commercial relationship may be entered into, as originally envisioned in the MPA.

3.  RELEASE BY ORIGINOIL

In  consideration for the terms and conditions of this Settlement Agreement, OriginOil for itself and for its present and former officers, employees and agents, administrators, transferees and assigns releases and forever discharges MBD, its present, and former officers, shareholders, owners, employees and agents, insurers, attorneys, administrators, transferees, successors and assigns from all claims, damages, costs, charges, suits, demands and expenses of every description, including unasserted and potential claims, which any of them may have now or may discover in the future, based on any act, omission, conduct or event occurring prior to signing of this Settlement Agreement,  arising directly or indirectly out of the Proceeding, , the MPA and/or the NDA.  Notwithstanding the foregoing, OriginOil expressly retains, and does not waive, its rights under California Civil Code Section 1542, which provides:  “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

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4.  RELEASE BYMBD

In  consideration for the terms and conditions of this Settlement Agreement , MBD releases and forever discharges OriginOil, its present and former officers, shareholders, owners, employees and agents, insurers, attorneys, administrators, transferees, successors and assigns from all claims, damages, costs, charges, suits, demands and expenses of every description, including unasserted and potential claims, which it may have now or may discover in the future, based on any act, omission, conduct or event occurring prior to signing of this Settlement Agreement, arising directly or indirectly out of the Proceeding, , the MPA and/or the NDA.  Notwithstanding the foregoing, MBD expressly retains, and does not waive, its rights under California Civil Code Section 1542, which provides:  “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

5. COVENANT NOT TO SUE DENIAL OF LIABILITY AND BAR TO SUIT

The parties acknowledge that:

5.1.1.   Each party denies any liability of any nature whatsoever to the other party  arising out of or in any way relating to the Proceedings,, the MPA and/or the NDA; and

5.1.2.   this Settlement Agreement may be pleaded by a party in bar to any action, suit, claim, demand, indemnity or proceedings now or hereafter commenced or made by the other party or its officers employees and agents, administrators, transferees and assigns released under either Section 3 of Section 4 above. In consideration for the terms and covenants of this Settlement Agreement, OriginOil and MBD each undertake on its own behalf and on behalf of its officers employees and agents, administrators, transferees and assigns not to assert a claim or commence or maintain proceedings in law or equity that was released under either Section 3 or Section 4.

6. DISMISSAL OF PROCEEDING

6.1.  Within five business days of receiving satisfactory evidence from MBD that it has withdrawn its Patent pursuant to 1.1 (c), OriginOil will file a dismissal of the Proceeding with no order as to costs, withdraw the Notice of Default and provide written confirmation of the same to MBD by letter signed on letterhead.

6.2.  OriginOil agrees to do all things and sign and execute all documents necessary to give effect to Section 6.1.

7. NON-DISPARAGEMENT

7.1  OriginOil

OriginOil agrees not to deliberately or maliciously disparage or injure the reputation of MBD or any of its officers, employees or agents.

7.2  MBD

MBD agrees not to deliberately or maliciously disparage or injure the reputation of OriginOil or any of its officers, employees or agents.

7.3  Public statement about Patent

(a)   Upon the execution of this Settlement Agreement, the Parties agree to issue a public statement to the following effect:

“MBD and OriginOil have resolved their differences on IP, with MBD withdrawing the patent application and invention ownership claims at issue.

“The parties have also resolved process issues which led to commercial delays.”

(b)   OriginOil agrees to obtain the prior written consent of MBD in relation to both the content and manner of publication of any statement by OriginOil about the Patent, the Proceedings, , the MPA, the Settlement Agreement and/or the NDA, provided that:

(i)   in relation to disclosures that are not required by law, such consent shall not be unreasonably withheld by MBD; and

(ii)   in relation to disclosures that are required by law, MBD has had a reasonable opportunity to comment on any such document that OriginOil proposes to issue in respect of which OriginOil must act reasonably.

8.  CONFIDENTIALITY

Each party undertakes to the other to keep this Settlement Agreement, the subject matter of this Settlement Agreement and all matters arising out of or relating to the Equipment, the NDA, the MPA,  and/or the Proceeding confidential (other than to the extent such matters are on the public record) and not to disclose the substance of this Settlement Agreement to any person except to their professional advisers or as otherwise required by law.

9 ENTIRE AGREEMENT

This Settlement Agreement, and any Appendix, Schedule or Exhibit incorporated herein, together with the MPA and NDA as amended by this Settlement Agreement, contains the entire agreement between the parties with respect to its subject matter.  It sets out the only conduct relied on by the parties and supersedes all earlier agreements, representations and/or conduct made by, or existing between, the parties with respect to its subject matter.

10  NO WAIVER

No failure to exercise and no delay in exercising any right, power or remedy under this Settlement Agreement will operate as a waiver.  Nor will any single or partial exercise of any right, power, or remedy preclude any other or further exercise of that, or any other, right, power or remedy.

11  SEVERANCE

Any provision of this Settlement Agreement which is prohibited or unenforceable in any jurisdiction will be ineffective as to that jurisdiction, to the extent of the prohibition or unenforceability of that provision in any other jurisdiction.

12  GOVERNING LAW

This Settlement Agreement will be governed by and construed in accordance with the laws of the State of California, without regard to the conflict of laws principles thereof. Any legal action to be brought by a Party hereunder will be brought in the Superior Court of the State of California, County of Los Angeles, or the United States District Court for the Central District of California, and the Parties hereby submit to the exclusive jurisdiction of such courts and waive any objection to such venue.

13 COSTS

Each party to this Settlement Agreement must bear its own costs of and incidental to the Proceedings and this Settlement Agreement.

14. NO INTERPRETATION AGAINST ANY DRAFTING PARTY

This Settlement Agreement is the product of negotiations by and between

represented parties, and will not be construed against any party simply because

that party or its counsel drafted the Settlement Agreement or any portion of it.

15. FURTHER ASSURANCES

The Parties shall use reasonable efforts to execute such additional documents and perform such further acts as may be reasonably necessary to give effect to the terms, conditions, and covenants of this Settlement Agreement

EXECUTED on the date appearing on the first page.

ACCEPTED AND AGREED TO:

MBD Energy Limited,

an entity formed under the laws of Australia

	Date:  __________
By:
Andrew Lawson
Its Managing Director

OriginOil, Inc.
By:	Date:  20 December 2012
T. Riggs Eckelberry
President and CEO

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Schedule 1

[…]

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Appendix A

OriginOil Technology

[…]

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EX-10.2

Exhibit 10.2

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO RULE 24B-2 AND ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST. COPIES OF THIS EXHIBIT CONTAINING THE OMITTED INFORMATION HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED PORTIONS OF THIS DOCUMENT ARE MARKED WITH A […].

CANADIAN TERRITORY MASTER OEM LICENSE AGREEMENT

This OEM License Agreement (this “Agreement”) is made and effective this 26th day of September 2012 (the “Effective Date”), by and between Origin Oil, Inc., a corporation duly organized and existing under the laws of the State of Nevada with its principal place of business at 5645 W. Adams Boulevard, Los Angeles, California 90016 (hereinafter, “OOIL”) and LH Opportunities Group Ltd. A corporation duly organized and existing under the laws of the province of Alberta, with its principal place of business at 228 Canniff Place SW Calgary, Alberta, Canada T2W 2L8 (hereinafter “LH”).

RECITALS

1. OOIL engages in the business of developing, manufacturing and marketing products and services in biofuels, algae, industrial wastewater treatment and water remediation for the oil and gas industries to multiple companies and through significant investment of time and resources has built up a significant amount of expertise, contacts, suppliers and customers in manufacturing, marketing, shipping, fulfillment, and other related areas;

2. LH and, associated companies (Ensteel Industries) or specialize in providing, the design, manufacture and distribution of industrial, oil and gas, waste water treatment systems, products, and capital and LH wishes to purchase Equipment related to the Technology and license the technology from OOIL for use in products designed, manufactured and/or distributed by LH and/or Enstell Industries; and

3. OOIL hereby grants LH non-exclusive license for the designated “Technology” to be used in LH Products in all “Canadian Markets” identified by LH listed herein below within the defined “Canadian Territory” and LH accepts and agrees to the terms and conditions of this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the covenants, promises, and obligations set forth herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, OOIL and LH agree as follows:

ARTICLE 1

DEFINITIONS

1.1 “Agreement” shall mean this document, Articles 1 through 16, inclusive, and all Appendices or Exhibit(s) attached hereto and/or specified herein to be so attached.  

1.2 “Confidential Information” means information relating to the business or anticipated business of either party to this Agreement including, but not limited to, trade secrets, know-how, inventions (whether patented or not), ideas, improvements, works of authorship, derivative works, modifications, product development plans, forecasts, strategies, names and expertise of employees and consultants, techniques, processes, algorithms, software programs, schematics, designs, contracts, customer lists, financial information, sales and marketing plans and all other business and technical information.

1.3 “Equipment” shall mean any mechanical or electrical components or control systems and algorithms provided related to the Technology.

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1.4 “Technology” shall be defined as certain mechanical and electrical designs, control algorithms and the integration of these components to remove contaminants for water treatment applications. These components may comprise, but are not limited to, anode/cathode materials and assemblies, separation devices, power supplies, software, PLCs SCADA systems, associated components, and other support documentation beneficial to integrate the Technology into LH Products.

1.5 “Markets” shall mean Companies either Canadian or international companies domiciled in Canada, contractors, customers and consumers in the oil and gas produced frac and industrial waste water treatment and recycling.

1.6 “Territory” shall principally mean in Canada: however it should be recognized that in certain situations “territory” may extend to international jurisdictions where Canadian controlled companies or International companies who have operations or relationships originating business in Canada.  Further, LH recognizes that OOIL may have other OEM accounts with international distribution that extends into Canada that cannot be prohibited from conducting business within Canada. ..

1.7 “Order” or “Orders” shall mean an order from LH for a definite amount of Equipment related to the Technology with a delivery schedule of less than one (1) year. The term “Order” shall not include letters of intent, memoranda of intent or understanding, volume purchase agreements, blanket purchase agreements or purchase orders with a delivery schedule of greater than one (1) year from the date of issuance.

1.8 “Subsidiary Companies” means any entity now existing or hereinafter acquired which is owned or controlled directly or indirectly by a party hereto as to fifty percent (50%) or more of the issued shares and/or voting rights entitled to vote for the election of directors or other governing authority or otherwise having power to control such entity’s general activities, but only for so long as such ownership or control shall continue.

1.9 “Effective Date” shall mean the date and time first written above.

1.10 LH Products” shall be defined as those  products designed, manufactured, distributed or marketed by LH, in whole or in part, utilizing Technology licensed or Equipment related to the Technology supplied by OOIL under the terms of this Agreement.

ARTICLE 2

GRANT OF LICENSE

2.1 Grant of License.  Conditioned upon LH’s continued satisfaction of the terms and conditions of this Agreement, OOIL hereby grants LH a non-exclusive Canadian license to use the Technology and related Equipment in the manufacture, distribution, and sale of LH Products in the designated Markets and within the defined Territory.  LH hereby accepts said license, and LH agrees that it shall not use the Technology or Equipment in the manufacture, distribution, and sale of LH Products except as expressly set forth in this Agreement.

LH acknowledges that the grant of this license may limit OOIL’s ability to commercialize the Technology to major international or national accounts.  LH therefore acknowledges that its license may be subordinated to any exclusive license granted by OOIL for the territory of that exclusive license.  Subordination shall mean that LH’s license would become a sublicense of the exclusive license. Said Subordination shall be under the identical terms of this agreement with no interruptions, modifications, or changes to LH’s use of this license in any manner what so ever.

All rights granted under this Agreement shall be construed narrowly, and any rights to the Technology granted herein shall be limited only to the products designed, built and marketed for the subject Market.  Under no circumstances shall LH have any rights under this Agreement to use the Technology or Equipment to manufacture, distribute, or sell any type of product that is designed to for products in other Markets.  Further, any sale by LH of OOIL Technology or related Equipment which is not integrated into LH products is strictly prohibited without express written consent of OOIL in each instance.  In this context, LH products shall mean products incorporating LH technology or incorporating OOIL technology in other LH products, such as frac tanks, or as a precursor to other technologies, such as Suncor’s TRO process..

2.2 Channels of Distribution. LH may contract with distribution channels (producers, oil service companies, water treatment companies, system integrators and engineering companies) of their choice to act on behalf of LH, LH shall provide OOIL a quarterly summary of pending opportunities and plans. LH and OOIL shall coordinate their individual distribution plans to eliminate potential conflicts. Any compensation to such channels shall be solely the responsibility of LH; and provided further that LH shall cause any distribution channels contracted by LH hereunder to also be bound by all restrictive covenants which bind LH under this Agreement.  Any agreement with such distribution channel with respect to the Technology shall be coterminous with this Agreement.  No prior written approval is required from OOIL for the appointment of any LH Subsidiary Companies as a distribution channel of the licensed Technology.

2.3 No Right to Sublicense.  LH may not sublicense the Technology license granted hereunder unless that right is specifically granted as an amendment to the agreement

2.4 Independent Contractor Status.  The relationship of OOIL and LH established by this Agreement is that of independent contractors, and neither party is an employee, agent, partner or joint venture of the other. LH shall not be considered an agent or legal representative of OOIL for any purpose, and neither LH nor any director, officer, agent, or employee of LH shall be, or be considered, an agent or employee of OOIL. LH is not granted and shall not exercise the right or authority to assume or create any obligation or responsibility on behalf of or in the name of OOIL. All sales and other agreements between LH and its customers are LH’s sole responsibility and will have no effect on OOIL’s obligations under this Agreement.

2.5 Operations and Expenses. The detailed operations of LH under this Agreement are subject to the sole control and management of LH. LH shall be responsible for all of its own expenses and employees. LH shall provide, at its own expense, such office space and facilities, and hire and train such personnel, as may be required to carry out its obligations under this Agreement. LH agrees that it shall incur no expense chargeable to OOIL, except as may be specifically authorized in advance and in writing by OOIL.

2.6 No Other Rights. Except as expressly provided in this Agreement, no right, title or interest is granted by OOIL to LH. No right, title or interest is granted by OOIL to LH relating to products other than the Technology defined in paragraph 1.4.

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2.7 Improvements and Developments.

2.7.1  The Parties acknowledge that significant intellectual property, unique processes and trade secrets (“Intellectual Property”) are embodied in the Equipment and Technology, and the systems and activities thereof, and in the LH Products and the systems and activities thereof.  Each of the parties hereto further acknowledges and agrees that neither party has an interest in the Intellectual Property of the other party and that no transfer of such Intellectual Property is implied or will occur in connection with this Agreement or any project hereunder or for any specific Intellectual Property use license agreement that may need to be executed as part of a project. Each of the parties shall ensure that its research partners such as public or private laboratories involved in joint research, development or R&D projects shall be bound not to infringe any of OOIL’s or LH’s rights in its Intellectual Property.

         2.7.2 In the event that either party conceives, reduces to practice or develops (in whole or in part, either alone or jointly with others) any additional inventions or discoveries relating to any Intellectual Property (“Developments”), then the following rights and obligations shall apply:

a. If the Development relates to OOIL’s Intellectual Property, including but not limited to the Technology or Equipment, then all right, title and interest in such Development shall be the property of OOIL and LH does hereby assign, including any divisions, continuations, and continuations-in-part thereof, and in and to any and all Letters Patent of the United States, and countries foreign thereto, which may be granted or have granted for said invention, and in and to any and all reissues and reexaminations thereof, and in and to any and all priority rights, convention rights, and other benefits accruing or to accrue to OOIL with respect to the filing of applications for patents or securing of patents in the United States and countries foreign thereto, unto OOIL and shall ensure that LH assigns to OOIL such Development and all rights thereto, including Intellectual Property.  If any such Development or rights therein assigned hereunder are based on, incorporate, are improvements or derivatives of, or cannot reasonably be made, used, reproduced and distributed without using or violating, technology or intellectual property or other rights owned or licensed by OOIL and not assigned hereunder, LH hereby grants OOIL a perpetual, worldwide , royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such technology and rights in support of OOIL’s exercise or exploitation of any assigned Development or rights related thereto (including any modifications, improvements and derivatives thereof). LH further agrees to sign and execute all necessary and lawful future documents, including applications for foreign patents, for filing divisions, continuations, and continuations-in-part of said application for patent, for obtaining any reissue or reissues of any Letters Patent which may be granted for the aforesaid invention, as OOIL or its designee(s) may from time to time require and prepare at its own expense.

b. If the Development relates to LH’s Intellectual Property, then all right, title and interest in such Development shall be the property of LH and OOIL shall assign and does hereby assign, or shall ensure that OOIL assigns, to LH such Development and all rights thereto.  If any such Development or rights therein assigned hereunder are based on, incorporate, are improvements or derivatives of, or cannot reasonably be made, used, reproduced and distributed without using or violating, technology or intellectual property or other rights owned or licensed by LH and not assigned hereunder, OOIL hereby grants LH a perpetual, worldwide, royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such technology and rights in support of LH’s exercise or exploitation of any assigned Development or rights related thereto (including any modifications, improvements and derivatives thereof).

c. If the Development does not relate to the Intellectual Property of either OOIL or LH and was developed jointly by the parties, then all right, title and interest, including Intellectual Property, in such Development shall be the joint property of OOIL and LH; provided, however, that in commercializing such Developments, each of the parties hereby covenants not to compete during the term of this Agreement and for a period of 5 (five) years, directly or indirectly, in or with the other party’s then-current business.  The parties shall negotiate in good faith the responsibilities for (i) filing and prosecuting any patent applications for such Development, and (ii) enforcing any rights derived from such patent applications.

d. If the Development does not relate to OOIL’s Intellectual Property and was developed by LH without the assistance of OOIL, then all right, title and interest, including Intellectual Property, in such Development shall be the property of LH.

e. If the Development does not relate to LH’s Intellectual Property and was developed by OOIL without the assistance of LH, then all right, title and interest, including Intellectual Property, in such Development shall be the property of OOIL.

ARTICLE 3

OBLIGATIONS OF LICENSEE

3.1 Diligence. LH shall use its best efforts to manufacture, distribute, and sell LH Products that utilize the Technology and/or related Equipment.  If LH determines that OOIL Technology is no longer the best technology for the Market, LH may utilize the technology of its choice and this License is terminated under paragraph 14.2.9.

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3.2 Consideration. LH and OOIL agree in principle that LH will be responsible for the purchase, construction and installation of all OOIL Technology and related equipment, with the exception of certain control software.  Further that consideration for the license shall be in the form of royalties from revenue sharing with LH.  The parties further agree in principle that revenue sharing will be based on, without limitation, revenues generated from the sale or lease of LH Products and license or royalties received by LH for the use of LH Products.  OOIL share of revenue shall not be reduced by discounts or special offerings to LH customers. Current fees and royalties are delineated in Appendix B and as these fees and royalties are changed or developed, Appendix B will be amended.

However in the initial phases of this Agreement, equipment costs and project economics either are not known or will vary from project to project.  Therefore, during this phase LH and OOIL shall negotiate in good faith to determine a upfront licensing fee for the related Equipment provided by OOIL to LH and for an on-going royalty fee that will be based on percentage of LH revenue from a given project.  Both LH and OOIL recognize that in the early stage of this commercialization of this technology, sales of these products will involve projects with varying degrees of cost savings.  Each of the projects will therefore involve unique economics and benefits to LH and OOIL. Specific payments shall be remitted in accordance with Article 6 and paragraph 4.1.

3.3 Costs and Expenses. Except as expressly set forth herein, LH shall be solely responsible for all costs and expenses related to developing saleable LH Products for the identified markets and territories and the advertising, marketing, promotion, and distribution of the LH Products and for performing its obligations hereunder.

3.4 Sales Activity Reports.  Within thirty (30) days after the end of each calendar quarter, LH shall send to OOIL a “Sales Activities Report” including the names and quantities of LH Products sold, project names, terms of the sale and licensing, volumes processed and the dollar amounts received by LH for the sale and licensing of LH Products. “Net Sales” means, as applicable, the total sales amount received by LH from its Customer for the LH Products less sales tax and freight costs.

3.5 Inspection of Records.  At any time during normal business hours, upon written notice and as often as OOIL may deem necessary, OOIL shall have the right, at its expense, to audit and examine all relevant LH support documents to the Sales Activity Report for the purpose of validating the completeness and accuracy of the quarterly Sales Activity Reports.  The audit or examination may be performed by OOIL or by an independent third party designated by OOIL. It is understood and agreed that the documents provided by LH for the purpose of audit and examination shall remain the property of LH and shall constitute “Confidential Information” of LH.  The failure to produce documentation in support of the Sales Activity Report shall constitute a material breach of this Agreement.

3.6 Indemnification. LH agrees to indemnify and hold OOIL, its officers, directors, employees, successors, and assigns harmless from and against any and all losses, damages or expenses of whatever form or nature, including attorneys’ fees and other costs of legal defense, whether direct or indirect, that they, or any of them, may sustain or incur as a result of any acts or omissions of LH or any of its directors, officers, employees, or agents, including but not limited to (i) breach of any of the provisions of this Agreement, (ii) negligence or other tortuous conduct, (iii) representations or statements not specifically authorized by OOIL herein or otherwise in writing, or (iv) violation by LH of any applicable law, regulation, or order in or of the Territory or the United States.

3.7 Joint Venture.  The parties acknowledge and agree that in the future they may desire to alter their relationship whereby OOIL and LH’s relationship would be that of joint venture partners or other equity holders.  Accordingly, OOIL reserves the right to waive its rights to any payments to which it would be entitled under this Agreement and convert such payments into equity contributions in connection with a potential revised relationship structure with LH.  Any waiver of rights by OOIL under this paragraph 3.7 shall not affect its other rights hereunder or its right to require payments be made as described in this Agreement.

ARTICLE 4

PRODUCTS & PRICES

4.1 Equipment Price.  As stated in Consideration, paragraph 3.2, LH and OOIL agree in principle that LH will be responsible for the purchase, construction and installation of all OOIL Technology and related equipment, with the exception of certain control software.  However, in the initial phase or projects, it may be expeditious for OOIL to provide certain equipment. The parties agree to work together in good faith to establish prices and discounts for the Equipment.

4.2 Technology Implementation and Changes.  OOIL offers and requires OOIL involvement in the design, implementation or integration of OOIL Technology in LH products.  Further, any changes in the design related to OOIL Technology require OOIL involvement in the design and their express written approval.   OOIL reserves the right, from time to time in its sole discretion, to discontinue certain Equipment or make changes to the Technology which do not adversely affect the utility of the Technology to LH, to add new and additional features to the Technology; and upon reasonable notice to LH, to change its sales and distribution policies, not inconsistent with the terms of this Agreement.

4.3 LH Product Pricing. LH shall provide OOIL with LH Product pricing information for OOIL’s consideration and comment.  Not less than thirty (30) days prior to the launch of each new LH Product, LH shall advise OOIL of the anticipated market price of the new LH Product(s).  The foregoing notwithstanding, the pricing of LH Products shall be the exclusive responsibility of LH.

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4.4 Quality Control.  LH shall cooperate with OOIL, in a commercially reasonable manner, to permit OOIL to ascertain that the  LH Products meet OOIL’s quality standards.

4.5 Inspection.  LH shall not make any use of, sell or distribute any OOIL Technology or related equipment prior to OOIL granting final written approval of the quality of the product, as to the use, implementation, design and construction of the Equipment and/or Technology with and into the LH Products. LH shall not have any rights against OOIL for damages or other remedies by reason of OOIL’s failure or refusal to grant any approval.

ARTICLE 5

PURCHASE ORDERS

5.1 Purchase Orders.  If certain equipment is to be provided by OOIL to LH, LH shall issue a written purchase order listing the specific equipment, price and terms of sale.

OOIL hereby covenants and agrees to sell LH all of the specified Equipment related to the Technology required by LH as confirmed by written orders tendered by LH to OOIL.  All orders for Equipment by LH shall be confirmed by a written purchase order in form acceptable to OOIL; provided, however, that an order may initially be placed orally, by fax or email if a written Purchase Order is received by OOIL within seven (10) days of said oral, fax or email order.

5.2 Agreement Governs. Purchase Orders shall be governed by the terms of this Agreement. Nothing contained in any Purchase Order shall in any way modify or delete the terms and conditions contained herein or add any additional or different terms or conditions to the terms and conditions of this Agreement.

5.3 Order Changes. Purchase Orders may be canceled only with OOIL’s prior written approval.  Cancellation of a Purchase Order is subject to a restocking charge equal to ten percent (10%) of the aggregate value of such Purchase Order.

ARTICLE 6

ROYALTY PAYMENTS

6.1.1   Within […] days after the end of each calendar quarter, LH shall remit to OOIL royalty payments due to OOIL as specified in the Sales Activity Report described in paragraph 3.4 herein.  Payment will only be made to OOIL with funds that have been actually received by LH from its customers. Receipt of payment by LH from its customers is a condition of any Royalty payment to OOIL.

6.1.2   OOIL and LH are each responsible for their own taxes on any Royalty payment transactions.

ARTICLE 7

PAYMENT AND TAXES

7.1 Payment Terms. Payment of any and all amounts due under this Agreement shall be in U.S. Dollars.  LH shall pay for the Equipment purchases pursuant to Article 5 within […] by wire transfer or check to OOIL’s designated account.

7.2 Offsets. Any credits, allowances, or other amounts payable to or creditable by LH shall be subject to offset for any claims or other amounts owed by LH to OOIL pursuant to the provisions of this Agreement.

7.3 Taxes.  Prices do not include and are net of any foreign or domestic governmental taxes or charges of any kind that may be applicable to the sale, licensing, marketing or distribution of the Equipment or Technology, including without limitation excise, sales, use, or value-added taxes; customs or other import duties; or other taxes, tariffs or duties.  LH shall be responsible for and shall pay all such taxes and charges levied against OOIL in a timely manner. When OOIL has the legal obligation to pay or collect such taxes, excluding taxes on the income of OOIL, the appropriate amount shall be invoiced to LH and paid by LH within thirty (30) days of the date of invoice unless LH provides OOIL with a valid tax exemption certificate authorized by the appropriate taxing authority.

ARTICLE 8

DELIVERY, REJECTION AND RETURN OF TECHNOLOGY

8.1 Shipment and Delivery. Equipment related to the Technology delivered pursuant to the terms of this Agreement shall be suitably packed for shipment in OOIL’s standard shipping cartons, marked for shipment to the destination specified in LH’s Purchase Order, and delivered to the carrier agent […], California, United States, at which time risk of loss shall pass to LH. Unless otherwise specified in writing by LH in LH’s purchase order, OOIL shall select the carrier. All freight, insurance, and other shipping expenses, as well as expenses for any special packing requested by LH and provided by OOIL, shall be paid by LH. All shipment and freight charges shall be deemed correct unless OOIL receives from LH, no later than […] after the date of shipment, a written notice specifying the shipment, the purchase order number, and the exact nature of the discrepancy between the order and the shipment in number or type of Technology shipped, or freight or other charges, as the case may be.

8.2 Title. OOIL shall retain all right, title and interest in and to Equipment related to the Technology delivered to LH until OOIL has received all applicable payments therefore.

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8.3 Inspection and Rejection.  LH shall inspect all equipment related to the Technology promptly upon receipt thereof and may reject any defective equipment related to the Technology, provided that LH shall (i) within the earlier of […] days after receipt of such alleged defective equipment related to the Technology or […] days after discovery of such alleged defect, notify OOIL of its rejection and request a Return Material Authorization (“RMA”) number and (ii) within […] days of receipt of the RMA number from OOIL return such rejected Technology to OOIL, freight prepaid and properly insured. Equipment related to the Technology not rejected within the foregoing time periods shall be deemed accepted by LH. In the event that OOIL determines that the returned Technology is defective and properly rejected by LH, OOIL shall at its option, repair or replace such defective equipment related to the Technology, or accept return for credit of such defective Technology. OOIL shall return to LH, freight prepaid, all repaired or replaced Technology properly rejected by LH. In the event that any rejected product is determined by OOIL to not be defective or to have been modified or subjected to unusual electrical or physical stress, misuse, abuse or unauthorized repair, LH shall reimburse OOIL for all costs and expenses related to the inspection, repair, if any, and return of such equipment related to the Technology to LH.  Once accepted, LH shall have title to the equipment and the responsibility for the function and support of the equipment.

8.4           Returned Product. LH shall only return equipment related to the Technology to OOIL with OOIL’s prior written approval. Any Technology returned to OOIL by LH as authorized under this Agreement shall be shipped, […] OOIL’s address first set forth above or such other location as OOIL may instruct LH, and shall be packed in its original packing material where practicable. OOIL may refuse to accept any equipment related to the Technology not packed and shipped as herein provided.

ARTICLE 9

TECHNICAL SUPPORT

9.1 Support by OOIL.  OOIL shall be responsible for supporting all Technology distributed hereunder. OOIL technical support (Level 3) shall be limited to direct and  reasonable technical support to LH, including without limitation (i) maintaining trained and competent technical and engineering support personnel for the Technology who are sufficiently knowledgeable with respect to the Technology to answer LH’s questions regarding the use and operation of the Technology, (ii) designating a technical liaison to coordinate technical support to LH, (iii) responding promptly to requests for technical support from LH, and (iv) providing technical support services to address and resolve LH’s support requests with respect to the Technology. LH shall ensure that LH’s technical and engineering support personnel attend any training required by OOIL with respect to the Technology.  OOIL technical support is specifically exclusive of any direct technical support to LH customers or resellers.

9.2 Support by LH. LH is responsible for all direct technical support for its customers (Level 1) and resellers (Level 2) either delivered by LH or its nominee.  LH shall ensure that all customer questions regarding the use or operation of LH Products are initially addressed to and answered by LH. Unless otherwise agreed in writing by OOIL, LH shall not represent to any third party that OOIL is available to answer questions from any customer directly.

9.3 Conformance with OOIL Policy. LH will provide prompt and effective service and repair of Technology in the Territory in accordance with OOIL’s standard support policies then in effect.

9.4 Additional Responsibilities.  Without limiting the foregoing and in addition to any other obligations set forth in OOIL’s then current support terms and conditions, LH also shall be responsible for (i) providing sufficient information to OOIL for OOIL to duplicate any reported error in the Technology; (ii) incorporating updates into the Technology promptly upon receipt thereof from OOIL; (iii) reporting errors promptly in writing in accordance with OOIL’s standard support procedures; and (iv) providing reasonable cooperation and full information to OOIL in the furnishing of support for the Technology.

ARTICLE 10

DISCLAIMER OF WARRANTY

10.1 OOIL makes no warranties or conditions, express, statutory, implied or otherwise, and OOIL specifically disclaims the implied warranties and conditions of merchantability, fitness for a particular purpose, and all other implied warranties or conditions arising from course of dealing, usage of trade or custom. Notwithstanding the foregoing, OOIL does not exclude liability to the extent that such liability may not be excluded or limited by law.

ARTICLE 11

CONFIDENTIALITY AND PROPRIETARY RIGHTS

11.1 Confidentiality. The parties acknowledge that by reason of the relationship created herein both OOIL and LH will have access to certain information and materials concerning one another’s business, plans, customers, technology, and products that are confidential and of substantial value, which value would be impaired if such information were disclosed to third parties (“Confidential Information”). OOIL and LH agrees that it will not use in any way for its own account or the account of any third party, nor disclose to any third party, any Confidential Information revealed to it pursuant to the terms of this Agreement. LH and OOIL shall communicate to specifically identify any particular information or materials as confidential.  In the event of termination of this Agreement, there shall be no use or disclosure by either party of any Confidential Information and each party agrees not to reproduce, manufacture, have reproduced or have manufactured any computer software programs, devices, components or assemblies utilizing any of the confidential information.

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11.2 Proprietary Rights. LH agrees that OOIL retains all of its right, title and interest in and to all patents, trademarks, trade names, inventions, copyrights, know-how and trade secrets relating to the Technology, and the design, manufacture, operation or service of the Technology including any improvements relating to the Technology developed by OOIL during the course of this Agreement. The use by LH of any of these property rights is authorized only for the purposes herein set forth and upon termination of this Agreement for any reason such authorization will cease. LH shall not (and shall require that its customers do not) remove, alter, cover or obfuscate any patent, trademark, copyright or other proprietary rights notices placed or embedded by OOIL on or in the Technology. LH shall not make use of any OOIL trademarks without prior approval by OOIL of such usage.

ARTICLE 12

INTELLECTUAL PROPERTY INDEMNIFICATION

12.1 Limited Indemnity. LH agrees that OOIL has the right to defend, or at its option to settle, and OOIL agrees, at its own expense, to defend or at its option to settle, any third party claim, suit or proceeding (collectively, “Action”) brought against LH alleging that the Technology infringes any patent, copyright or trademark in existence as of the Effective Date, subject to the limitations hereinafter set forth. OOIL shall have sole control of any such Action or settlement negotiations, and OOIL agrees to pay, subject to the limitations hereinafter set forth, any final judgment entered against LH on such issue in any such Action defended by OOIL. LH agrees that OOIL will be relieved of the foregoing obligations unless LH notifies OOIL in writing of such Action within thirty (30) days after becoming aware of such action, gives OOIL authority to proceed as contemplated herein, and gives OOIL proper and full information and assistance to settle and/or defend any such Action. If it is determined by a court of competent jurisdiction, or if OOIL believes, that the Technology, or any part thereof, infringes any patent, copyright or trademark, or if the sale or use of the Technology, or any part thereof, is, as a result, enjoined, then OOIL may, at its election, option, and expense: (i) procure for LH the right under such patent, copyright or trademark to sell or use, as appropriate, the Technology or such part thereof; (ii) replace the Technology, or part thereof, with other noninfringing suitable products or parts; (iii) suitably modify the Technology or part thereof; or (iv) remove the Technology, or part thereof, terminate distribution or sale thereof and refund the payments paid by LH for such Technology.

12.2 Limitations. Notwithstanding the provisions of Section 12.1 above, OOIL assumes no liability for infringement claims arising from (i) combination of the Technology or portions thereof with other intellectual property not provided by OOIL if such infringement would not have occurred but for such combination, or (ii) the modification of the Technology or portions thereof unless such modification was made or authorized by OOIL, when such infringement would not have occurred but for such modification.

ARTICLE 13

LIMITATION OF LIABILITY

13.1 In no event shall either party be liable for lost profits, cost of procurement of substitute goods, or any other special, reliance, incidental, or consequential damages, however caused and under any theory of liability whether based in contract, tort (including negligence), products liability, or otherwise. The foregoing limitations shall apply regardless of whether such party has been advised of the possibility of such damages and notwithstanding the failure of essential purpose of any limited remedy stated herein.

ARTICLE 14

TERM AND TERMINATION

14.1 Term.  Unless earlier terminated pursuant to Section 14.2 below or by mutual written consent, this Agreement shall commence upon the Effective Date and continue in full force and effect for an initial term expiring on [__3 years________]. LH retains the right to auto renew the Agreement for recurring additional terms by written mutual consent of the parties.

14.2 Termination. This Agreement may be terminated prior to the expiration of the initial term by prior written notice to the other party as follows:

14.2.1 By either party upon written notice of termination if the other party breaches any material term or condition of this Agreement and fails to cure that breach within thirty (30) days after receiving written notice stating the nature of the breach and the non-breaching party’s intent to terminate; or

14.2.2 By either party, effective immediately, if the other party should become the subject of any voluntary or involuntary bankruptcy, receivership, or other insolvency proceedings or make an assignment or other arrangement for the benefit of its creditors, or if such other party should be nationalized or have any of its material assets expropriated; or

14.2.3 By either party, effective immediately, if there should occur any unauthorized material change in the management, ownership, control, sales personnel, sales and marketing capability, or financial condition of the other party that prevents the other party from fulfilling its obligations hereunder; or

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14.2.4 By OOIL, effective immediately, if any law or regulation should become adopted or in effect in the Territory that would restrict OOIL’s termination rights or otherwise invalidate any provisions hereof; or

14.2.5 By OOIL, effective immediately, if LH should violate the terms of paragraph 15.1, below; or

14.2.6 By OOIL, effective immediately, if LH knowingly makes any false or untrue statements or representations to OOIL herein; or

14.2.7 By OOIL, effective immediately, if LH is more than 60 business days late in making the payment required under Section 3.2, or is late by more than 90 business days for any other payment to be made to OOIL as required under this Agreement.

14.2.9 By OOIL, effective immediately, if LH is not longer utilizing OOIL Technology in LH products.

14.3 Purchase Orders; No Waiver.  Notwithstanding the foregoing, LH shall be obligated to accept deliveries of equipment related to the Technology for which orders were accepted by OOIL prior to the effective date of termination. After any notice of termination has been delivered by either party hereunder, deliveries of equipment related to the Technology from OOIL to LH, unless otherwise agreed by OOIL in its sole discretion, shall require prepayment by wire transfer by LH to OOIL. The acceptance of any order for the sale of any equipment related to the Technology to LH after the termination or expiration of this Agreement shall not be construed as a renewal or extension of this Agreement nor as a waiver of termination of this Agreement.

14.4 Rights of Parties Upon Termination or Expiration. The following provisions shall apply on the termination or expiration of this Agreement.

14.4.1 Cessation of Sales Activities. LH shall cease all sales and other activities on behalf of OOIL and shall return to OOIL and immediately cease all use of Confidential Information previously furnished by OOIL and then in Lh’s possession;

14.4.2 Acceleration of Amounts Owed. All indebtedness of LH to OOIL shall become immediately due and payable without further notice or demand, which is hereby expressly waived;

14.4.3 No Obligation to Repurchase. OOIL shall have no obligation to repurchase or to credit LH for its inventory of equipment related to the Technology at the time of termination of this Agreement. OOIL may, at its sole option, repurchase from LH at the prices paid by LH less a 20% restocking fee, any or all inventory of Technology originally purchased by LH from OOIL and remaining unsold by LH.

14.5 No Liability for Termination. Except as expressly required by law, in the event of termination of this Agreement by either party in accordance with any of the provisions of this Agreement, neither party shall be liable to the other, because of such termination, for compensation, reimbursement or damages on account of the loss of prospective profits or anticipated sales or on account of expenditures, inventory, investments, leases or commitments in connection with the business or goodwill of OOIL or LH. Termination shall not, however, relieve either party of obligations incurred prior to the termination.  Termination of this Agreement by OOIL, pursuant to 14.2.1, shall not alter the obligation of LH to remit the minimum royalty payments specified in paragraphs 3.5 and 6.1, of this Agreement.

14.6 Survival. Except for termination by OOIL pursuant to paragraph 14.2.1 above, LH may sell Products existing in its inventory as of the effective date of termination of this Agreement for a period of one hundred eighty (180) days after the effective date of such termination (“Wind-Down Period”).  During the Wind-Down Period, the provisions of paragraph 2.2, and Article 16 shall survive.

ARTICLE 15

COMPLIANCE WITH LAWS

15.1 Export Control. Any and all obligations of OOIL to provide the Technology, as well as any technical data, shall be subject in all respects to such United States laws and regulations as will from time to time govern the license and delivery of technology and products abroad by persons subject to the jurisdiction of the United States, including the Export Administration Act of 1979, as amended, any successor legislation, and the Export Administration Regulations issued by the U.S. Department of Commerce, Bureau of Export Administration. LH represents and warrants that it will not export or re-export the Technology or technical data related thereto except in conformity with such laws and regulations.

15.2 Local Law. LH shall notify OOIL of the existence and content of any mandatory provision of law in the Territory that conflicts with any provision of this Agreement at the time of its execution or thereafter.

15.3 Liability of OOIL. The provisions of this Agreement under which the liability of OOIL is excluded or limited shall not apply to the extent that such exclusions or limitations are declared illegal or void under the laws applicable in the countries in which Products are sold hereunder.

15.4 Questionable Payments. LH certifies that neither it, nor any of its directors, officers, employees, or agents is an official, agent, or employee of any government or governmental agency or political party or a candidate for any political office on the date of this Agreement. LH shall promptly notify OOIL of any event that would or may result in an exception to the foregoing representation. LH shall not, directly or indirectly, in the name of, on behalf of, or for the benefit of OOIL offer, promise to pay, or pay any compensation, or give anything of value to, any official, agent, or employee of any government or governmental agency, or to any political party or officer, employee, or agent thereof. Any breach of the provisions of this paragraph 15.4, shall entitle OOIL to terminate this Agreement effective immediately upon written notice to LH pursuant to paragraph 14.2 above.

ARTICLE 16

MISCELLANEOUS PROVISIONS

16.1 Governing Law; Venue. This agreement has been negotiated and entered into in the State of California, and shall be governed by, construed and enforced in accordance with the internal laws of the State of California, applied to contracts made in California to be wholly performed in California.  Except as otherwise provided herein, the United States District Court for the Central District of California shall have jurisdiction to enforce the terms of this Agreement and any action for breach of the agreement or to enforce any of the terms of this agreement shall be filed in the United States District Court for the Central District of California.  In the event that the United States District Court for the Central District of California lacks jurisdiction pursuant to 28 U.S.C. § 1441(b) or otherwise refuses to exercise jurisdiction over the parties or causes relating to this Agreement, then the general jurisdiction Courts of the State of California, located in Los Angeles, California shall have jurisdiction to enforce the terms of this Agreement and adjudicate any action for breach of the Agreement.

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16.2 Assignment. LH may not transfer or assign any of its obligations under this Agreement without the prior written consent of OOIL. OOIL may freely transfer or assign its rights under this Agreement without the prior written consent of LH. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the parties hereto, their successors and assigns.

16.3 No Implied Waivers. The failure of either party at any time to require performance by the other of any provision hereof shall not affect the right of such party to require performance at any time thereafter, nor shall the waiver of either party of a breach of any provision hereof be taken or held to be a waiver of a provision itself.

16.4 Severability. If any provision of this Agreement is held to be invalid by a court of competent jurisdiction, then the remaining provisions will nevertheless remain in full force and effect. The parties agree to renegotiate in good faith those provisions held to be invalid to create valid, enforceable provisions which provisions shall reflect as closely as possible the original intent of the parties.

16.5 Force Majeure. Except for payment of monies, neither party shall be liable for failure to fulfill its obligations under this Agreement or any purchase order issued hereunder or for delays in delivery due to causes beyond its reasonable control, including, but not limited to, acts of God, man-made or natural disasters, earthquakes, fire, riots, flood, material shortages, strikes, delays in transportation or inability to obtain labor or materials through its regular sources. The time for performance of any such obligation shall be extended for the time period lost by reason of the delay.

16.6 Conflicting Terms. The parties agree that the terms and conditions of this Agreement shall prevail, notwithstanding contrary or additional terms, in any purchase order, sales acknowledgment, confirmation or any other document issued by either party effecting the purchase and/or sale of Technology.

16.7 Headings. Headings of paragraphs herein are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

16.8 Notice. Any notice required or permitted to be given under this Agreement shall be delivered (a) by hand, (b) by registered or certified mail, postage prepaid, return receipt requested, to the address of the other party first set forth above, or to such other address as a party may designate by written notice, (c) by overnight courier, or (d) by fax with confirming letter mailed under the conditions described in (b) above. Notice so given shall be deemed effective when received, or if not received by reason of fault of addressee, when delivered.

16.9 Interpretation:  No provision of this agreement is to be interpreted for or against either party because that party or that party’s representative drafted such provision.

16.10 Indemnity:  In the event that any party violates the terms of this Agreement, then the party violating this agreement shall indemnify and hold harmless the non-breaching parties from any and all liability, costs, expenses and fees, including attorneys’ fees (whether suit is actually filed and in connection with all appeals), arising from said violation of this agreement or arising from an action to enforce the terms of the agreement.

16.11 Arbitration Agreement.  Except as specified in paragraph 6.5 of this Agreement, any unresolved controversy or claim arising out of or relating to this Agreement shall be submitted to binding arbitration under the auspices of Judicial Arbitration & Mediation Service (JAMS) in accordance with its rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof.  Except as otherwise provided herein, each party will bear its own costs in respect of any disputes arising under this Agreement.

16.12 Waiver of Jury Trial.  Each party hereto hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the administration, performance, enforcement or termination hereof.

16.13 Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements relating thereto, written or oral, between the parties. Amendments to this Agreement must be in writing, signed by the duly authorized officers or representatives of the parties.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement effective as of the specified Effective Date.

ORIGIN OIL, INC.

_______________________________

By:  Riggs Eckelberry, CEO

Date:  November 26, 2012

&

LH Opportunities Group Ltd.

_______________________________

BY: William J Ross President

Date: November 22, 2012

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OEM LICENSE AGREEMENT

APPENDIX “A”

Pursuant to the terms of the Agreement, OOIL hereby grants LH the right to manufacture, distribute, and sell LH Products incorporating OriginOil Technology in the following specified Markets. Further, OOIL recognizes LH’s potential and role in Calgary/western Canadian sector, OOIL grant LH Most Favored Nation status for this territory. By this OOIL means that OOIL will ensure that to the extent OOIL can, OOIL will favor LH for that sector (referring all leads to LH, etc.) and will not grant additional OEMs in that sector for a period of at least two years, renewable.

1.   All Canadian markets in the Oil & Gas and Frac and Produced Water Treatment Market - This market includes the sale of any produced water treatment equipment utilizing OOIL Technology to producers, oil service companies, water treatment companies, system integrators and engineering companies in the oil and gas marketplace. It is also recognized that LH may proceed into other international jurisdictions whereby business relationships originated in Canada.

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2. OEM LICENSE AGREEMENT

APPENDIX “B”

ROYALTY

The Royalty Fee shall be equal to the following:

[…]

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EX-10.3

Exhibit 10.3

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO RULE 24B-2 AND ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST. COPIES OF THIS EXHIBIT CONTAINING THE OMITTED INFORMATION HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED PORTIONS OF THIS DOCUMENT ARE MARKED WITH A […].

OEM LICENSE AGREEMENT

This OEM License Agreement (this “Agreement”) is made and effective this 16th day of October 2012 (the “Effective Date”), by and between Origin Oil, Inc., a corporation duly organized and existing under the laws of the State of Nevada with its principal place of business at 5645 W. Adams Boulevard, Los Angeles, California 90016 (hereinafter, “OOIL”) and PEARL H20, LLC, a limited liability company duly organized and existing under the laws of the State of California with its principal place of business at 17520 Newhope Street, Suite 200, Fountain Valley , CA 92780 (hereinafter, “PEARL”).

RECITALS

1. OOIL engages in the business of developing, manufacturing and marketing products and services in biofuels, algae, industrial wastewater treatment and water remediation for the oil and gas industries to multiple companies and through significant investment of time and resources has built up a significant amount of expertise, contacts, suppliers and customers in manufacturing, marketing, shipping, fulfillment, and other related areas;

2. PEARL is a company which specializes in the design, manufacture and distribution of water treatment systems and products and PEARL wishes to purchase Equipment related to the Technology and license the technology from OOIL for use in products designed, manufactured and/or distributed by PEARL and/or its Subsidiary Companies; and

3. OOIL hereby grants PEARL non-exclusive license for the designated “Technology” to be used in PEARL Products in the specified “Markets” listed herein below within the defined “Territory” and PEARL accepts and agrees to the terms and conditions of this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the covenants, promises, and obligations set forth herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, OOIL and PEARL agree as follows:

ARTICLE 1

DEFINITIONS

1.1 “Agreement” shall mean this document, Articles 1 through 16, inclusive, and all Appendices or Exhibit(s) attached hereto and/or specified herein to be so attached.  

1.2 “Confidential Information” means information relating to the business or anticipated business of either party to this Agreement including, but not limited to, trade secrets, know-how, inventions (whether patented or not), ideas, improvements, works of authorship, derivative works, modifications, product development plans, forecasts, strategies, names and expertise of employees and consultants, techniques, processes, algorithms, software programs, schematics, designs, contracts, customer lists, financial information, sales and marketing plans and all other business and technical information.

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1.3 “Equipment” shall mean any mechanical or electrical components or control systems and algorithms provided related to the Technology.

1.4 “Technology” shall be defined as certain mechanical and electrical designs, control algorithms and the integration of these components to remove contaminants for water treatment applications. These components may comprise, but are not limited to, anode/cathode materials and assemblies, separation devices, power supplies, software, PLCs SCADA systems, associated components, and other support documentation beneficial to integrate the Technology into PEARL Products.

1.5 “Markets” shall mean companies, contractors, customers and consumers in the frack flowback and produced water treatment and recycling markets.

1.6 “Territory” shall mean any location in the world.

1.7 “Order” or “Orders” shall mean an order from PEARL for a definite amount of Equipment related to the Technology with a delivery schedule of less than one (1) year. The term “Order” shall not include letters of intent, memoranda of intent or understanding, volume purchase agreements, blanket purchase agreements or purchase orders with a delivery schedule of greater than one (1) year from the date of issuance.

1.8 “Subsidiary Companies” means any entity now existing or hereinafter acquired which is owned or controlled directly or indirectly by a party hereto as to fifty percent (50%) or more of the issued shares and/or voting rights entitled to vote for the election of directors or other governing authority or otherwise having power to control such entity’s general activities, but only for so long as such ownership or control shall continue.

1.9 “Effective Date” shall mean the date and time first written above.

1.10 “PEARL Product” or “PEARL Products” shall be defined as those water treatment products designed, manufactured, distributed or marketed by PEARL, in whole or in part, utilizing Technology licensed or Equipment related to the Technology supplied by OOIL under the terms of this Agreement.

ARTICLE 2

GRANT OF LICENSE

2.1 Grant of License.  Conditioned upon PEARL’s continued satisfaction of the terms and conditions of this Agreement, OOIL hereby grants PEARL a worldwide, non-exclusive license to use the Technology and related Equipment in the manufacture, distribution, and sale of PEARL Products in the designated Markets and within the defined Territory.  PEARL hereby accepts said license, and PEARL agrees that it shall not use the Technology or Equipment in the manufacture, distribution, and sale of PEARL Products except as expressly set forth in this Agreement.

PEARL acknowledges that the grant of this license may limit OOIL’s ability to commercialize the Technology to major international or national accounts.  PEARL therefore acknowledges that its license may be subordinated to any exclusive license granted by OOIL for the territory of that exclusive license.  Subordination shall mean that PACE’s license would become a sublicense of the exclusive license. Said Subordination shall be under the identical terms of this agreement with no interruptions, modifications, or changes to PEARL’s use of this license in any manner what so ever.

All rights granted under this Agreement shall be construed narrowly, and any rights to the Technology granted herein shall be limited only to the products designed, built and marketed for the subject Market.  Under no circumstances shall PEARL have any rights under this Agreement to use the Technology or Equipment to manufacture, distribute, or sell any type of product that is designed to for products in other Markets.  Further, any sale by PEARL of OOIL Technology or related Equipment which is not integrated into PEARL products is strictly prohibited without express written consent of OOIL in each instance.  In this context, PEARL products shall mean products incorporating PEARL technology and shall not include standard pumps, filters or other off the shelf products.

PEARL acknowledges OOIL rights to sell or license OOIL’s Technology to others in the subject Market or other markets.

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2.2

2.3 Channels of Distribution. PEARL may contract with distribution channels (producers, oil service companies, water treatment companies, system integrators and engineering companies) of their choice to act on behalf of PEARL. PEARL shall provide OOIL a quarterly summary of pending opportunities and plans. PEARL and OOIL shall coordinate their individual distribution plans to eliminate potential conflicts. Any compensation to such channels shall be solely the responsibility of PEARL; and provided further that PEARL shall cause any distribution channels contracted by PEARL hereunder to also be bound by all restrictive covenants which bind PEARL under this Agreement.  Any agreement with such distribution channel with respect to the Technology shall be coterminous with this Agreement.  No prior written approval is required from OOIL for the appointment of any PACE Subsidiary Companies as a distribution channel of the licensed Technology.

2.4 No Right to Sublicense.  PEARL may not sublicense the Technology license granted hereunder unless that right is specifically granted as an amendment to this agreement.

2.5 Independent Contractor Status.  The relationship of OOIL and PEARL established by this Agreement is that of independent contractors, and neither party is an employee, agent, partner or joint venture of the other. PEARL shall not be considered an agent or legal representative of OOIL for any purpose, and neither PEARL nor any director, officer, agent, or employee of PEARL shall be, or be considered, an agent or employee of OOIL. PEARL is not granted and shall not exercise the right or authority to assume or create any obligation or responsibility on behalf of or in the name of OOIL. All sales and other agreements between PEARL and its customers are PEARL’s sole responsibility and will have no effect on OOIL’s obligations under this Agreement.

2.6 Operations and Expenses. The detailed operations of PEARL under this Agreement are subject to the sole control and management of PEARL. PEARL shall be responsible for all of its own expenses and employees. PEARL shall provide, at its own expense, such office space and facilities, and hire and train such personnel, as may be required to carry out its obligations under this Agreement. PEARL agrees that it shall incur no expense chargeable to OOIL, except as may be specifically authorized in advance and in writing by OOIL.

2.7 No Other Rights. Except as expressly provided in this Agreement, no right, title or interest is granted by OOIL to PEARL. No right, title or interest is granted by OOIL to PEARL relating to products other than the Technology defined in paragraph 1.4.

2.8 Improvements and Developments.

2.8.1  The Parties acknowledge that significant intellectual property, unique processes and trade secrets (“Intellectual Property”) are embodied in the Equipment and Technology, and the systems and activities thereof, and in the PEARL Products and the systems and activities thereof.  Each of the parties hereto further acknowledges and agrees that neither party has an interest in the Intellectual Property of the other party and that no transfer of such Intellectual Property is implied or will occur in connection with this Agreement or any project hereunder or for any specific Intellectual Property use license agreement that may need to be executed as part of a project. Each of the parties shall ensure that its research partners such as public or private laboratories involved in joint research, development or R&D projects shall be bound not to infringe any of OOIL’s or PEARL’s rights in its Intellectual Property.

         2.8.2 In the event that either party conceives, reduces to practice or develops (in whole or in part, either alone or jointly with others) any additional inventions or discoveries relating to any Intellectual Property (“Developments”), then the following rights and obligations shall apply:

a. If the Development relates to OOIL’s Intellectual Property, including but not limited to the Technology or Equipment, then all right, title and interest in such Development shall be the property of OOIL and PEARL does hereby assign, including any divisions, continuations, and continuations-in-part thereof, and in and to any and all Letters Patent of the United States, and countries foreign thereto, which may be granted or have granted for said invention, and in and to any and all reissues and reexaminations thereof, and in and to any and all priority rights, convention rights, and other benefits accruing or to accrue to OOIL with respect to the filing of applications for patents or securing of patents in the United States and countries foreign thereto, unto OOIL and shall ensure that PEARL assigns to OOIL such Development and all rights thereto, including Intellectual Property.  If any such Development or rights therein assigned hereunder are based on, incorporate, are improvements or derivatives of, or cannot reasonably be made, used, reproduced and distributed without using or violating, technology or intellectual property or other rights owned or licensed by OOIL and not assigned hereunder, PEARL hereby grants OOIL a perpetual, worldwide, royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such technology and rights in support of OOIL’s exercise or exploitation of any assigned Development or rights related thereto (including any modifications, improvements and derivatives thereof). PEARL further agrees to sign and execute all necessary and lawful future documents, including applications for foreign patents, for filing divisions, continuations, and continuations-in-part of said application for patent, for obtaining any reissue or reissues of any Letters Patent which may be granted for the aforesaid invention, as OOIL or its designee(s) may from time to time require and prepare at its own expense.

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b. If the Development relates to PEARL’s Intellectual Property, then all right, title and interest in such Development shall be the property of PEARL and OOIL shall assign and does hereby assign, or shall ensure that OOIL assigns, to PEARL such Development and all rights thereto.  If any such Development or rights therein assigned hereunder are based on, incorporate, are improvements or derivatives of, or cannot reasonably be made, used, reproduced and distributed without using or violating, technology or intellectual property or other rights owned or licensed by PEARL and not assigned hereunder, OOIL hereby grants PEARL a perpetual, worldwide, royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such technology and rights in support of PEARL’s exercise or exploitation of any assigned Development or rights related thereto (including any modifications, improvements and derivatives thereof).

c. If the Development does not relate to the Intellectual Property of either OOIL or PEARL and was developed jointly by the parties, then all right, title and interest, including Intellectual Property, in such Development shall be the joint property of OOIL and PEARL; provided, however, that in commercializing such Developments, each of the parties hereby covenants not to compete during the term of this Agreement and for a period of 2 (two) years, directly or indirectly, in or with the other party’s then-current business.  The parties shall negotiate in good faith the responsibilities for (i) filing and prosecuting any patent applications for such Development, and (ii) enforcing any rights derived from such patent applications.

d. If the Development does not relate to OOIL’s Intellectual Property and was developed by PEARL without the assistance of OOIL, then all right, title and interest, including Intellectual Property, in such Development shall be the property of PEARL.

e. If the Development does not relate to PEARL’s Intellectual Property and was developed by OOIL without the assistance of PEARL, then all right, title and interest, including Intellectual Property, in such Development shall be the property of OOIL.

ARTICLE 3

OBLIGATIONS OF LICENSEE

3.1 Diligence. PEARL shall use its best efforts to manufacture, distribute, and sell PEARL Products that utilize the Technology and/or related Equipment.  If PEARL determines that OOIL Technology is no longer the best technology for the Market, PEARL may utilize the technology of its choice and this License is terminated under paragraph 14.2.9.

3.2 Consideration. PEARL and OOIL agree in principle that PEARL will be responsible for the purchase, construction and installation of all OOIL Technology and related equipment, with the exception of certain control software.  Further that consideration for the license shall be in the form of royalties from revenue sharing with PEARL.  The parties further agree in principle that revenue sharing will be based on, without limitation, revenues generated from the sale or lease of PEARL Products and license or royalties received by PEARL for the use of PEARL Products.  OOIL share of revenue shall not be reduced by discounts or special offerings to PEARL customers. Current fees and royalties are delineated in Appendix B and as these fees and royalties are changed or developed, Appendix B will be amended.

However in the initial phases of this Agreement, equipment costs and project economics either are not known or will vary from project to project.  Therefore, during this phase PEARL and OOIL shall negotiate in good faith to determine a upfront licensing fee for the related Equipment provided by OOIL to PEARL and for an on-going royalty fee that will be based on percentage of PEARL revenue from a given project.  Both PEARL and OOIL recognize that in the early stage of this commercialization of this technology, sales of these products will involve projects with varying degrees of cost savings.  Each of the projects will therefore involve unique economics and benefits to PEARL and OOIL. Specific payments shall be remitted in accordance with Article 6 and paragraph 4.1.

3.3 Costs and Expenses. Except as expressly set forth herein, PEARL shall be solely responsible for all costs and expenses related to developing saleable PEARL Products for the identified markets and territories and the advertising, marketing, promotion, and distribution of the PEARL Products and for performing its obligations hereunder.

3.4 Sales Activity Reports.  Within thirty (30) days after the end of each calendar quarter, PEARL shall send to OOIL a “Sales Activities Report” including the names and quantities of PEARL Products sold, project names, terms of the sale and licensing, volumes processed and the dollar amounts received by PEARL for the sale and licensing of PEARL Products. “Net Sales” means, as applicable, the total sales amount received by PEARL from its Customer for the PEARL Products less sales tax and freight costs.

3.5 Inspection of Records.  At any time during normal business hours, upon written notice and as often as OOIL may deem necessary, OOIL shall have the right, at its expense, to audit and examine all relevant PEARL support documents to the Sales Activity Report for the purpose of validating the completeness and accuracy of the quarterly Sales Activity Reports.  The audit or examination may be performed by OOIL or by an independent third party designated by OOIL. It is understood and agreed that the documents provided by PEARL for the purpose of audit and examination shall remain the property of PEARL and shall constitute “Confidential Information” of PEARL.  The failure to produce documentation in support of the Sales Activity Report shall constitute a material breach of this Agreement.

3.6 Indemnification. PEARL agrees to indemnify and hold OOIL, its officers, directors, employees, successors, and assigns harmless from and against any and all losses, damages or expenses of whatever form or nature, including attorneys’ fees and other costs of legal defense, whether direct or indirect, that they, or any of them, may sustain or incur as a result of any acts or omissions of PEARL or any of its directors, officers, employees, or agents, including but not limited to (i) breach of any of the provisions of this Agreement, (ii) negligence or other tortuous conduct, (iii) representations or statements not specifically authorized by OOIL herein or otherwise in writing, or (iv) violation by PEARL of any applicable law, regulation, or order in or of the Territory or the United States.

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3.7 Joint Venture.  The parties acknowledge and agree that in the future they may desire to alter their relationship whereby OOIL and PEARL’s relationship would be that of joint venture partners or other equity holders.  Accordingly, OOIL reserves the right to waive its rights to any payments to which it would be entitled under this Agreement and convert such payments into equity contributions in connection with a potential revised relationship structure with PEARL.  Any waiver of rights by OOIL under this paragraph 3.7 shall not affect its other rights hereunder or its right to require payments be made as described in this Agreement.

ARTICLE 4

PRODUCTS & PRICES

4.1 Equipment Price.  As stated in Consideration, paragraph 3.2, PEARL and OOIL agree in principle that PEARL will be responsible for the purchase, construction and installation of all OOIL Technology and related equipment, with the exception of certain control software.  However, in the initial phase or projects, it may be expeditious for OOIL to provide certain equipment. The parties agree to work together in good faith to establish prices and discounts for the Equipment.

4.2 Technology Implementation and Changes.  OOIL offers and requires OOIL involvement in the design, implementation or integration of OOIL Technology in PEARL products.  Further, any changes in the design related to OOIL Technology require OOIL involvement in the design and their express written approval.   OOIL reserves the right, from time to time in its sole discretion, to discontinue certain Equipment or make changes to the Technology which do not adversely affect the utility of the Technology to PEARL, to add new and additional features to the Technology; and upon reasonable notice to PEARL, to change its sales and distribution policies, not inconsistent with the terms of this Agreement.

4.3 PEARL Product Pricing. PEARL shall provide OOIL with PEARL Product pricing information for OOIL’s consideration and comment.  Not less than thirty (30) days prior to the launch of each new PEARL Product, PEARL shall advise OOIL of the anticipated market price of the new PEARL Product(s).  The foregoing notwithstanding, the pricing of PEARL Products shall be the exclusive responsibility of PEARL.

4.4 Quality Control.  PEARL shall cooperate with OOIL, in a commercially reasonable manner, to permit OOIL to ascertain that the PEARL Products meet OOIL’s quality standards.

4.5 Inspection.  PEARL shall not make any use of, sell or distribute any OOIL Technology or related equipment prior to OOIL granting final written approval of the quality of the product, as to the use, implementation, design and construction of the Equipment and/or Technology with and into the PEARL Products.  PEARL shall not have any rights against OOIL for damages or other remedies by reason of OOIL’s failure or refusal to grant any approval.

ARTICLE 5

PURCHASE ORDERS

5.1 Purchase Orders.  If certain equipment is to be provided by OOIL to PEARL, PEARL shall issue a written purchase order listing the specific equipment, price and terms of sale.

OOIL hereby covenants and agrees to sell PEARL all of the specified Equipment related to the Technology required by PEARL as confirmed by written orders tendered by PEARL to OOIL.  All orders for Equipment by PEARL shall be confirmed by a written purchase order in form acceptable to OOIL; provided, however, that an order may initially be placed orally, by fax or email if a written Purchase Order is received by OOIL within seven (7) days of said oral, fax or email order.

5.2 Agreement Governs. Purchase Orders shall be governed by the terms of this Agreement. Nothing contained in any Purchase Order shall in any way modify or delete the terms and conditions contained herein or add any additional or different terms or conditions to the terms and conditions of this Agreement.

5.3 Order Changes. Purchase Orders may be canceled only with OOIL’s prior written approval.  Cancellation of a Purchase Order is subject to a restocking charge equal to ten percent (10%) of the aggregate value of such Purchase Order.

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ARTICLE 6

ROYALTY PAYMENTS

6.1.1   Within […] days after the end of each calendar quarter, PEARL shall remit to OOIL royalty payments due to OOIL as specified in the Sales Activity Report described in paragraph 3.4 herein.  Payment will only be made to OOIL with funds that have been actually received by PEARL from its customers. Receipt of payment by PEARL from its customers is a condition of any Royalty payment to OOIL.

6.1.2   OOIL and PEARL are each responsible for there own taxes on any Royalty payment transactions.

ARTICLE 7

PAYMENT AND TAXES

7.1 Payment Terms. Payment of any and all amounts due under this Agreement shall be in U.S. Dollars.  PEARL shall pay for the Equipment purchases pursuant to Article 5 within […] by wire transfer or check to OOIL’s designated account.

7.2 Offsets. Any credits, allowances, or other amounts payable to or creditable by PEARL shall be subject to offset for any claims or other amounts owed by PEARL to OOIL pursuant to the provisions of this Agreement.

7.3 Taxes.  Prices do not include and are net of any foreign or domestic governmental taxes or charges of any kind that may be applicable to the sale, licensing, marketing or distribution of the Equipment or Technology, including without limitation excise, sales, use, or value-added taxes; customs or other import duties; or other taxes, tariffs or duties.  PEARL shall be responsible for and shall pay all such taxes and charges levied against OOIL in a timely manner. When OOIL has the legal obligation to pay or collect such taxes, excluding taxes on the income of OOIL, the appropriate amount shall be invoiced to PEARL and paid by PEARL within thirty (30) days of the date of invoice unless PEARL provides OOIL with a valid tax exemption certificate authorized by the appropriate taxing authority.

ARTICLE 8

DELIVERY, REJECTION AND RETURN OF TECHNOLOGY

8.1 Shipment and Delivery. Equipment related to the Technology delivered pursuant to the terms of this Agreement shall be suitably packed for shipment in OOIL’s standard shipping cartons, marked for shipment to the destination specified in PEARL’s Purchase Order, and delivered to the carrier agent […], California, United States, at which time risk of loss shall pass to PEARL. Unless otherwise specified in writing by PEARL in PEARL’s purchase order, OOIL shall select the carrier. All freight, insurance, and other shipping expenses, as well as expenses for any special packing requested by PEARL and provided by OOIL, shall be paid by PEARL. All shipment and freight charges shall be deemed correct unless OOIL receives from PEARL, no later than […] after the date of shipment, a written notice specifying the shipment, the purchase order number, and the exact nature of the discrepancy between the order and the shipment in number or type of Technology shipped, or freight or other charges, as the case may be.

8.2 Title. OOIL shall retain all right, title and interest in and to Equipment related to the Technology delivered to PEARL until OOIL has received all applicable payments therefore.

8.3 Inspection and Rejection.  PEARL shall inspect all equipment related to the Technology promptly upon receipt thereof and may reject any defective equipment related to the Technology, provided that PEARL shall (i) within the earlier of […] days after receipt of such alleged defective equipment related to the Technology or […] days after discovery of such alleged defect, notify OOIL of its rejection and request a Return Material Authorization (“RMA”) number and (ii) within […] days of receipt of the RMA number from OOIL return such rejected Technology to OOIL, freight prepaid and properly insured. Equipment related to the Technology not rejected within the foregoing time periods shall be deemed accepted by PEARL. In the event that OOIL determines that the returned Technology is defective and properly rejected by PEARL, OOIL shall at its option, repair or replace such defective equipment related to the Technology, or accept return for credit of such defective Technology. OOIL shall return to PEARL, freight prepaid, all repaired or replaced Technology properly rejected by PEARL. In the event that any rejected product is determined by OOIL to not be defective or to have been modified or subjected to unusual electrical or physical stress, misuse, abuse or unauthorized repair, PEARL shall reimburse OOIL for all costs and expenses related to the inspection, repair, if any, and return of such equipment related to the Technology to PEARL.  Once accepted, PEARL shall have title to the equipment and the responsibility for the function and support of the equipment.

8.4           Returned Product. PEARL shall only return equipment related to the Technology to OOIL with OOIL’s prior written approval. Any Technology returned to OOIL by PEARL as authorized under this Agreement shall be shipped, […] OOIL’s address first set forth above or such other location as OOIL may instruct PEARL, and shall be packed in its original packing material where practicable. OOIL may refuse to accept any equipment related to the Technology not packed and shipped as herein provided.

ARTICLE 9

TECHNICAL SUPPORT

9.1 Support by OOIL.  OOIL shall be responsible for supporting all Technology distributed hereunder. OOIL technical support (Level 3) shall be limited to direct and  reasonable technical support to PEARL, including without limitation (i) maintaining trained and competent technical and engineering support personnel for the Technology who are sufficiently knowledgeable with respect to the Technology to answer PEARL’s questions regarding the use and operation of the Technology, (ii) designating a technical liaison to coordinate technical support to PEARL, (iii) responding promptly to requests for technical support from PEARL, and (iv) providing technical support services to address and resolve PEARL’s support requests with respect to the Technology. PEARL shall ensure that PEARL’s technical and engineering support personnel attend any training required by OOIL with respect to the Technology.  OOIL technical support is specifically exclusive of any direct technical support to PEARL customers or resellers.

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9.2 Support by PEARL. PEARL is responsible for all direct technical support for its customers (Level 1) and resellers (Level 2) either delivered by PEARL or its nominee.  PEARL shall ensure that all customer questions regarding the use or operation of PEARL Products are initially addressed to and answered by PEARL. Unless otherwise agreed in writing by OOIL, PEARL shall not represent to any third party that OOIL is available to answer questions from any customer directly.

9.3 Conformance with OOIL Policy. PEARL will provide prompt and effective service and repair of Technology in the Territory in accordance with OOIL’s standard support policies then in effect.

9.4 Additional Responsibilities.  Without limiting the foregoing and in addition to any other obligations set forth in OOIL’s then current support terms and conditions, PEARL also shall be responsible for (i) providing sufficient information to OOIL for OOIL to duplicate any reported error in the Technology; (ii) incorporating updates into the Technology promptly upon receipt thereof from OOIL; (iii) reporting errors promptly in writing in accordance with OOIL’s standard support procedures; and (iv) providing reasonable cooperation and full information to OOIL in the furnishing of support for the Technology.

ARTICLE 10

DISCLAIMER OF WARRANTY

10.1 OOIL makes no warranties or conditions, express, statutory, implied or otherwise, and OOIL specifically disclaims the implied warranties and conditions of merchantability, fitness for a particular purpose, and all other implied warranties or conditions arising from course of dealing, usage of trade or custom. Notwithstanding the foregoing, OOIL does not exclude liability to the extent that such liability may not be excluded or limited by law.

ARTICLE 11

CONFIDENTIALITY AND PROPRIETARY RIGHTS

11.1 Confidentiality. The parties acknowledge that by reason of the relationship created herein both OOIL and PEARL will have access to certain information and materials concerning one another’s business, plans, customers, technology, and products that are confidential and of substantial value, which value would be impaired if such information were disclosed to third parties (“Confidential Information”). OOIL and PEARL agrees that it will not use in any way for its own account or the account of any third party, nor disclose to any third party, any Confidential Information revealed to it pursuant to the terms of this Agreement. PEARL and OOIL shall communicate to specifically identify any particular information or materials as confidential.  In the event of termination of this Agreement, there shall be no use or disclosure by either party of any Confidential Information and each party agrees not to reproduce, manufacture, have reproduced or have manufactured any computer software programs, devices, components or assemblies utilizing any of the confidential information.

11.2 Proprietary Rights. PEARL agrees that OOIL retains all of its right, title and interest in and to all patents, trademarks, trade names, inventions, copyrights, know-how and trade secrets relating to the Technology, and the design, manufacture, operation or service of the Technology including any improvements relating to the Technology developed by OOIL during the course of this Agreement. The use by PEARL of any of these property rights is authorized only for the purposes herein set forth and upon termination of this Agreement for any reason such authorization will cease. PEARL shall not (and shall require that its customers do not) remove, alter, cover or obfuscate any patent, trademark, copyright or other proprietary rights notices placed or embedded by OOIL on or in the Technology. PEARL shall not make use of any OOIL trademarks without prior approval by OOIL of such usage.

ARTICLE 12

INTELLECTUAL PROPERTY INDEMNIFICATION

12.1 Limited Indemnity. PEARL agrees that OOIL has the right to defend, or at its option to settle, and OOIL agrees, at its own expense, to defend or at its option to settle, any third party claim, suit or proceeding (collectively, “Action”) brought against PEARL alleging that the Technology infringes any patent, copyright or trademark in existence as of the Effective Date, subject to the limitations hereinafter set forth. OOIL shall have sole control of any such Action or settlement negotiations, and OOIL agrees to pay, subject to the limitations hereinafter set forth, any final judgment entered against PEARL on such issue in any such Action defended by OOIL. PEARL agrees that OOIL will be relieved of the foregoing obligations unless PEARL notifies OOIL in writing of such Action within thirty (30) days after becoming aware of such action, gives OOIL authority to proceed as contemplated herein, and gives OOIL proper and full information and assistance to settle and/or defend any such Action. If it is determined by a court of competent jurisdiction, or if OOIL believes, that the Technology, or any part thereof, infringes any patent, copyright or trademark, or if the sale or use of the Technology, or any part thereof, is, as a result, enjoined, then OOIL may, at its election, option, and expense: (i) procure for PEARL the right under such patent, copyright or trademark to sell or use, as appropriate, the Technology or such part thereof; (ii) replace the Technology, or part thereof, with other noninfringing suitable products or parts; (iii) suitably modify the Technology or part thereof; or (iv) remove the Technology, or part thereof, terminate distribution or sale thereof and refund the payments paid by PEARL for such Technology.

12.2 Limitations. Notwithstanding the provisions of Section 12.1 above, OOIL assumes no liability for infringement claims arising from (i) combination of the Technology or portions thereof with other intellectual property not provided by OOIL if such infringement would not have occurred but for such combination, or (ii) the modification of the Technology or portions thereof unless such modification was made or authorized by OOIL, when such infringement would not have occurred but for such modification.

ARTICLE 13

LIMITATION OF LIABILITY

13.1 In no event shall either party be liable for lost profits, cost of procurement of substitute goods, or any other special, reliance, incidental, or consequential damages, however caused and under any theory of liability whether based in contract, tort (including negligence), products liability, or otherwise. The foregoing limitations shall apply regardless of whether such party has been advised of the possibility of such damages and notwithstanding the failure of essential purpose of any limited remedy stated herein.

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ARTICLE 14

TERM AND TERMINATION

14.1 Term.  Unless earlier terminated pursuant to Section 14.2 below or by mutual written consent, this Agreement shall commence upon the Effective Date and continue in full force and effect for an initial term expiring on [__3 years________]. The parties may renew this Agreement for additional terms upon mutual written consent.

14.2 Termination. This Agreement may be terminated prior to the expiration of the initial term by prior written notice to the other party as follows:

14.2.1 By either party upon written notice of termination if the other party breaches any material term or condition of this Agreement and fails to cure that breach within thirty (30) days after receiving written notice stating the nature of the breach and the non-breaching party’s intent to terminate; or

14.2.2 By either party, effective immediately, if the other party should become the subject of any voluntary or involuntary bankruptcy, receivership, or other insolvency proceedings or make an assignment or other arrangement for the benefit of its creditors, or if such other party should be nationalized or have any of its material assets expropriated; or

14.2.3 By either party, effective immediately, if there should occur any material change in the management, ownership, control, sales personnel, sales and marketing capability, or financial condition of the other party that prevents the other party from fulfilling its obligations hereunder; or

14.2.4 By OOIL, effective immediately, if any law or regulation should become adopted or in effect in the Territory that would restrict OOIL’s termination rights or otherwise invalidate any provisions hereof; or

14.2.5 By OOIL, effective immediately, if PEARL should violate the terms of paragraph 15.1, below; or

14.2.6 By OOIL, effective immediately, if PEARL knowingly makes any false or untrue statements or representations to OOIL herein; or

14.2.7 By OOIL, effective immediately, if PACE is more than 30 business days late in making the payment required under Section 3.2, or is late by more than 90 business days for any other payment to be made to OOIL as required under this Agreement.

14.2.8 By either party, upon 60 days written notice to the other party, for lack of performance (including projects) or for business convenience.

14.2.9 By OOIL, effective immediately, if PEARL is not longer utilizing OOIL Technology in PEARL products.

14.3 Purchase Orders; No Waiver.  Notwithstanding the foregoing, PEARL shall be obligated to accept deliveries of equipment related to the Technology for which orders were accepted by OOIL prior to the effective date of termination. After any notice of termination has been delivered by either party hereunder, deliveries of equipment related to the Technology from OOIL to PEARL, unless otherwise agreed by OOIL in its sole discretion, shall require prepayment by wire transfer by PEARL to OOIL. The acceptance of any order for the sale of any equipment related to the Technology to PEARL after the termination or expiration of this Agreement shall not be construed as a renewal or extension of this Agreement nor as a waiver of termination of this Agreement.

14.4 Rights of Parties Upon Termination or Expiration. The following provisions shall apply on the termination or expiration of this Agreement.

14.4.1 Cessation of Sales Activities. PEARL shall cease all sales and other activities on behalf of OOIL and shall return to OOIL and immediately cease all use of Confidential Information previously furnished by OOIL and then in PEARL’s possession;

14.4.2 Acceleration of Amounts Owed. All indebtedness of PEARL to OOIL shall become immediately due and payable without further notice or demand, which is hereby expressly waived;

14.4.3 No Obligation to Repurchase. OOIL shall have no obligation to repurchase or to credit PEARL for its inventory of equipment related to the Technology at the time of termination of this Agreement. OOIL may, at its sole option, repurchase from PEARL at the prices paid by PEARL less a 20% restocking fee, any or all inventory of Technology originally purchased by PEARL from OOIL and remaining unsold by PEARL.

14.5 No Liability for Termination. Except as expressly required by law, in the event of termination of this Agreement by either party in accordance with any of the provisions of this Agreement, neither party shall be liable to the other, because of such termination, for compensation, reimbursement or damages on account of the loss of prospective profits or anticipated sales or on account of expenditures, inventory, investments, leases or commitments in connection with the business or goodwill of OOIL or PEARL. Termination shall not, however, relieve either party of obligations incurred prior to the termination.  Termination of this Agreement by OOIL, pursuant to 14.2.1, shall not alter the obligation of PEARL to remit the minimum royalty payments specified in paragraphs 3.5 and 6.1, of this Agreement.

14.6 Survival. Except for termination by OOIL pursuant to paragraph 14.2.1 above, PEARL may sell Products existing in its inventory as of the effective date of termination of this Agreement for a period of one hundred eighty (180) days after the effective date of such termination (“Wind-Down Period”).  During the Wind-Down Period, the provisions of paragraph 2.2, and Article 16 shall survive.

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ARTICLE 15

COMPLIANCE WITH LAWS

15.1 Export Control. Any and all obligations of OOIL to provide the Technology, as well as any technical data, shall be subject in all respects to such United States laws and regulations as will from time to time govern the license and delivery of technology and products abroad by persons subject to the jurisdiction of the United States, including the Export Administration Act of 1979, as amended, any successor legislation, and the Export Administration Regulations issued by the U.S. Department of Commerce, Bureau of Export Administration. PEARL represents and warrants that it will not export or re-export the Technology or technical data related thereto except in conformity with such laws and regulations.

15.2 Local Law. PEARL shall notify OOIL of the existence and content of any mandatory provision of law in the Territory that conflicts with any provision of this Agreement at the time of its execution or thereafter.

15.3 Liability of OOIL. The provisions of this Agreement under which the liability of OOIL is excluded or limited shall not apply to the extent that such exclusions or limitations are declared illegal or void under the laws applicable in the countries in which Products are sold hereunder.

15.4 Questionable Payments. PEARL certifies that neither it, nor any of its directors, officers, employees, or agents is an official, agent, or employee of any government or governmental agency or political party or a candidate for any political office on the date of this Agreement. PEARL shall promptly notify OOIL of any event that would or may result in an exception to the foregoing representation. PEARL shall not, directly or indirectly, in the name of, on behalf of, or for the benefit of OOIL offer, promise to pay, or pay any compensation, or give anything of value to, any official, agent, or employee of any government or governmental agency, or to any political party or officer, employee, or agent thereof. Any breach of the provisions of this paragraph 15.4, shall entitle OOIL to terminate this Agreement effective immediately upon written notice to PEARL pursuant to paragraph 14.2 above.

ARTICLE 16

MISCELLANEOUS PROVISIONS

16.1 Governing Law; Venue. This agreement has been negotiated and entered into in the State of California, and shall be governed by, construed and enforced in accordance with the internal laws of the State of California, applied to contracts made in California to be wholly performed in California.  Except as otherwise provided herein, the United States District Court for the Central District of California shall have jurisdiction to enforce the terms of this Agreement and any action for breach of the agreement or to enforce any of the terms of this agreement shall be filed in the United States District Court for the Central District of California.  In the event that the United States District Court for the Central District of California lacks jurisdiction pursuant to 28 U.S.C. § 1441(b) or otherwise refuses to exercise jurisdiction over the parties or causes relating to this Agreement, then the general jurisdiction Courts of the State of California, located in Los Angeles, California shall have jurisdiction to enforce the terms of this Agreement and adjudicate any action for breach of the Agreement.

16.2 Assignment. PEARL may not transfer or assign any of its obligations under this Agreement without the prior written consent of OOIL. OOIL may freely transfer or assign its rights under this Agreement without the prior written consent of PACE. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the parties hereto, their successors and assigns.

16.3 No Implied Waivers. The failure of either party at any time to require performance by the other of any provision hereof shall not affect the right of such party to require performance at any time thereafter, nor shall the waiver of either party of a breach of any provision hereof be taken or held to be a waiver of a provision itself.

16.4 Severability. If any provision of this Agreement is held to be invalid by a court of competent jurisdiction, then the remaining provisions will nevertheless remain in full force and effect. The parties agree to renegotiate in good faith those provisions held to be invalid to create valid, enforceable provisions which provisions shall reflect as closely as possible the original intent of the parties.

16.5 Force Majeure. Except for payment of monies, neither party shall be liable for failure to fulfill its obligations under this Agreement or any purchase order issued hereunder or for delays in delivery due to causes beyond its reasonable control, including, but not limited to, acts of God, man-made or natural disasters, earthquakes, fire, riots, flood, material shortages, strikes, delays in transportation or inability to obtain labor or materials through its regular sources. The time for performance of any such obligation shall be extended for the time period lost by reason of the delay.

16.6 Conflicting Terms. The parties agree that the terms and conditions of this Agreement shall prevail, notwithstanding contrary or additional terms, in any purchase order, sales acknowledgment, confirmation or any other document issued by either party effecting the purchase and/or sale of Technology.

16.7 Headings. Headings of paragraphs herein are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

16.8 Notice. Any notice required or permitted to be given under this Agreement shall be delivered (a) by hand, (b) by registered or certified mail, postage prepaid, return receipt requested, to the address of the other party first set forth above, or to such other address as a party may designate by written notice, (c) by overnight courier, or (d) by fax with confirming letter mailed under the conditions described in (b) above. Notice so given shall be deemed effective when received, or if not received by reason of fault of addressee, when delivered.

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16.9 Interpretation:  No provision of this agreement is to be interpreted for or against either party because that party or that party’s representative drafted such provision.

16.10 Indemnity:  In the event that any party violates the terms of this Agreement, then the party violating this agreement shall indemnify and hold harmless the non-breaching parties from any and all liability, costs, expenses and fees, including attorneys’ fees (whether suit is actually filed and in connection with all appeals), arising from said violation of this agreement or arising from an action to enforce the terms of the agreement.

16.11 Arbitration Agreement.  Except as specified in paragraph 6.5 of this Agreement, any unresolved controversy or claim arising out of or relating to this Agreement shall be submitted to binding arbitration under the auspices of Judicial Arbitration & Mediation Service (JAMS) in accordance with its rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof.  Except as otherwise provided herein, each party will bear its own costs in respect of any disputes arising under this Agreement.

16.12 Waiver of Jury Trial.  Each party hereto hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the administration, performance, enforcement or termination hereof.

16.13 Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements relating thereto, written or oral, between the parties. Amendments to this Agreement must be in writing, signed by the duly authorized officers or representatives of the parties.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement effective as of the specified Effective Date.

ORIGIN OIL, INC.

_______________________________

By:  Riggs Eckelberry, CEO

Date:  October 16, 2012

PEARL H20, LLC.

_______________________________

By:  Cory M. Severson, President

Date:  October 16, 2012

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OEM LICENSE AGREEMENT

APPENDIX “A”

Pursuant to the terms of the Agreement, OOIL hereby grants PEARL the right to manufacture, distribute, and sell PEARL Products incorporating OriginOil Technology in the following specified Markets:

1. Oil & Gas Frack Flowbach and Produced Water Treatment Market  -  This market includes the sale of any frack flowback and produced water treatment equipment utilizing OOIL Technology to producers, oil service companies, water treatment companies, system integrators and engineering companies in the oil and gas marketplace.

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OEM LICENSE AGREEMENT

APPENDIX “B”

ROYALTY

A. The Royalty Fee shall be equal to the following:

[…]

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EX-10.4

Exhibit 10.4

ORIGINOIL, INC.

STOCK OPTION AGREEMENT

This Stock Option Agreement ("Agreement") is made and entered into as of the date set forth below, by and between OriginOil, Inc., a Nevada corporation (the "Company"), and the employee of the Company named in Section 1(b) ("Optionee").

In consideration of the covenants herein set forth, the parties hereto agree as follows:

1.  Option Information.

(a) Date of Option: April 12, 2013

(b) Optionee: T. Riggs Eckelberry

(c) Number of Shares: 759,645

(d) Exercise Price: $0.43

2.  Acknowledgements.

(a) Optionee is an employee, officer and director of the Company.

(b) The Board of Directors of the Company (the “Board”) has authorized the granting to Optionee of a stock option ("Option") to purchase shares of common stock of the Company ("Common Stock") upon the terms and conditions hereinafter stated and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act") provided by Section 4(2) thereunder.

3.  Shares; Price.  The Company hereby grants to Optionee the right to purchase, upon and subject to the terms and conditions herein stated, the number of shares of Common Stock set forth in Section 1(c) above (the "Shares") at the price per Share set forth in Section 1(d) above (the "Exercise Price").

4.  Term of Option; Continuation of Employment.  This Option shall expire, and all rights hereunder to purchase the Shares shall terminate 5 years from the date hereof. This Option shall earlier terminate subject to Sections 7 and 8 hereof upon, and as of the date of, the termination of Optionee's employment if such termination occurs prior to the end of such 5 year period. Nothing contained herein shall confer upon Optionee the right to the continuation of his employment by the Company or to interfere with the right of the Company to terminate such employment or to increase or decrease the compensation of Optionee from the rate in existence at the date hereof.

5.  Vesting of Option.  Subject to the provisions of Sections 7 and 8 hereof, this Option shall become exercisable during the term of Optionee's employment. This Option shall vest in full immediately upon grant.

6.  Exercise.

(a) This Option shall be exercised by delivery to the Company of (a) written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached hereto as Appendix A, (b) a check or cash in the amount of the Exercise Price of the Shares covered by the notice and (c) a written investment representation as provided for in Section 12 hereof. This Option shall not be assignable or transferable, except by will or by the laws of descent and distribution, and shall be exercisable only by Optionee during his or her lifetime, except as provided in Section 8 hereof.

(b) Anything herein to the contrary notwithstanding, to the extent and only to the extent vested, the Option may also be exercised (as to the Shares vested) at such time by means of a “cashless exercise” in which the Optionee shall be entitled to receive a certificate for the number of Shares equal to the quotient obtained by dividing:

[(A-B) (X)] by (A), where:

(A) equals the closing price of the Company’s Common Stock, as reported (in order of priority) on the Trading Market on which the Company’s Common Stock is then listed or quoted for trading on the Trading Date preceding the date of the election to exercise; or, if the Company’s Common Stock is not then listed or traded on a Trading Market, then the fair market value of a share of Common Stock as determined by the Board;

(B) equals the Exercise Price of the Option, as adjusted from time to time in accordance herewith; and

(X) equals the number of vested Shares issuable upon exercise of this Option in accordance with the terms of this Option by means of a cash exercise rather than a cashless exercise (or, if the Option is being exercised only as to a portion of the shares as to which it has vested, the portion of the Option being exercised at the time the cashless exercise is made pursuant to this Section 6).

1

For purposes of this Agreement:

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

“Trading Market” means, in order of priority, the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, NYSE MKT LLC, the OTCBB, the OTCQB or the Pink Sheets.

7.  Termination of Employment.  If Optionee shall cease to be employed by the Company  for any reason, whether voluntarily or involuntarily, other than by his or her death, Optionee (or if the Optionee shall die after such termination, but prior to such exercise date, Optionee's personal representative or the person entitled to succeed to the Option) shall have the right at any time within six (6) months following such termination of employment or the remaining term of this Option, whichever is the lesser, to exercise in whole or in part this Option to the extent, but only to the extent, that this Option was exercisable as of the date of termination of employment and had not previously been exercised; provided, however: (i) if Optionee is permanently disabled (within the meaning of Section 22(e)(3) of the Code) at the time of termination, the foregoing six month (6) period shall be extended in the discretion of the Board of Directors to up to one (1) year; or (ii) if Optionee is terminated "for cause" as defined in any applicable employment, or in the absence of an employment agreement then defined as (i) Optionee’s conviction of or entrance of a plea of guilty or nolo contendere to a felony; or (ii) Optionee is engaging or has engaged in material fraud, material dishonesty, or other acts of willful and continued misconduct in connection with the business affairs of the Company, this Option shall automatically terminate as to all Shares covered by this Option not exercised prior to termination. Unless earlier terminated, all rights under this Option shall terminate in any event on the expiration date of this Option as defined in Section 4 hereof.

8.  Death of Optionee.  If the Optionee shall die while in the employ of the Company, Optionee's personal representative or the person entitled to Optionee's rights hereunder may at any time within six (6) months after the date of Optionee's death, or during the remaining term of this Option, whichever is the lesser, exercise this Option and purchase Shares to the extent, but only to the extent, that Optionee could have exercised this Option as of the date of Optionee's death, as such may be accelerated by the Board of Directors; provided, in any case, that this Option may be so exercised only to the extent that this Option has not previously been exercised by Optionee.

9.  Adjustment of Exerise Price and Number of Common Stock. The number of shares of Common Stock deliverable upon exercise of this Option (or any shares of stock or other securities or property receivable upon exercise of this Option) and the Exercise Price are subject to adjustment upon occurrence of the following events:

(a)           Adjustment for Stock Splits, Stock Subdivisions or Combinations of Shares of Common Stock. The Exercise Price of this Option shall be proportionally decreased and the number of shares of Common Stock deliverable upon exercise of this Option (or any shares of stock or other securities at the time deliverable upon exercise of this Option) shall be proportionally increased to reflect any stock split or subdivision of the Company’s Common Stock. The Exercise Price of this Option shall be proportionally increased and the number of shares of Common Stock deliverable upon exercise of this Option (or any shares of stock or other securities at the time deliverable upon exercise of this Option) shall be proportionally decreased to reflect any combination of the Company’s Common Stock.

(b)           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 Option) 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 Option 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 Option 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 9.

(c)           Reclassification. If the Company, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Option exist into the same or a different number of securities of any other class or classes, this Option 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 Option immediately prior to such reclassification or other change and the Exercise Price therefore shall be appropriately adjusted, all subject to further adjustment as provided in this Section 9.

(d)           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 Option shall thereafter be entitled to receive upon exercise of this Option, during the period specified herein and upon payment of the Exercise 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 Option would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Option had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 9. The foregoing provisions of this Section 9(d) 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 Option. 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 Board. In all events, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions of this Option with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Option 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 Option.

2

10.  No Rights as Shareholder.  Optionee shall have no rights as a shareholder with respect to the Shares covered by any installment of this Option until the effective date of issuance of Shares following exercise of this Option, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are issued except as provided for herein.

11.    Additional Consideration.  Should the Internal Revenue Service determine that the Exercise Price established by the Board as the fair market value per Share is less than the fair market value per Share as of the date of Option grant, Optionee hereby agrees to tender such additional consideration, or agrees to tender upon exercise of all or a portion of this Option, such fair market value per Share as is determined by the Internal Revenue Service.

12. Modifications, Extension and Renewal of Options.  The Board may modify, extend or renew this Option or accept the surrender thereof (to the extent not theretofore exercised) and authorize the granting of a new option in substitution therefore (to the extent not theretofore exercised).

13.  Investment Intent; Restrictions on Transfer.

(a) Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon such exercise of this Option in whole or in part, Optionee (or any person or persons entitled to exercise this Option under the provisions of Sections 7 and 8 hereof) shall furnish to the Company a written statement to such effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the foregoing investment representation and agreement and shall not be required to furnish the Company with the foregoing written statement.

(b) Optionee further represents that Optionee has had the opportunity to ask questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information.

(c) Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company's transfer agent.

14.  Stand-off Agreement.  Optionee agrees that in connection with any registration of the Company's securities under the Securities Act, and upon the request of the Company or any underwriter managing an underwritten offering of the Company's securities, Optionee shall not sell, short any sale of, loan, grant an option for, or otherwise dispose of any of the Shares (other than Shares included in the offering) without the prior written consent of the Company or such managing underwriter, as applicable, for a period of at least one year following the effective date of registration of such offering.

15.  Notices.  Any notice required to be given pursuant to this Option shall be in writing and shall be deemed to be delivered upon receipt or, in the case of notices by the Company, five (5) days after deposit in the U.S. mail, postage prepaid, addressed to Optionee at the address last provided to the Company by Optionee for his or her employee records.

16.  Applicable Law.  This Option has been granted, executed and delivered in the State of Nevada, and the interpretation and enforcement shall be governed by the laws thereof and subject to the exclusive jurisdiction of the courts therein.

[SIGNATURE PAGE FOLLOWS]

3

In Witness Whereof, the parties hereto have executed this Option as of the date first above written.

COMPANY:	OriginOil, Inc.
	By:	/s/ Steven Glovsky
		Name: Steven Glovsky
		Title: Director

OPTIONEE:
	By:	/s/ T. Riggs Eckelberry
		(signature)
		Name: T. Riggs Eckelberry

(one of the following, as appropriate, shall be signed)

4

Appendix A

NOTICE OF EXERCISE

OriginOil, Inc.

Re: Stock Option

Notice is hereby given pursuant to Section 6 of my Stock Option Agreement that I elect to purchase the number of shares set forth below at the exercise price set forth in my option agreement:

Stock Option Agreement dated: ____________

Number of shares being purchased: ____________

Exercise Price: $____________

By exercising this Option, I hereby make the following election:

 Tender herewith payment of the Exercise Price in full in the form of cash or a certified or official bank check in same-day funds in the amount of $____________ for _________ such securities.

 If applicable pursuant to the cashless exercise feature set forth in Section 6(b).

I hereby confirm that such shares are being acquired by me for my own account for investment purposes, and not with a view to, or for resale in connection with, any distribution thereof. I will not sell or dispose of my Shares in violation of the Securities Act of 1933, as amended, or any applicable federal or state securities laws.

I understand that the certificate representing the Shares will bear a restrictive legend within the contemplation of the Securities Act and as required by such other state or federal law or regulation applicable to the issuance or delivery of the Shares.

By:
	(signature)
Name:

5

EX-31.1

EXHIBIT 31

Certifications

I, T Riggs Eckelberry, certify that:

1.       I have reviewed this Annual Report on Form 10-K of OriginOil, Inc.;

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, including its consolidated subsidiaries, is made known to us by others within those entities, 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 functions):

(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.

Date: April 16, 2013

/s/ T Riggs Eckelberry

T Riggs Eckelberry

Chief Executive Officer (Principal Executive Officer) Acting Chief Financial Officer

(Principal Accounting and Financial Officer)

EX-32.1

EXHIBIT 32

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 this Annual Report of OriginOil, Inc. (the “Company”) on Form 10-K filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, T Riggs Eckelberry, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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 Exchange Act of 1934; and

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

/s/ T Riggs Eckelberry

T Riggs Eckelberry

Chief Executive Officer (Principal Executive Officer)

Acting Chief Financial Officer

(Principal Accounting and Financial Officer)

Date: April 16, 2013

XML

STOCK OPTIONS AND WARRANTS - Summary of shares authorized under warrants by exercise price range (Details 5) (Warrant)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Warrants, outstanding	7,098,104	836,188	733,832
Warrants Exercisable	7,048,104
Exercisable Prices $ 9.30
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	9.3
Warrants, outstanding	223,338
Warrants Exercisable	223,338
Weighted Average Remaining Contractual Life (years)	1 year 6 months
Exercisable Prices $ 10.2
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	10.2
Warrants, outstanding	28,335
Warrants Exercisable	28,335
Weighted Average Remaining Contractual Life (years)	1 year 7 months 17 days
Exercisable Prices $ 9
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	9
Warrants, outstanding	9,168
Warrants Exercisable	9,168
Weighted Average Remaining Contractual Life (years)	1 year 9 months 22 days
Exercisable Prices $ 8.7
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	8.7
Warrants, outstanding	3,334
Warrants Exercisable	3,334
Weighted Average Remaining Contractual Life (years)	1 year 10 months 13 days
Exercisable Prices $ 8.4
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	8.4
Warrants, outstanding	667
Warrants Exercisable	667
Weighted Average Remaining Contractual Life (years)	2 years 29 days
Exercisable Prices $ 8.7
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	8.7
Warrants, outstanding	5,000
Warrants Exercisable	5,000
Weighted Average Remaining Contractual Life (years)	2 years 4 months 28 days
Exercisable Prices $ 5.7
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	5.7
Warrants, outstanding	7,334
Warrants Exercisable	7,334
Weighted Average Remaining Contractual Life (years)	2 years 7 months 2 days
Exercisable Prices $ 4.5
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	4.5
Warrants, outstanding	3,334
Warrants Exercisable	3,334
Weighted Average Remaining Contractual Life (years)	2 years 8 months 12 days
Exercisable Prices $ 4.2
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	4.2
Warrants, outstanding	8,334
Warrants Exercisable	8,334
Weighted Average Remaining Contractual Life (years)	2 years 8 months 23 days
Exercisable Prices $ 4.2
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	4.2
Warrants, outstanding	33,334
Warrants Exercisable	33,334
Weighted Average Remaining Contractual Life (years)	2 years 8 months 27 days
Exercisable Prices $ 3.6
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	3.6
Warrants, outstanding	8,334
Warrants Exercisable	8,334
Weighted Average Remaining Contractual Life (years)	2 years 9 months 29 days
Exercisable Prices $ 4.5
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	4.5
Warrants, outstanding	33,334
Warrants Exercisable	33,334
Weighted Average Remaining Contractual Life (years)	2 years 10 months 24 days
Exercisable Prices $ 4.2
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	4.2
Warrants, outstanding	13,335
Warrants Exercisable	13,335
Weighted Average Remaining Contractual Life (years)	2 years 10 months 28 days
Exercisable Prices $ 6
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	6
Warrants, outstanding	133,334
Warrants Exercisable	133,334
Weighted Average Remaining Contractual Life (years)	2 years 11 months 23 days
Exercisable Prices $ 6
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	6
Warrants, outstanding	33,334
Warrants Exercisable	33,334
Weighted Average Remaining Contractual Life (years)	2 years 11 months 27 days
Exercisable Prices $ 6.3
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	6.3
Warrants, outstanding	8,334
Warrants Exercisable	8,334
Weighted Average Remaining Contractual Life (years)	3 years 2 months 16 days
Exercisable Prices $ 5.7
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	5.7
Warrants, outstanding	4,001
Warrants Exercisable	4,001
Weighted Average Remaining Contractual Life (years)	3 years 3 months
Exercisable Prices $ 6.9
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	6.9
Warrants, outstanding	33,334
Warrants Exercisable	33,334
Weighted Average Remaining Contractual Life (years)	3 years 5 months 16 days
Exercisable Prices $ 6.9
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	6.9
Warrants, outstanding	33,334
Warrants Exercisable	33,334
Weighted Average Remaining Contractual Life (years)	3 years 8 months 16 days
Exercisable Prices $ 1.9
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	1.9
Warrants, outstanding	80,000
Warrants Exercisable	80,000
Weighted Average Remaining Contractual Life (years)	3 years 9 months 4 days
Exercisable Prices $ 6.9
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	6.9
Warrants, outstanding	33,334
Warrants Exercisable	33,334
Weighted Average Remaining Contractual Life (years)	3 years 11 months 16 days
Exercisable Prices $1.47
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	1.47
Warrants, outstanding	260,000
Warrants Exercisable	260,000
Weighted Average Remaining Contractual Life (years)	4 years 3 months 26 days
Exercisable Prices $0.65
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	0.65
Warrants, outstanding	280,000
Warrants Exercisable	280,000
Weighted Average Remaining Contractual Life (years)	4 years 7 months 10 days
Exercisable Prices $0.65
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	0.65
Warrants, outstanding	20,000
Warrants Exercisable	20,000
Weighted Average Remaining Contractual Life (years)	4 years 9 months 18 days
Exercisable Prices $0.65
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	0.65
Warrants, outstanding	50,000
Warrants Exercisable	50,000
Weighted Average Remaining Contractual Life (years)	4 years 9 months 29 days
Exercisable Prices $ 0.89
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	0.89
Warrants, outstanding	100,000
Warrants Exercisable	100,000
Weighted Average Remaining Contractual Life (years)	4 years 9 months 29 days
Exercisable Prices $0.65
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	0.65
Warrants, outstanding	5,651,918
Warrants Exercisable	5,651,918
Exercisable Prices $0.65 | Maximum
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	4 years 11 months 27 days
Exercisable Prices $0.65 | Minimum
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	11 months 27 days

XML

CONVERTIBLE PROMISORY NOTES (Detail Textuals) (USD $)	1 Months Ended	12 Months Ended		12 Months Ended	0 Months Ended		1 Months Ended			12 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Convertible promissory notes	Apr. 12, 2013 Convertible promissory notes Subsequent Event	Feb. 04, 2013 Convertible promissory notes Subsequent Event	Nov. 30, 2012 Convertible promissory notes Subsequent Event	Dec. 31, 2012 Convertible promissory notes Minimum	Dec. 31, 2012 Convertible promissory notes Maximum	Dec. 31, 2012 Derivative
Debt Instrument [Line Items]
Unsecured convertible promissory issued		$ 1,669,828		$ 430,000	$ 125,000	$ 100,000	$ 100,000
Debt Issuance Cost				143,330
Conversion price of convertible debentures								$ 0.4375	$ 0.65
Term of note maturity				90 days
One time interest charge				57,330
Extension period of maturity on repayment of notes				30 days
Percentage of extension fee				25.00%
Per day penalty on conversion of convertible securities not timely delivered				2,000
Repayment of defaulted notes description condition				(i) the outstanding principal amount of the Note plus accrued and unpaid interest divided by the then conversion price of the Notes multiplied by Company's lowest trade price at the time of demand or payment, or (ii) 150% of the outstanding principal amount of the Notes plus accrued and unpaid interest and other fees due thereon. In addition, in an event of default, the Notes bear interest at 25% per annum.
Percentage of outstanding principal amount, repayment of defaulted notes description condition				150.00%
Note bears interest rate				25.00%
Percentage of average of three lowest closing prices				70.00%
Number of trading days previous to conversion				25 days
Interest and extension fee amount					233,066
Shares of common stock for the convertible debenture (in shares)	1,828,348	1,241,929			1,432,285	245,639
Amortization of debt discount in interest expense										96,992
Recorded derivative liability Estimated present value of conversion feature										264,085
Derivative liability		$ 355,526	$ 641,900							$ 218,680

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UNSECURED CONVERTIBLE PROMISSORY NOTES (Detail Textuals) (USD $)	1 Months Ended	12 Months Ended	1 Months Ended	12 Months Ended	1 Months Ended	12 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Nov. 30, 2011 November 2011 Notes	Dec. 31, 2012 November 2011 Notes	Dec. 31, 2011 December 2011 Notes	Dec. 31, 2012 January 2012 Notes
Debt Instrument [Line Items]
Unsecured convertible promissory issued		$ 1,669,828	$ 32,500	$ 12,500	$ 218,750	$ 1,479,578
Prinicipal amount of promissory note as result of an exchange					20,000	190,250
Total outstanding principal amount				0		210,000
Converted an aggregate principal amount	1,520,828	841,197		12,500		1,269,578
Shares of common stock for the convertible debenture (in shares)	1,828,348	1,241,929
Unpaid accrued interest	$ 78,690

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SUBSEQUENT EVENTS (Detail Textuals) (USD $)	12 Months Ended		1 Months Ended		0 Months Ended		1 Months Ended		0 Months Ended		2 Months Ended	1 Months Ended
	Dec. 31, 2012	Dec. 31, 2012 Promissory Notes	Jun. 20, 2012 Securities Purchase Agreement Private Placement	Jun. 20, 2012 Securities Purchase Agreement Private Placement Common stock	Apr. 12, 2013 Subsequent Event Promissory Notes	Feb. 04, 2013 Subsequent Event Promissory Notes	Nov. 30, 2012 Subsequent Event Promissory Notes	Feb. 20, 2013 Subsequent Event Promissory Notes	Mar. 19, 2013 Subsequent Event Promissory Notes Private Placement Accredited Investors	Feb. 12, 2013 Subsequent Event Promissory Notes Private Placement Accredited Investors	Apr. 20, 2013 Subsequent Event Promissory Notes Private Placement Accredited Investors	Feb. 20, 2013 Subsequent Event Securities Purchase Agreement Promissory Notes	Feb. 20, 2013 Subsequent Event Securities Purchase Agreement Promissory Notes Common stock
Subsequent Event [Line Items]
Aggregate principal amount of promissory Note	$ 1,669,828	$ 430,000			$ 125,000	$ 100,000	$ 100,000		$ 113,333	$ 133,333		$ 100,000
Proceeds from issuance of private placement			100,000						85,000	100,000	85,000
Number of common stock called by warrants (in shares)				153,846				153,846					153,846
Total outstanding principal amount								$ 200,000					$ 200,000

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DEFERRED TAX BENEFIT (Detail Textuals) (USD $)	Dec. 31, 2012
Deferred Tax Benefit [Abstract]
Net operating loss carry-forwards	$ 15,128,000

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CAPITAL STOCK (Detail Textuals) (USD $)	1 Months Ended	12 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Jun. 30, 2012
Capital Stock [Line Items]
Common stock, shares authorized		250,000,000	250,000,000	250,000,000
Preferred stock, shares authorized		25,000,000	25,000,000	25,000,000
Common stock, shares, issued for cash (in shares)		1,222,557
Common stock value shares, issued for cash		$ 1,642,048
Common stock issued for settlement of accounts payable (in share)		12,001
Common stock issued for settlement of accounts payable value		21,000
Additional common stock issued for services (in share)		12,000
Additional common stock issued for services value		21,000
Common stock issued in exchange for cancellation of the convertible debentures value	1,520,828	841,197
Additional common stock issued with the conversion of a convertible debenture (in shares)		9,670
Additional common stock shares issue at fair value associated with conversion of convertible debenture		6,286	335,303
Common stock issued for conversion of debt (in shares)		1,728,438
Common stock issued for conversion of debt debenture		1,514,540
Common stock issued for conversion of interest payable on debt (in share)		90,240
Common stock issued for conversion of interest payable on debt		78,961
Common stock issued with for settlement of debt at fair value (in shares)		1,850,019
Common stock issued with for settlement of debt at fair value		1,605,642
Cashless exercise of common stock purchase warrants (in shares)		262,281	62,718
Common stock issued for conversion of interest due on the convertible debentures (in share)		6,551
Common stock issued for conversion of interest due on the convertible debentures		9,892
Proceeds for issuance of common stock		1,576,896	2,584,175
Common stock issued		2,426,003
Issue price of common stock issued for conversion of debt			$ 2.40
Unsecured convertible promissory issued		1,669,828
Common stock issued upfront promissory notes		1,411,351
Common stock value of shares issued for services		1,684,048	370,453
Number of warrants called by common stock (in shares)		493,943	95,238
Debt Conversion, Converted Instrument, Shares Issued	1,828,348	1,241,929
Maximum
Capital Stock [Line Items]
Common stock issued for services at fair value par value (in dollars per share)		$ 1.75
Issue price of common stock issued for conversion of debt		$ 1.75
Minimum
Capital Stock [Line Items]
Common stock issued for services at fair value par value (in dollars per share)		$ 0.79
Issue price of common stock issued for conversion of debt		$ 0.65
Promissory Notes
Capital Stock [Line Items]
Unsecured convertible promissory issued		430,000
Promissory Notes | Maximum
Capital Stock [Line Items]
Conversion price of convertible debentures		$ 0.65
Promissory Notes | Minimum
Capital Stock [Line Items]
Conversion price of convertible debentures		$ 0.4375
Common stock
Capital Stock [Line Items]
Additional common stock issued with the conversion of a convertible debenture (in shares)		2,980,036	139,711
Additional common stock shares issue at fair value associated with conversion of convertible debenture		298	14
Common stock issued with for settlement of debt at fair value (in shares)		1,850,019
Common stock issued with for settlement of debt at fair value		185
Cashless exercise of common stock purchase warrants (in shares)		262,281	62,718
Cashless exercise of common stock purchase warrants		26	6
Common stock issued		2,426,003	1,187,382
Common stock issued upfront promissory notes		1,411,351
Conversion price of convertible debentures			$ 1.75
Common stock issued for services (in shares)		1,246,558	142,501
Common stock value of shares issued for services		124	15
Common stock issued for conversion of debt (in shares)		2,980,036	139,711
Common stock | Private Placement
Capital Stock [Line Items]
Common stock, shares, issued for cash (in shares)			1,187,382
Common stock value shares, issued for cash			2,665,175
Common stock issued for conversion of interest due on the convertible debentures (in share)			8,411
Common stock issued for conversion of interest due on the convertible debentures			$ 15,955
Conversion price of convertible debentures			$ 1.75
Debt Conversion Converted Instrument Shares Outstanding			480,684
Common stock issued for services (in shares)			142,501
Debt Conversion, Converted Instrument, Shares Issued			490,212
1 Year warrant
Capital Stock [Line Items]
Term of warrants		1 year
Number of common stock called by warrants at first closing (in shares)		2,346,772
3 Year warrant
Capital Stock [Line Items]
Term of warrants		3 years
Number of common stock called by warrants at first closing (in shares)		1,230,776
5 Year warrant
Capital Stock [Line Items]
Term of warrants		5 years
Number of common stock called by warrants at first closing (in shares)		1,920,548

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SUBSEQUENT EVENTS (Details Textuals 2) (USD $)	1 Months Ended	12 Months Ended				1 Months Ended	12 Months Ended		12 Months Ended		1 Months Ended			0 Months Ended		1 Months Ended		0 Months Ended	1 Months Ended	2 Months Ended		0 Months Ended			2 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Common stock	Dec. 31, 2011 Common stock	Jun. 20, 2012 Private Placement Securities Purchase Agreement	Dec. 31, 2011 Private Placement Common stock	Jun. 20, 2012 Private Placement Common stock Securities Purchase Agreement	Dec. 31, 2012 Promissory Notes	Dec. 31, 2012 Promissory Notes Securities Purchase Agreement	Mar. 30, 2013 Subsequent Event Common stock	Mar. 30, 2013 Subsequent Event Warrant	Feb. 15, 2013 Subsequent Event Private Placement Warrant	Apr. 12, 2013 Subsequent Event Promissory Notes	Feb. 04, 2013 Subsequent Event Promissory Notes	Nov. 30, 2012 Subsequent Event Promissory Notes	Feb. 20, 2013 Subsequent Event Promissory Notes	Feb. 15, 2013 Subsequent Event Promissory Notes Securities Purchase Agreement	Feb. 20, 2013 Subsequent Event Promissory Notes Securities Purchase Agreement	Apr. 20, 2013 Subsequent Event Promissory Notes Common stock Securities Purchase Agreement	Feb. 20, 2013 Subsequent Event Promissory Notes Common stock Securities Purchase Agreement	Feb. 12, 2013 Subsequent Event Promissory Notes Accredited Investors	Mar. 19, 2013 Subsequent Event Promissory Notes Accredited Investors Private Placement	Feb. 12, 2013 Subsequent Event Promissory Notes Accredited Investors Private Placement	Apr. 20, 2013 Subsequent Event Promissory Notes Accredited Investors Private Placement
Subsequent Event [Line Items]
Unsecured convertible promissory issued		$ 1,669,828							$ 430,000					$ 125,000	$ 100,000	$ 100,000			$ 100,000				$ 113,333	$ 133,333
Aggregate purchase price of promissory notes in private placements						100,000																	85,000	100,000	85,000
Interest rate on debentures									25.00%	10.00%												10.00%	10.00%
Conversion price of convertible debentures					$ 1.75		$ 1.75			$ 0.65												$ 0.4375
Percentage of extension fee									25.00%													25.00%
Number of common stock called by warrants (in shares)								153,846					36,000,000				153,846				153,846
Total outstanding principal amount																	200,000				200,000
Principal and interest amount																									$ 90,796
Debt conversion, converted instrument shares Issued (in shares)	1,828,348	1,241,929					490,212							1,432,285	245,639					104,694					255,000
Cashless exercise of common stock purchase warrants (in shares)		262,281	62,718	262,281	62,718						254,911
Number of warrants called by common stock (in shares)		493,943	95,238									254,911
Percentage of average of three lowest closing prices									70.00%									70.00%					70.00%
Number of trading days previous to conversion									25 days									25 days					25 days

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INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2012

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Schedule of impaired intangible assets

	2012		2011
Patents	$	317,689	$	180,380
Trademarks		4,467		4,467
	$	322,156	$	184,847

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SECURITES PURCHASE AGREEMENT - Significant assumptions used in the Black Scholes valuation of the derivative (Details) (Securities Purchase Agreement, Derivative)	12 Months Ended
	Dec. 31, 2012
Agreement [Line Items]
Weighted average expected option life	6 months
Expected dividend yield
Minimum
Agreement [Line Items]
Risk free interest rate	0.00%
Stock volatility factor	29.13%
Maximum
Agreement [Line Items]
Risk free interest rate	0.16%
Stock volatility factor	80.29%

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INTANGIBLE ASSETS (Detail Textuals) (USD $)	12 Months Ended
	Dec. 31, 2012
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Finite lived intangible assets written off related cost	$ 34,078

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STOCK OPTIONS AND WARRANTS - Summary of valuation assumptions of warrants (Details 3) (Warrant)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average expected option life	5 years	5 years
Expected dividend yield
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	0.86%	2.50%
Stock volatility factor	70.61%	257.10%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	0.62%	1.51%
Stock volatility factor	68.56%	63.04%

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SECURITES PURCHASE AGREEMENT (Detail Textuals 1) (USD $)				12 Months Ended		12 Months Ended			0 Months Ended		12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Apr. 12, 2013 Warrant Subsequent Event Maximum	Dec. 31, 2012 Promissory Notes	Dec. 31, 2012 Promissory Notes Maximum	Dec. 31, 2012 Securities Purchase Agreement Warrant	Dec. 31, 2012 Securities Purchase Agreement Promissory Notes	Dec. 31, 2012 Securities Purchase Agreement Promissory Notes Maximum	Feb. 15, 2013 Securities Purchase Agreement Promissory Notes Subsequent Event	Feb. 15, 2013 Securities Purchase Agreement Promissory Notes Subsequent Event Maximum	Dec. 31, 2012 Securities Purchase Agreement Derivative
Agreement [Line Items]
Percentage of average of three lowest closing prices				70.00%					70.00%
Number of trading days previous to conversion				25 days					25 days
Note bears interest rate				25.00%			10.00%
Increased interest rate							15.00%
Conversion price of convertible debentures					$ 0.65		$ 0.65	$ 0.65		$ 0.65
Term of warrants						4 years	4 years
Exercise price of warrants (in dollars per share)			0.25			0.65
Term of note maturity				90 days			6 months
Extended maturity date							13 months
Extended maturity note conversion price of debt							$ 0.4375
Amortization of debt discount in interest expense											$ 76,122
Recorded derivative liability Estimated present value of conversion feature											76,122
Valuation of the derivative method											Black Scholes valuation
Derivative liability	$ 355,526	$ 641,900									$ 26,538

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CONVERTIBLE DEBENTURES (Detail Textuals) (USD $)	1 Months Ended	12 Months Ended		0 Months Ended	1 Months Ended	12 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Jul. 07, 2011 Convertible Debentures	May 18, 2011 Convertible Debentures	Dec. 31, 2012 Convertible Debentures
Debt Instrument [Line Items]
Convertible debentures and warrants issuance				$ 1,000,000
Debentures aggregate principal amount				1,176,500
Conversion price of convertible debentures				$ 1.75
Reverse stock split ratio				1:30
Interest rate on debentures				5.00%
Increased interest rate on debentures in the event of default				18.00%
Daily volume weighted average price of our common stock				Interest was 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 were delivered after the date the quarterly interest payment is due).
Number of Common stock are which warrants are exercisable (in shares)						215,692
Exercise period of warrants						5 years
Exercise price of warrants (in dollars per share)						0.44
Derivative liability		355,526	641,900			1,176,500
Shares of common stock for the convertible debenture (in shares)	1,828,348	1,241,929			1,241,929
Conversion of debentures in common stock value	1,520,828	841,197			841,197
Interest payment of common stock in cash					5,262
Stock issued for interest payable on convertible debentures value		9,892			9,892
Shares issued for interest payable on convertible debentures (in shares)		6,551			6,551
Amortization of debt discount in interest expense						$ 249,298

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ORGANIZATION AND LINE OF BUSINESS

12 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

ORGANIZATION AND LINE OF BUSINESS

1.      ORGANIZATION AND LINE OF BUSINESS

Organization

OriginOil, Inc. (the "Company") was incorporated in the state of Nevada on June 1, 2007.  The Company, based in Los Angeles, California, began operations on June 1, 2007 to develop and market a renewable oil technology. The Company began planned principle operations in December, 2010 and thus has exited the development stage.

Line of Business

OriginOil is a pure technology company and has developed an energy production process for harvesting algae and cleaning up oil & gas water.  The Company’s technology integrates easily with other industry processes and can be embedded into larger systems through licensing and joint ventures.

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 2013, and is deriving revenue from sales of demonstration scale machines.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 along with future sales will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business operations.

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EQUITY INVESTMENT (Detail Textuals) (Ennesys Sas, Equity, USD $)	Dec. 31, 2012	Apr. 29, 2011
Ennesys Sas | Equity
Investment Holdings [Line Items]
Equity invested		$ 20,000
Percent of equity ownership	10.84%	22.50%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of estimated useful lives of Property and equipment (Details)	12 Months Ended
	Dec. 31, 2012
Leasehold improvements
Property, Plant and Equipment [Line Items]
Estimated useful lives	2 years
Computer equipment
Property, Plant and Equipment [Line Items]
Estimated useful lives	5 Years
Furniture & fixtures
Property, Plant and Equipment [Line Items]
Estimated useful lives	7 Years
Machinery & equipment
Property, Plant and Equipment [Line Items]
Estimated useful lives	10 Years

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CONVERTIBLE PROMISORY NOTES (Tables)

12 Months Ended

Dec. 31, 2012

Convertible Promisory Notes [Abstract]

Schedule of convertiable derivative valuation assumptions

Risk free interest rate		.01% - .11	%
Stock volatility factor		6.41% - 30.96	%
Weighted average expected option life	3 months
Expected dividend yield	None

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SUBSEQUENT EVENTS (Detail Textuals 1) (USD $)	1 Months Ended	12 Months Ended														0 Months Ended			0 Months Ended			0 Months Ended			1 Months Ended		1 Months Ended	0 Months Ended			0 Months Ended			2 Months Ended	1 Months Ended	2 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Stock Options	Dec. 31, 2011 Stock Options	Dec. 31, 2012 1 Year warrant	Dec. 31, 2012 3 Year warrant	Dec. 31, 2012 5 Year warrant	Dec. 31, 2012 Common stock	Dec. 31, 2011 Common stock	Dec. 31, 2012 Promissory Notes	Dec. 31, 2011 Private Placement Common stock	Dec. 31, 2012 Securities Purchase Agreement Three series of warrants	Dec. 31, 2012 Securities Purchase Agreement Promissory Notes	Jun. 20, 2012 Securities Purchase Agreement Private Placement Common stock	Apr. 12, 2013 Subsequent Event Stock Options CEO	Mar. 19, 2013 Subsequent Event 1 Year warrant	Mar. 19, 2013 Subsequent Event 3 Year warrant	Apr. 12, 2013 Subsequent Event 5 Year warrant	Apr. 12, 2013 Subsequent Event Three series of warrants Minimum	Apr. 12, 2013 Subsequent Event Three series of warrants Maximum	Apr. 15, 2013 Subsequent Event Common stock	Apr. 12, 2013 Subsequent Event Promissory Notes	Feb. 04, 2013 Subsequent Event Promissory Notes	Nov. 30, 2012 Subsequent Event Promissory Notes	Feb. 20, 2013 Subsequent Event Promissory Notes	Apr. 08, 2013 Subsequent Event Accredited Investors	Mar. 19, 2013 Subsequent Event Accredited Investors Common stock	Mar. 19, 2013 Subsequent Event Private Placement	Feb. 15, 2013 Subsequent Event Private Placement Three series of warrants	Feb. 15, 2013 Subsequent Event Private Placement Common stock	Mar. 19, 2013 Subsequent Event Private Placement Accredited Investors Promissory Notes	Feb. 12, 2013 Subsequent Event Private Placement Accredited Investors Promissory Notes	Apr. 20, 2013 Subsequent Event Private Placement Accredited Investors Promissory Notes	Feb. 20, 2013 Subsequent Event Securities Purchase Agreement Promissory Notes	Apr. 20, 2013 Subsequent Event Securities Purchase Agreement Promissory Notes Common stock	Feb. 20, 2013 Subsequent Event Securities Purchase Agreement Promissory Notes Common stock
Subsequent Event [Line Items]
Aggregate principal amount of promissory Note		$ 1,669,828									$ 430,000												$ 125,000	$ 100,000	$ 100,000							$ 113,333	$ 133,333		$ 100,000
Unpaid accrued interest	78,690																							7,467
Shares of common stock for the convertible debenture (in shares)	1,828,348	1,241,929										490,212											1,432,285	245,639										255,000		104,694
Interest and extension fee amount																							233,066
Private placement offering (in shares)		2,426,003							2,426,003	1,187,382																	286,000	2,950,126			12,000,000
Number of common stock called by warrants (in shares)						2,346,772	1,230,776	1,920,548							153,846		2,400,000	400,000	4,000,000							153,846				36,000,000							153,846
Term of warrants						1 year	3 years	5 years					4 years	4 years					5 years
Exercise price of warrants (in dollars per share)													0.65							0.15	0.25
Proceeds from issuance of private placement		1,575,395	2,584,175																								71,500		537,532
Cash bonus awarded																40,000
Term of options																5 years
Exercisable price per share				384,000	223,334											759,645
Weighted average exercise price, Exercisable at the end of period				$ 3.08	$ 4.37											$ 0.43
Common stock issued for services (in shares)									1,246,558	142,501		142,501										200,004
Common stock value of shares issued for services		$ 1,684,048	$ 370,453						$ 124	$ 15												$ 104,694

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DEFERRED TAX BENEFIT - Summary of income tax provision differs from amount of income tax determined by applying U.S. federal income tax rate to pretax income from continuing operations (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Deferred Tax Benefit [Abstract]
Book income	$ (4,228,000)	$ (2,259,617)
State taxes	300
Depreciation	(5,700)	(4,129)
Meals and Entertainment	2,500	3,803
Related party accruals	95,600
R&D	26,200	(36,752)
Accrued compensated absences	(12,700)
Non deductible stock compensation	978,300	524,016
Other non deductable expenses	1,855,900
Valuation Allowance	1,287,600	1,772,679
Income tax expense

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of assets and liabilities measured at fair value on a recurring basis (Details 1) (Fair Value, Measurements, Recurring, USD $)	Dec. 31, 2012
Total
Assets
Other Asset Investment	$ 20,000
Total assets measured at fair value	20,000
Liabilities
Derivative Liability	355,526
Unsecured Promissory Notes, net of discount	171,361
Convertible Debenture, net of discount	435,365
Total liabilities measured at fair value	962,252
(Level 1)
Assets
Other Asset Investment
Total assets measured at fair value
Liabilities
Derivative Liability
Unsecured Promissory Notes, net of discount
Convertible Debenture, net of discount
Total liabilities measured at fair value
(Level 2)
Assets
Other Asset Investment
Total assets measured at fair value
Liabilities
Derivative Liability
Unsecured Promissory Notes, net of discount
Convertible Debenture, net of discount
Total liabilities measured at fair value
(Level 3)
Assets
Other Asset Investment	20,000
Total assets measured at fair value	20,000
Liabilities
Derivative Liability	355,526
Unsecured Promissory Notes, net of discount	171,361
Convertible Debenture, net of discount	435,365
Total liabilities measured at fair value	$ 962,252

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of calculation of numerator and denominator in earnings per share (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Accounting Policies [Abstract]
(Loss) to common shareholders (Numerator)	$ (10,570,029)	$ (5,649,043)
Basic and diluted weighted average number of common shares outstanding (Denominator)	11,474,316	7,014,861

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SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Supplemental Cash Flow Information [Abstract]
Shares issued for interest payable on convertible debentures (in shares)	6,551
Stock issued for interest payable on convertible debentures value	$ 9,892
Common stock issued upfront promissory notes	1,411,351
Cashless exercise of common stock purchase warrants (in shares)	262,281	62,718
Cashless exercise for stock purchase warrants (in shares)	474,333
Common stock issued for the convertible debenture at fair value (in shares)	2,980,037	98,043
Common stock issued for convertible debenture at fair value	2,362,023	235,300
Common stock issued with for settlement of debt at fair value (in shares)	1,850,019
Common stock issued with for settlement of debt at fair value	1,605,642
Loss on settlement of debt	$ 1,199,762
Number of warrants called by common stock (in shares)	493,943	95,238

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail Textuals) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Depreciation expense	$ 13,645	$ 11,495
Research and development Costs	980,170	1,145,749
Share based payments valuation method	Black Scholes option valuation model
Bank deposits in excess of federally insured limits	$ 252,270	$ 0
Warrant
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Loss per share calculations warrants excluded	7,554,616	2,004,074

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STOCK OPTIONS AND WARRANTS (Detail Textuals) (USD $)	12 Months Ended									12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Stock Options	Dec. 31, 2011 Stock Options	Dec. 31, 2012 Warrant	Dec. 31, 2011 Warrant	Dec. 31, 2012 Maximum Stock Options	Dec. 31, 2012 Minimum Stock Options	May 25, 2012 2012 Incentive Stock Option Plan	Dec. 31, 2012 2012 Incentive Stock Option Plan Maximum Stock Options	Dec. 31, 2012 2012 Incentive Stock Option Plan Minimum Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares reserves and sets aside for the granting of options (in shares)									(1,000,000)
Exercisable price per share			384,000	223,334
Stock options vest term			1/48 every 30 days thereafter
Grant at an exercise price (in dollars per share)			$ 0.9	$ 5.72						$ 7.20	$ 0.89
Exercise period of stock option exercisable				5 years			10 years	4 years		10 years	4 years
Share based compensation expense			$ 241,164	$ 380,425
Number of warrants granted for services					6,361,918	192,337
Warrants liability, fair value					498,300	553,710
Cashless exercise of common stock purchase warrants (in shares)	262,281	62,718
Number of warrants called by common stock (in shares)	493,943	95,238
Common stock issued for cash and subscription payable (in shares)	2,426,003
Common stock issued for cash and subscriptions payable	$ 1,576,892	$ 2,665,175
Number of common stock called by warrants (in shares)					7,554,616
Number of purchase warrants forfeited or cancelled	217,435
Number of common stock shares called by warrant issued for services	1,446,186
Number of common stock shares called by warrant issued for investors stock purchase warrants	6,108,430

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CONVERTIBLE PROMISORY NOTES (Details) (Derivative)	12 Months Ended
	Dec. 31, 2012
Debt Instrument [Line Items]
Weighted average expected option life	3 months
Expected dividend yield
Minimum
Debt Instrument [Line Items]
Risk free interest rate	0.01%
Stock volatility factor	6.41%
Maximum
Debt Instrument [Line Items]
Risk free interest rate	0.11%
Stock volatility factor	30.96%

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BALANCE SHEETS (USD $)	Dec. 31, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash	$ 507,355	$ 197,868
Accounts receivable	25,000
Work in process	35,666	248,443
Prepaid expenses	186,978	300,102
Other receivables	1,200	17,977
TOTAL CURRENT ASSETS	756,199	764,390
PROPERTY & EQUIPMENT
Machinery & equipment	32,670	30,992
Furniture & fixtures	27,056	27,056
Computer equipment	28,824	28,824
Leasehold improvements	94,914	94,914
GROSS PROPERTY & EQUIPMENT	183,464	181,786
Less accumulated depreciation	(140,067)	(126,422)
NET PROPERTY & EQUIPMENT	43,397	55,364
OTHER ASSETS
Investment	20,000	20,000
Patents	317,689	180,380
Trademark	4,467	4,467
Security deposit	9,650	9,650
TOTAL OTHER ASSETS	351,806	214,497
TOTAL ASSETS	1,151,402	1,034,251
CURRENT LIABILITIES
Accounts payable	353,200	342,369
Accrued expenses	376,846	124,417
Deferred income		313,163
Derivative liability	355,526	641,900
Convertible debenture		397,213
Convertible promissory notes, net of discount of $237,965	435,365
Unsecured notes payable, net of discount of $38,639	171,361	13,483
TOTAL LIABILITIES	1,692,298	1,832,545
SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value; 25,000,000 authorized preferred shares
Common stock, $0.0001 par value; 250,000,000 authorized common shares 17,967,545 and 7,694,505 shares issued and outstanding	1,797	770
Additional paid in capital	27,024,419	16,198,019
Accumulated deficit	(27,567,112)	(16,997,083)
TOTAL SHAREHOLDERS' DEFICIT	(540,896)	(798,294)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$ 1,151,402	$ 1,034,251

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DEFERRED TAX BENEFIT - Summary of components of net deferred tax liabilities (Details 1) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Deferred tax assets:
NOL carryover	$ 6,051,100	$ 4,646,838
R & D carryover	308,500	242,968
Contributions carryover	2,000	1,980
Accrued vacation payable	14,600	27,232
Related party accrual	111,600
Depreciation		18,689
Deferred tax liabilites:
Depreciation	(25,200)
Less Valuation Allowance	(6,462,600)	(4,937,707)
Net deferred tax asset

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STATEMENT OF SHAREHOLDERS' DEFICIT (Parentheticals) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Issue price of common stock issued for cash and subscription payable		$ 240
Issue price of common stock issued for conversion of debt		$ 2.40
Issue price of common stock issued for conversion of interest payable on debt	$ 0.875	$ 2.40
Minimum
Issue price of common stock issued for cash and subscription payable	$ 0.65
Issue price of common stock issued for conversion of debt	$ 0.65
Common stock issued for services at fair value par value (in dollars per share)	$ 0.77	$ 1.90
Maximum
Issue price of common stock issued for cash and subscription payable	$ 1.75
Issue price of common stock issued for conversion of debt	$ 1.75
Common stock issued for services at fair value par value (in dollars per share)	$ 1.75	$ 6.00

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STOCK OPTIONS AND WARRANTS - Summary of company stock option activity (Details 1) (Stock Options, USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Options, Outstanding, beginning of period	351,130	498,297
Number of Options, Granted	384,000	223,334
Cashless exercise of common stock purchase warrants (in shares)
Number of Options, Forfeited/Expired	(269,836)	(370,501)
Number of Options, Outstanding, end of period	465,294	351,130
Number of Options, Exercisable at the end of period	75,735	66,455
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Weighted average exercise price, Outstanding, beginning of period	$ 6.14	$ 7.2
Weighted average exercise price, Granted	$ 0.9	$ 5.72
Weighted average exercise price, Exercised
Weighted average exercise price, Forfeited/Expired	$ (6.4)	$ (7.17)
Weighted average exercise price, Outstanding, end of period	$ 1.67	$ 6.14
Weighted average exercise price, Exercisable at the end of period	$ 3.08	$ 4.37
Weighted average fair value of options granted during the period	$ 0.68	$ 5.72

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Revenue Recognition

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 transferees 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

Cash and Cash Equivalent

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

Use of Estimates

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.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives:

Leasehold improvements	2 years
Computer equipment	5 Years
Furniture & fixtures	7 Years
Machinery & equipment	10 Years

Depreciation expense for the years ended December 31, 2012 and 2011, was $13,645 and $11,495, respectively.

Fair Value of Financial Instruments

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 December 31, 2012 and 2011, the balances reported for cash, prepaid expenses, accounts payable, and accrued expenses, 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 1measurements) 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 December 31, 2012:

	Total		(Level 1)		(Level 2)		(Level 3)
Other Asset
Investment	$	20,000	$	-	$	-	$	20,000
Total assets measured at fair value	$	20,000	$	-	$	-	$	20,000
Liabilities
Derivative Liability	$	355,526	$	-	$	-	$	355,526
Unsecured Promissory Notes, net of discount		171,361		-		-	$	171,361
Convertible Debenture, net of discount		435,365		-		-		435,365
Total liabilities measured at fair value	$	962,252	$	-	$	-	$	962,252

Investments

Investments

Certificate of Deposits with banking institutions are short-term investments with initial maturities of more than 90 days. The carrying amount of these investments is a reasonable estimate of fair value due to their short-term nature.

Loss per Share Calculations

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 or consulting 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 years ended December 31, 2012 and 2011, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded  7,554,616 and  2,004,074 warrants for the years ended December 31, 2012 and 2011, respectively.

.

	For the year ended
	December 31,
	2012			2011
(Loss) to common shareholders (Numerator)	$	(10,570,029	)	$	(5,649,043	)
Basic and diluted weighted average number of common shares outstanding (Denominator)		11,474,316			7,014,861

Income Taxes

Income Taxes

The Company uses the liability method of accounting for income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law.  The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.

Research and Development

Research and Development

Research and development costs are expensed as incurred.  Total research and development costs were $980,170 and $1,145,749 for the years ended December 31, 2012 and 2011, respectively.

Advertising Costs

Advertising Costs

The Company expenses the cost of advertising and promotional materials when incurred.  There were no advertising costs for the years ended December 31, 2012 and 2011, respectively.

Stock-Based Compensation

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 will be 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 would then be amortized over the respective vesting period of the stock option. The adoption of share based compensation has no material impact on our results of operations.

Work-in-Process

Work-in-Process

The Company recognizes cost for work-in-process on internal projects to ensure that costs are capitalized on balance sheet accounts during the project. Cost is recognized when revenue is posted to a profit and loss account by temporarily capitalizing cost in the balance sheet. The WIP is calculated at the cost of materials and labor related to the construction of equipment, including algae appliances, sold to customers

Concentration of Credit Risk

Concentration of Credit Risk

As of December 31, 2012 and 2011, the Company bank deposits in excess of Federally insured limits of $252,270 and $0 respectively.

Accounts Receivable

Accounts Receivable

An allowance for uncollectible accounts receivable is established by charges to operations for amounts required to maintain an adequate allowance, in management's judgment, to cover anticipated losses from customer accounts and sales returns. Such accounts are charged to the allowance when collection appears doubtful. Any subsequent recoveries are credited to the allowance account.

Reclassification

Reclassification

Certain expenses for the period ended December 31, 2011 were reclassified to conform to the expenses for the period ended December 31, 2012.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the year ended December 31, 2012, and adopted the following pronouncements:

The Company adopted accounting pronouncement ASC TOPIC 605 for “Revenue Recognition”, to recognize revenue when earned. An entity’s revenue earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing operation and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.  The adoption of this pronouncement did not have a material effect on the Company's financial statements.

The Company adopted accounting pronouncement ASC TOPIC 855 for “Subsequent Events”, whereby an entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. The adoption of this pronouncement did not have a material effect on the Company’s financial statements.

The Company adopted ASC TOPIC 730 accounting pronouncement for “Research and Development Costs” associated with materials, equipment, and facilities. The cost of materials and equipment or facilities that are acquired or constructed for research and development activities and that have alternative future uses shall be capitalized as tangible assets when acquired or constructed. The cost of such materials consumed in research and development activities and the depreciation of such equipment or facilities used in those activities are research and development costs. However, the costs of materials, equipment, or facilities that are acquired or constructed for a particular research and development project and that have no alternative future uses and therefore no separate economic values are research and development costs at the time the costs are incurred.

The Company adopted ASC 815 "Accounting for Derivative Instruments and Hedging Activities". This pronouncement addresses the accounting for derivative instruments including certain derivative instruments embedded in other contracts, and hedging activities. Derivative instruments that meet the definition of assets and liabilities should be reported in the financial statements at fair value, and any gain or loss should be recognized in current earnings.  The adoption of this pronouncement did have a material effect on the financial statements of the Company.

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STOCK OPTIONS AND WARRANTS - Summary of shares authorized under stock option plans by exercise price range (Details 2) (Stock Options, USD $)				12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Exercisable Prices $ 9.6	Dec. 31, 2012 Exercisable Prices $ 6.9	Dec. 31, 2012 Exercisable Prices $ 7.2	Dec. 31, 2012 Exercisable Prices $ 4.5	Dec. 31, 2012 Exercisable Prices $ 6	Dec. 31, 2012 Exercisable Prices $ 4.2	Dec. 31, 2012 Exercisable Prices $ 5.15	Dec. 31, 2012 Exercisable Prices $ 1.7	Dec. 31, 2012 Exercisable Prices $ 0.89	Dec. 31, 2012 Exercisable Prices $ 0.89	Dec. 31, 2012 Exercisable Prices $ 0.89
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices	$ 3.08	$ 4.37		$ 9.60	$ 6.90	$ 7.2	$ 4.5	$ 6	$ 4.2	$ 5.15	$ 1.7	$ 0.89	$ 0.89	$ 0.89
Stock Options Outstanding	465,294	351,130	498,297	6,250	209	1,667	33,334	16,500	13,334	10,000	4,000	60,000	200,000	120,000
Stock Options Exercisable	75,735	66,455		3,634	84	949	17,535	7,346	4,037	2,815	1,002	7,500	20,833	10,000
Weighted Average Remaining Contractual Life (years)				2 years 8 months 23 days	2 years 8 months 23 days	2 years 8 months 23 days	2 years 10 months 24 days	2 years 11 months 23 days	3 years 6 months 15 days	3 years 7 months 17 days	3 years 9 months	9 years 6 months	9 years 6 months 29 days	9 years 8 months 1 day

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STOCK OPTIONS AND WARRANTS (Tables)

12 Months Ended

Dec. 31, 2012

Stock Options and Warrants [Abstract]

Schedule of valuation assumptions of stock options exercisable

	2012			2011
Risk free interest rate		0.87 - 1.58	%		0.95% - 2.04	%
Stock volatility factor		69.93 - 70.25	%		55.16% - 271.95	%
Weighted average expected option life	4-10 years			5 years
Expected dividend yield	None			None

Schedule of company's stock option activity and related information

	2012						2011
				Weighted						Weighted
	Number			average			Number			average
	of			exercise			of			exercise
	Options			price			Options			price
Outstanding, beginning of period		351,130		$	6.14			498,297		$	7.20
Granted		384,000			0.90			223,334			5.72
Exercised		-			-			-			-
Forfeited/Expired		(269,836	)		(6.40	)		(370,501	)		(7.17	)
Outstanding, end of period		465,294		$	1.67			351,130		$	6.14
Exercisable at the end of period		75,732		$	3.08			66,455		$	4.37
Weighted average fair value of
options granted during the period				$	0.68					$	5.72

Schedule of weighted average remaining contractual life of options outstanding issued under the Plan

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.60		6,250		3,634		2.73
$	6.90		209		84		2.73
$	7.20		1,667		949		2.73
$	4.50		33,334		17,535		2.90
$	6.00		16,500		7,346		2.98
$	4.20		13,334		4,037		3.54
$	5.15		10,000		2,815		3.63
$	1.70		4,000		1,002		3.75
$	0.89		60,000		7,500		9.50
$	0.89		200,000		20,833		9.58
$	0.89		120,000		10,000		9.67
			465,294		75,735

Schedule of share based compensation, warrant, activity

	2012			2011
Risk free interest rate		.62% - .86	%		1.51% - 2.5	%
Stock volatility factor		68.56% - 70.61	%		63.04% - 257.10	%
Weighted average expected option life	5 years			5 years
Expected dividend yield	None			None

Schedule of company's warrant activity and related information

	Year End						Year End
	December 31, 2012						December 31, 2011
				Weighted						Weighted
				average						average
				exercise						exercise
	Options			price			Options			price
Outstanding -beginning of year		836,188		$	4.20			733,832		$	4.20
Granted		6,361,918			0.66			192,337			3.30
Exercised		-			-			-			-
Forfeited		(100,002	)		(4.10	)		(89,980	)		-
Outstanding - end of year		7,098,104		$	0.79			836,188		$	4.20

Schedule of weighted average remaining contractual life of warrants outstanding

						Weighted
						Average
						Remaining
Exercisable		Warrants		Warrants		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.30		223,338		223,338		1.50
$	10.20		28,335		28,335		1.63
$	9.00		9,168		9,168		1.81
$	8.70		3,334		3,334		1.87
$	8.40		667		667		2.08
$	8.70		5,000		5,000		2.41
$	5.70		7,334		7,334		2.59
$	4.50		3,334		3,334		2.70
$	4.20		8,334		8,334		2.73
$	4.20		33,334		33,334		2.74
$	3.60		8,334		8,334		2.83
$	4.50		33,334		33,334		2.90
$	4.20		13,335		13,335		2.91
$	6.00		133,334		133,334		2.98
$	6.00		33,334		33,334		2.99
$	6.30		8,334		8,334		3.21
$	5.70		4,001		4,001		3.25
$	6.90		33,334		33,334		3.46
$	6.90		33,334		33,334		3.71
$	1.90		80,000		80,000		3.76
$	6.90		33,334		33,334		3.96
$	1.47		260,000		260,000		4.32
$	0.65		280,000		280,000		4.61
$	0.65		20,000		20,000		4.80
$	0.65		50,000		50,000		4.83
$	0.89		100,000		100,000		4.83
$	0.65		5,651,918		5,651,918		0.99 - 4.99
			7,098,104		7,098,104

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STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (10,570,029)	$ (5,649,043)
Adjustment to reconcile net loss to net cash used in operating activities
Depreciation & amortization	13,645	11,495
Common stock and warrants issued for services	1,617,538	258,691
Stock compensation expense	739,464	934,135
(Gain)/Loss on change in valuation of derivative liability	737,185	(445,173)
Debt discount and beneficial conversion feature recognized as interest expense	2,174,910	734,857
Loss on settlement of debt	1,634,989
Original issue discount amortized as interest	92,662	83,838
Common stock issued for interest payable on debt	88,852	15,955
Loss on impairment of intangible assets	34,078
(Increase) Decrease in:
Accounts receivable	(25,000)
Prepaid expenses	179,635	(64,913)
Work in progress	212,777	(248,443)
Other receivables	16,777	(3,959)
Deposits
Increase (Decrease) in:
Accounts payable	10,830	262,089
Accrued expenses	252,429	77,475
Deferred income	(313,163)	313,163
Other payable		(8,461)
NET CASH USED IN OPERATING ACTIVITIES	(3,102,421)	(3,728,294)
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Purchase of investment		(20,000)
Purchase of fixed assets	(1,678)	(32,140)
Patent expenditures	(171,387)	(95,547)
NET CASH USED IN INVESTING ACTIVITIES	(173,065)	(147,687)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from unsecured subordinated debt	1,479,578	251,250
Proceeds from convertible promissory notes	530,000
Proceeds from convertible debenture		1,000,000
Proceeds for issuance of common stock and subscription payable, net of stock issuance cost	1,575,395	2,584,175
NET CASH PROVIDED BY FINANCING ACTIVITIES	3,584,973	3,835,425
NET INCREASE/(DECREASE) IN CASH	309,487	(40,556)
CASH BEGINNING OF PERIOD	197,868	238,424
CASH END OF PERIOD	507,355	197,868
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	5,262	9,185
Taxes paid

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BALANCE SHEETS (Parentheticals) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	25,000,000	25,000,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	17,967,545	7,694,505
Common stock, shares outstanding	17,967,545	7,694,505
Convertible promissory notes
Discount on debt (in dollars)	$ 237,965
Unsecured notes payable
Discount on debt (in dollars)	$ 38,639

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CONVERTIBLE DEBENTURES

12 Months Ended

Dec. 31, 2012

Convertible Debentures [Abstract]

CONVERTIBLE DEBENTURES

9. CONVERTIBLE DEBENTURE

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 had an aggregate principal amount of $1,176,500, and became due and payable on July 11, 2012. The debentures were convertible 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 bore interest at the rate of 5% per annum increasing to 18% in the event of default. Interest was 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 were delivered after the date the quarterly interest payment is due). The warrants outstanding as of  December 31, 2012 are exercisable for an aggregate of 215,692 shares of common stock at the option of the holder for a period of five years at an exercise price of $0.44 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.

On May 18, 2012, the debentures’ remaining principal amount of $841,197 was converted into 1,241,929 shares of common stock, with payments of interest in both cash and common stock consisting of $5,262 and issuance of 6,551 of common stock at a fair value of $9,892.

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 was amortized over the life of the convertible debenture, which was converted during the period and resulted in the recognition of $249,298 in interest expense for the year ended December 31, 2012.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Apr. 15, 2013	Jun. 29, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	ORIGINOIL INC
Entity Central Index Key	0001419793
Trading Symbol	ooil
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Well-Known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding		23,305,510
Entity Public Float			$ 10,710,061
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY

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UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES

12 Months Ended

Dec. 31, 2012

Unsecured Subordinated Convertible Promissory Notes [Abstract]

UNSECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTES

10. 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 2011 Notes”). During December 2011, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $218,750 (the “December 2011 Notes”). As a result of an exchange, $20,000 in principal amounts of the November 2011 Notes were exchanged for like principal amounts of the December 2011 Notes. During the year ended December 31, 2012, the Company issued unsecured convertible promissory notes in the aggregate principal amounts of $1,479,578 (the “January 2012 Notes”). As a result of a further exchange, $190,250 in principal amounts of the December 2011 Notes was exchanged for like principal amounts of the January 2012 Notes.  As of December 31, 2012, there were an aggregate principal amount of $210,000 of the January 2012 Notes outstanding.

During the month of November 2012, holders of the November, December, and January Notes converted an aggregate principal amount of $1,520,828, plus unpaid accrued interest of $78,690 for 1,828,348 shares of common stock of the Company.

November 2011 Notes

The November 2011 Notes had an aggregate principal amount of $12,500 with a five-year term and were convertible into shares of common stock of the Company at a conversion price of $2.40 per share.  Interest on the November 2011 Notes was calculated each quarter on the aggregate unconverted outstanding principal amount of the note, and was 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 was less than $2.40 then the interest was paid in cash at 4.8% of the outstanding principal note. Interest was payable quarterly, upon redemption and/or at maturity.  During the year ended December 31, 2012, note holders converted $12,500 of principal into shares of common stock.  The aggregate principal amount outstanding at December 31, 2012 was $0.

December 2011 Notes

The December 2011 Notes had an aggregate principal amount of $48,500 with a one-year term and were convertible into shares of common stock of the Company at a conversion price of $1.75 per share. Also, the December 2011 Notes had detachable three (3) year warrants to purchase 54,858 shares of common stock.  The December 2011 Notes accrued interest at 8% per annum and were payable on the conversion date and/or at maturity. The December 2011 Notes were 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. During the year ended December 31, 2012, note holders converted $48,500 of principal into shares of common stock.  The aggregate principal amount outstanding at December 31, 2012 was $0.

The December 2011 Notes were originally issued with detachable three (3) year warrants to purchase an aggregate of 272,282 shares of common stock at an exercise price of $1.75 (the “December Warrants”), and 217,433 were subsequently exchanged for 133,005 shares of common stock. The detachable warrants were evaluated for purposes of classification under ASC 480-10, “Distinguishing Liabilities from Equity”. The warrants did not embody any of the conditions for liability classification under the ASC 480-10 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 2012 Notes

The January 2012 Notes had an aggregate principal amount of $1,669,828 with a one-year term and were convertible into shares of common stock of the Company at a conversion price of $1.75 per share. In addition, the Company issued upfront shares of common stock in the amount of 1,411,351, which included the amount from the December exchange during the period. In the event the note was converted in full prior to maturity, the holder was entitled to one additional share of common stock for each share converted. The January 2012 Notes accrued interest at 8% per annum and were payable on the conversion date and/or at maturity. The January 2012 Notes were 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. During the year ended December 31, 2012, note holders converted $1,269,578 of principal into shares of common stock.  The aggregate principal amount outstanding at December 31, 2012 was $210,000.

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

The notes were issued with a discount, which is amortized over the life of the note. The Company recorded amortization of the debt discount of $1,629,016 in interest expense for the year ended December 31, 2012.

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STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Income Statement [Abstract]
Sales	$ 588,163	$ 180,000
Cost of Goods Sold	401,647	57,102
Gross Profit	186,516	122,898
Operating Expenses
Selling and general and administrative expenses	4,942,275	4,213,453
Research and development	980,170	1,145,749
Total Operating Expenses	5,922,445	5,359,202
Loss before Depreciation and Amortization	(5,735,929)	(5,236,304)
Depreciation & amortization expense	13,645	11,495
Loss from Operations before Other Income/(Expenses)	(5,749,574)	(5,247,799)
OTHER INCOME/(EXPENSE)
Interest income	1	2
Foreign exchange loss	(3,096)
Loss on settlement of debt	(1,634,989)
Loss on change in derivative	(737,185)	445,173
Penalties		(2,384)
Interest expense	(2,445,186)	(844,035)
TOTAL OTHER INCOME/(EXPENSES)	(4,820,455)	(401,244)
NET LOSS	$ (10,570,029)	$ (5,649,043)
BASIC LOSS PER SHARE (in dollars per share)	$ (0.92)	$ (0.81)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED (in shares)	11,474,316	7,014,861

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STOCK OPTIONS AND WARRANTS

12 Months Ended

Dec. 31, 2012

Stock Options and Warrants [Abstract]

STOCK OPTIONS AND WARRANTS

4.      STOCK OPTIONS AND WARRANTS

On May 25, 2012, the Board of Directors adopted the OriginOil, Inc., 2012 Incentive Stock Option 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 One Million (1,000,000) 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 years ended December 31, 2012 and 2011, the Company granted 384,000 and 223,334 stock options, respectively. 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 periods ranging from  four or ten years from the date of grant at an exercise price between $0.89 and $7.20 per share

	2012			2011
Risk free interest rate		0.87 - 1.58	%		0.95% - 2.04	%
Stock volatility factor		69.93 - 70.25	%		55.16% - 271.95	%
Weighted average expected option life	4-10 years			5 years
Expected dividend yield	None			None

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

	2012						2011
				Weighted						Weighted
	Number			average			Number			average
	of			exercise			of			exercise
	Options			price			Options			price
Outstanding, beginning of period		351,130		$	6.14			498,297		$	7.20
Granted		384,000			0.90			223,334			5.72
Exercised		-			-			-			-
Forfeited/Expired		(269,836	)		(6.40	)		(370,501	)		(7.17	)
Outstanding, end of period		465,294		$	1.67			351,130		$	6.14
Exercisable at the end of period		75,732		$	3.08			66,455		$	4.37
Weighted average fair value of
options granted during the period				$	0.68					$	5.72

 The weighted average remaining contractual life of options outstanding issued under the plan as of December 31, 2012 as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	9.60		6,250		3,634		2.73
$	6.90		209		84		2.73
$	7.20		1,667		949		2.73
$	4.50		33,334		17,535		2.90
$	6.00		16,500		7,346		2.98
$	4.20		13,334		4,037		3.54
$	5.15		10,000		2,815		3.63
$	1.70		4,000		1,002		3.75
$	0.89		60,000		7,500		9.50
$	0.89		200,000		20,833		9.58
$	0.89		120,000		10,000		9.67
			465,294		75,735

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 year ended December 31, 2012, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of December 31, 2012 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to December 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 years ended December 31, 2012 and 2011 is $241,164 and $380,425, respectively.

Warrants

During the years ended December 31, 2012 and 2011, the Company granted 6,361,918 and 192,337 warrants issued for services and with private placements and debt, respectively,  valued using the Black Scholes pricing model.

	2012			2011
Risk free interest rate		.62% - .86	%		1.51% - 2.5	%
Stock volatility factor		68.56% - 70.61	%		63.04% - 257.10	%
Weighted average expected option life	5 years			5 years
Expected dividend yield	None			None

During the years ended December 31, 2012 and 2011, the Company issued warrants for services and with private placements and debt. A summary of the Company’s warrant activity and related information follows:

	Year End						Year End
	December 31, 2012						December 31, 2011
				Weighted						Weighted
				average						average
				exercise						exercise
	Options			price			Options			price
Outstanding -beginning of year		836,188		$	4.20			733,832		$	4.20
Granted		6,361,918			0.66			192,337			3.30
Exercised		-			-			-			-
Forfeited		(100,002	)		(4.10	)		(89,980	)		-
Outstanding - end of year		7,098,104		$	0.79			836,188		$	4.20

At December 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		223,338		223,338		1.50
$	10.20		28,335		28,335		1.63
$	9.00		9,168		9,168		1.81
$	8.70		3,334		3,334		1.87
$	8.40		667		667		2.08
$	8.70		5,000		5,000		2.41
$	5.70		7,334		7,334		2.59
$	4.50		3,334		3,334		2.70
$	4.20		8,334		8,334		2.73
$	4.20		33,334		33,334		2.74
$	3.60		8,334		8,334		2.83
$	4.50		33,334		33,334		2.90
$	4.20		13,335		13,335		2.91
$	6.00		133,334		133,334		2.98
$	6.00		33,334		33,334		2.99
$	6.30		8,334		8,334		3.21
$	5.70		4,001		4,001		3.25
$	6.90		33,334		33,334		3.46
$	6.90		33,334		33,334		3.71
$	1.90		80,000		80,000		3.76
$	6.90		33,334		33,334		3.96
$	1.47		260,000		260,000		4.32
$	0.65		280,000		280,000		4.61
$	0.65		20,000		20,000		4.80
$	0.65		50,000		50,000		4.83
$	0.89		100,000		100,000		4.83
$	0.65		5,651,918		5,651,918		0.99 - 4.99
			7,098,104		7,098,104

Warrants with a fair value of $498,300 and $553,710 determined using the Black Scholes pricing model, was recognized in the statement of income for the years ended December 31, 2012 and 2011, respectively.

In addition to the warrants mentioned above, during the year ended December 31, 2012, 493,943 purchase warrants were exercised through a cashless exercise to purchase 262,281 shares of common stock, and 217,435 purchase warrants were forfeited or cancelled. The number of outstanding stock purchase warrants to purchase shares of common stock as of December 31, 2012, was 1,446,186 for services, and 6,108,430 for investors stock purchase warrants for a total of 7,554,616.

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CAPITAL STOCK

12 Months Ended

Dec. 31, 2012

Equity [Abstract]

CAPITAL STOCK

3. CAPITAL STOCK

As of June 30, 2012, the Company increased the total number of authorized shares of common stock to 250,000,000 shares and increased the total number of authorized shares of preferred stock to 25,000,000 shares.

During the year ended December 31, 2012, the Company issued 1,222,557 shares of common stock at fair value for services that ranged in prices from $0.79 to $1.75 with a fair value of $1,642,048; issued 12,001 shares of common stock for settlement of accounts payable in the amount of $21,000, and also issued an additional 12,000 shares for services with a fair value of $21,000; issued 1,241,929 shares of common stock in exchange for cancellation of the convertible debentures in the aggregate amount of $841,197, and also issued an additional 9,670 shares of common stock at a fair value of $6,286, associated with the conversion of a convertible debenture; issued 1,728,438 shares of common stock for conversion of debt with a fair value of $1,514,540; issued 90,240 shares of common stock for conversion of interest payable on debt at a fair value of $78,961; issued 1,850,019 shares of common stock for settlement of debt at a fair value of $1,605,642; issued 262,281 shares of common stock for stock through a cashless exercise of 493,943 stock purchase warrants; issued 6,551 shares of common stock at fair value of $9,892 for interest due on the convertible debentures; received proceeds for issuance of common stock in the amount of $1,576,896 to purchase 2,426,003 shares of common stock at a price of $0.65 together with one (1) year warrants to purchase an aggregate of 2,346,772 shares of common stock and three (3) year warrants to purchase an aggregate of 1,230,776 shares of common stock, plus five (5) year warrants to purchase an aggregate of 1,920,548 shares of common stock. In addition, the Company issued unsecured promissory notes in the aggregate principal amount of $1,669,828, with an issuance of 1,411,351 shares of common stock associated with the notes.

During the year ended December 31, 2011, the Company issued through a private placement 1,187,382 shares of common stock at a price of $2.40 per share for $2,665,175 in cash; issued 142,501 shares of common stock for services at a fair value of $370,453, converted $335,303 of the convertible debentures into 139,711 shares of common stock at a conversion price of $1.75. There were 490,212 shares of common stock issued with the debenture of which 480,684 were outstanding as of December 31, 2011. The Company further issued 8,411 shares of common stock for the interest payable of $15,955 associated with the convertible debentures. In addition, there was a cashless exercise of 95,238 warrants into 62,718 shares of common stock;

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Schedule of Property and Equipment

Leasehold improvements	2 years
Computer equipment	5 Years
Furniture & fixtures	7 Years
Machinery & equipment	10 Years

Schedule of Fair Value of Financial Instruments

	Total		(Level 1)		(Level 2)		(Level 3)
Other Asset
Investment	$	20,000	$	-	$	-	$	20,000
Total assets measured at fair value	$	20,000	$	-	$	-	$	20,000
Liabilities
Derivative Liability	$	355,526	$	-	$	-	$	355,526
Unsecured Promissory Notes, net of discount		171,361		-		-	$	171,361
Convertible Debenture, net of discount		435,365		-		-		435,365
Total liabilities measured at fair value	$	962,252	$	-	$	-	$	962,252

Schedule of Loss per Share Calculations

	For the year ended
	December 31,
	2012			2011
(Loss) to common shareholders (Numerator)	$	(10,570,029	)	$	(5,649,043	)
Basic and diluted weighted average number of common shares outstanding (Denominator)		11,474,316			7,014,861

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SECURITES PURCHASE AGREEMENT

12 Months Ended

Dec. 31, 2012

Securities Purchase Agreement [Abstract]

SECURITES PURCHASE AGREEMENT

11.   SECURITIES PURCHASE AGREEMENT

On June 20, 2012, the Company entered into a securities purchase agreement with an investor providing for the issuance of a promissory note (the “Note”) in an aggregate principal amount of $400,000 and warrants to purchase an aggregate of up 615,384 shares of the Company’s common stock for an aggregate purchase price of $100,000 in a private placement. At closing, which took place simultaneously with execution of the securities purchase agreement, the Company issued the Note with an outstanding principal sum of $100,000 together with a warrant to purchase 153,846 shares of the Company’s common stock.

Under the terms of the securities purchase agreement, the investor has the option to purchase an additional $300,000 in principal under the Note and receive further warrants to purchase an aggregate of up to 461,538 shares of the Company’s common stock.

The Note originally matures six months from the date of each purchase made under the Note, and bears interest at a rate of 10% per annum, which increased to 15% when the Note was not repaid by September 18, 2012. The Note was originally convertible into shares of the Company’s common stock at a conversion price of $0.65. The warrants may be exercised at any time for a period of four years from the date of issuance at an exercise price of $0.65. On February 15, 2013, the note was amended and the maturity date was extended until July 21, 2013 and the amendment of the conversion price of the Note to the lesser of $0.65 or 70% of the average of the three lowest closing prices in the 25 trading days previous to a conversion, subject to, at the election of the Company, a conversion floor of $0.4375 per share. If the Company elects to enforce the conversion floor it is required to make a cash payment to cover the conversion loss in an amount as set forth in the amendment. The conversion floor terminates in the event the Company issues or enters into an agreement providing for the issuance of shares at a price below the conversion floor. The conversion floor has since terminated.

On February 20, 2013, the lender funded a further $100,000 under the securities purchase agreement, bringing the total outstanding principal due under the Note to $200,000. Simultaneous therewith, the Company issued to the lender a Warrant to purchase 153,846 shares of the Company's common stock.

The note was issued with a discount, which is amortized over the life of the note. The Company recorded amortization of the debt discount of $76,122 in interest expense for the year ended December 31, 2012.

ASC Topic 815 provides guidance applicable to the convertible debt issued by the Company in instances where debt has embedded conversion options and net settlement. For example, when a convertible debt 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 debt 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 $76,122 representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount of $76,122 representing the imputed interest associated with the embedded derivative. The discount was amortized over the life of the convertible debt, and resulted in the recognition of $76,122 in interest expense for the year ended December 31, 2012.

The derivative liability is adjusted periodically according to the Company’s stock price fluctuations. For purpose of determining the fair market value of the derivative liability for the embedded conversion,  the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Risk free interest rate		.0% - .16	%
Stock volatility factor		29.13% - 80.29	%
Weighted average expected option life	6 months
Expected dividend yield	None

The value of the derivative liability at December 31, 2012 was $26,538.

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INCOME TAXES

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

INCOME TAXES

7.  INCOME TAXES

The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010.

Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain.Included in the balance at December 31, 2012 and 2011, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.  Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the periods ended December 31, 2012 and 2011, the Company did not recognize interest and penalties.

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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2012

Intangible Assets, Net (Excluding Goodwill) [Abstract]

INTANGIBLE ASSETS

5.      INTANGIBLE ASSETS

Intangible assets that have finite useful lives continue to be amortized over their useful lives, and are reviewed for impairment when warranted by economic condition. In 2012, the Company wrote off $34,078 of capitalized patent costs as these patent applications were abandoned during the year.

	2012		2011
Patents	$	317,689	$	180,380
Trademarks		4,467		4,467
	$	322,156	$	184,847

As of December 31, 2012 and 2011, the patents are in the process of being approved, and will be amortized over their useful lives once approved.

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EQUITY INVESTMENT

12 Months Ended

Dec. 31, 2012

Schedule Of Investments [Abstract]

EQUITY INVESTMENT

6. EQUITY INVESTMENT

On April 29, 2011, the Company invested $20,000 for a 22.5% equity ownership in Ennesys SAS, which is an engineering company that will commercialize, design, install and eventually operate, by itself or via subcontractors, complete algae growth systems. As of December 31, 2012, the equity ownership was 10.84%

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DEFERRED TAX BENEFIT

12 Months Ended

Dec. 31, 2012

Deferred Tax Benefit [Abstract]

DEFERRED TAX BENEFIT

8. DEFERRED TAX BENEFIT

At December 31, 2012, the Company had net operating loss carry-forwards of approximately $15,128,000, which expire at dates that have not been determined. No tax benefit has been reported in the December 31, 2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2012 and 2011 due to the following:

	2012			2011
Book income	$	(4,228,000	)	$	(2,259,617	)
State taxes		300			-
Depreciation		(5,700	)		(4,129	)
Meals and Entertainment		2,500			3,803
Related party accruals		95,600			-
R&D		26,200			(36,752	)
Accrued compensated absences		(12,700	)		-
Non deductible stock compensation		978,300			524,016
Other non deductable expenses		1,855,900
Valuation Allowance		1,287,600			1,772,679
Income tax expense	$	-		$	-

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax liabilities consist of the following components as of December 31, 2012 and 2011.

	2012			2011
Deferred tax assets:
NOL carryover	$	6,051,100		$	4,646,838
R & D carryover		308,500			242,968
Contributions carryover		2,000			1,980
Accrued vacation payable		14,600			27,232
Related party accrual		111,600			-
Depreciation		-			18,689
Deferred tax liabilites:
Depreciation		(25,200	)		-
Less Valuation Allowance		(6,462,600	)		(4,937,707	)
Net deferred tax asset	$	-		$	-

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.

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STOCK OPTIONS AND WARRANTS - Summary of valuation assumptions of stock options (Details) (Stock Options)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate, minimum	0.87%	0.95%
Risk free interest rate, maximum	1.58%	2.04%
Stock volatility factor, minimum	69.93%	55.16%
Stock volatility factor, maximum	70.25%	271.95%
Weighted average expected option life		5 years
Expected dividend yield
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average expected option life	10 years
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average expected option life	4 years

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SECURITES PURCHASE AGREEMENT (Detail Textuals) (USD $)	12 Months Ended		0 Months Ended		1 Months Ended		1 Months Ended		1 Months Ended
	Dec. 31, 2012	Dec. 31, 2012 Promissory Notes	Apr. 12, 2013 Promissory Notes Subsequent Event	Feb. 04, 2013 Promissory Notes Subsequent Event	Nov. 30, 2012 Promissory Notes Subsequent Event	Feb. 20, 2013 Promissory Notes Subsequent Event	Feb. 20, 2013 Securities Purchase Agreement Promissory Notes Subsequent Event	Feb. 20, 2013 Securities Purchase Agreement Promissory Notes Common stock Subsequent Event	Jun. 20, 2012 Securities Purchase Agreement Private Placement	Jun. 20, 2012 Securities Purchase Agreement Private Placement Common stock	Jun. 20, 2012 Securities Purchase Agreement Private Placement Promissory Notes
Agreement [Line Items]
Debt instrument issue value at frist closing											$ 100,000
Unused borrowing capacity											300,000
Aggregate principal amount debt											400,000
Number of common stock called by warrants at first closing (in shares)						153,846		153,846		153,846
Number of common stock called by warrants receive further (in shares)										461,538
Number of common stock called by warrants (in shares)										615,384
Proceeds from issuance of private placement									100,000
Unsecured convertible promissory issued	1,669,828	430,000	125,000	100,000	100,000		100,000
Total outstanding principal amount						$ 200,000		$ 200,000

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

13 SUBSEQUENT EVENTS

Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855.

On February 4, 2013, holder of convertible note, known in our filings as “January 2012 Notes”, converted an aggregate outstanding principal amount of $100,000, plus unpaid interest of $7,467 into an aggregate of 245,639 shares of common stock.

From February 4, 2013 to February 12, 2013, the Company issued original issue discount convertible promissory notes to accredited investors in an aggregate principal amount of $133,333 for an aggregate purchase price of $100,000 in a private placement.  The Notes provide for a one-time interest charge of 10% of the aggregate principal amount of the Notes. The Notes may be converted into shares of the Company’s common stock at a conversion price of $0.4375 (subject to adjustment for stock splits, dividends, combinations and other similar transactions).  The Notes mature 90 days from the date of issuance. If the Company does not repay the Notes on maturity, then the maturity date shall be automatically extended for up to three further 30 day periods and an extension fee of 25% of the then outstanding principal, interest and other fees shall be added to the principal amount of the Notes at the end of each 30 day period that the Notes are still outstanding. All other terms referenced in Number 12 “CONVERTIBLE PROMISSORY NOTES” are applicable herein as well.

On February 20, 2013, the Company received additional funds totaling $100,000 under a prior securities purchase agreement with lender bringing the total outstanding principal due under the Note to $200,000.  Simultaneous therewith, the Company issued to the lender a Warrant to purchase 153,846 shares of the Company's common stock. As of March 20, 2013, the Lender converted an aggregate principal and interest amount of $90,796 into 255,000 shares of common stock under prior securities purchase agreement.

During the month of March 2013, the company issued 254,911 shares of common stock in exchange for 254,911 purchase warrants.

From March 18, 2013 to March 19, 2013, the Company issued original issue discount convertible promissory notes to accredited investors in an aggregate principal amount of $113,333 for an aggregate purchase price of $85,000 in a private placement. The Notes provide for a one-time interest charge of 10% of the aggregate principal amount of the Notes. The Notes may be converted into shares of the Company’s common stock at a conversion price of the lesser of $0.4375 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 70% of the average of the three lowest closing prices in the 25 trading days previous to a conversion, subject to, at the election of the Company, a conversion floor of $0.4375. . All other terms referenced in Number 12 “CONVERTIBLE PROMISSORY NOTES” are applicable herein as well.

On February 15, 2013, the Company commenced a private placement offering of up to 12,000,000 shares of common stock together with up to three series of warrants to purchase up to an aggregate of 36,000,000 shares of common stock.  As of April 12, 2013, the Company sold to accredited investors and to two non-U.S. persons 2,950,126 shares of its common stock together with one-year warrants to purchase an aggregate of 2,400,000 shares of its common stock, three-year warrants to purchase an aggregate of 2,400,000 shares of its common stock and five-year warrants to purchase 4,000,000 shares of its common stock for aggregate gross proceeds of $537,532.  Each of the warrants is exercisable at a price per share between $0.15 and $0.25 subject to adjustment for stock splits, dividends, distributions, recapitalizations and the like.

On April 12, 2013, in recognition of the CEO’s contributions to the Company in 2012, the Board of Directors awarded to the CEO a cash bonus of $40,000 and issued to him a five-year option to purchase 759,645 shares of common stock exercisable at $0.43 per share.

On April 12, 2013, holders of original issuance discount convertible promissory notes  issued in October 2012 in the aggregate principal amount of $125,000 plus interest and extension fees of $233,066 were converted into an aggregate of 1,432,285 shares of common stock.

During the subsequent period through April 15, 2013, the Company issued 200,004 shares of common stock for services at fair value of $104,694.

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DEFERRED TAX BENEFIT (Tables)

12 Months Ended

Dec. 31, 2012

Deferred Tax Benefit [Abstract]

Schedule of components of income tax expense (benefit)

	2012			2011
Book income	$	(4,228,000	)	$	(2,259,617	)
State taxes		300			-
Depreciation		(5,700	)		(4,129	)
Meals and Entertainment		2,500			3,803
Related party accruals		95,600			-
R&D		26,200			(36,752	)
Accrued compensated absences		(12,700	)		-
Non deductible stock compensation		978,300			524,016
Other non deductable expenses		1,855,900
Valuation Allowance		1,287,600			1,772,679
Income tax expense	$	-		$	-

Schedule of deferred tax assets and liabilities

	2012			2011
Deferred tax assets:
NOL carryover	$	6,051,100		$	4,646,838
R & D carryover		308,500			242,968
Contributions carryover		2,000			1,980
Accrued vacation payable		14,600			27,232
Related party accrual		111,600			-
Depreciation		-			18,689
Deferred tax liabilites:
Depreciation		(25,200	)		-
Less Valuation Allowance		(6,462,600	)		(4,937,707	)
Net deferred tax asset	$	-		$	-

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UNSECURED CONVERTIBLE PROMISSORY NOTES (Detail Textuals 1) (USD $)	1 Months Ended	12 Months Ended		12 Months Ended				12 Months Ended		12 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Dec. 31, 2012 3 Year warrant	Dec. 31, 2012 November 2011 Notes	Dec. 31, 2011 November 2011 Notes	Dec. 31, 2012 December 2011 Notes	Dec. 31, 2011 December 2011 Notes	Dec. 31, 2012 December 2011 Notes 3 Year warrant	Dec. 31, 2011 December 2011 Notes 3 Year warrant	Dec. 31, 2012 January 2012 Notes
Debt Instrument [Line Items]
Aggregate principal amount		$ 435,365			$ 12,500		$ 48,500			$ 1,669,828
Outstanding principal amount of each promissory note					100	0
Debt instrument, convertible, term					5 years
Conversion price of convertible debentures					$ 2.40	$ 2.40			$ 1.75	$ 1.75
Number of common stock issued for interest payable at the per annum					2
Description of interest payable on debt					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.
Total outstanding principal amount				0		0				210,000
Number of common stock called by warrants (in shares)			1,230,776						54,858
Accrued interest per annum						8.00%				8.00%
Period of detachable warrant						3 years
Redemption price of the outstanding principal plus accrued and unpaid interest						112.00%				112.00%
Converted an aggregate principal amount	1,520,828	841,197		12,500		48,500		217,433		1,269,578
Warrants or options issued under debt conversion								272,282
Shares of common stock for the convertible debenture (in shares)	1,828,348	1,241,929						133,005
Common stock issued upfront promissory notes		1,411,351								1,411,351
Amortization of debenture discount										$ 1,629,016

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INTANGIBLE ASSETS - Summary of intangible assets (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	$ 322,156	$ 184,847
Patents
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	317,689	180,380
Trademarks
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	$ 4,467	$ 4,467

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STATEMENT OF SHAREHOLDERS' DEFICIT (USD $)	Preferred stock	Common stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2010		$ 615	$ 11,708,841	$ (11,348,040)	$ 361,416
Balance (in shares) at Dec. 31, 2010		6,153,656
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share adjustment due to reverse split		126
Common stock issued for cash and subscriptions payable		119	2,665,056		2,665,175
Common stock issued for cash and subscription payable (in shares)		1,187,382
Cashless exercise of common stock purchase warrants		6	(6)
Cashless exercise of common stock purchase warrants (in shares)		62,718			62,718
Common stock issued for conversion of debt		14	335,289		335,303
Common stock issued for conversion of debt (in shares)		139,711
Common stock issued for conversion of interest payable on debt		1	15,954		15,955
Common stock issued for conversion of interest payable on debt (in shares)		8,411
Common stock value of shares issued for services		15	370,438		370,453
Common stock issued for services (in shares)		142,501
Write down of fair value of debenture converted			89,426		89,426
Original issue discount			(92,662)		(92,662)
Beneficial conversion feature on promissory notes			240,107		240,107
Options and warrant compensation expense			946,576		946,576
Stock issuance cost			(81,000)		(81,000)
Net loss				(5,649,043)	(5,649,043)
Balance at Dec. 31, 2011		770	16,198,019	(16,997,083)	(798,294)
Balance (in shares) at Dec. 31, 2011		7,694,505
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued for cash and subscriptions payable		243	1,576,649		1,576,892
Common stock issued for cash and subscription payable (in shares)		2,426,003			2,426,003
Cashless exercise of common stock purchase warrants		26	(26)
Cashless exercise of common stock purchase warrants (in shares)		262,281			262,281
Common stock issued for conversion of debt		298	3,561,488		3,561,786
Common stock issued for conversion of debt (in shares)		2,980,036
Common stock issued for conversion of interest payable on debt		10	88,842		88,852
Common stock issued for conversion of interest payable on debt (in shares)		96,791
Common stock value of shares issued for services		124	1,683,924		1,684,048
Common stock issued for services (in shares)		1,246,558
Common stock issued with unsecured subordinated debt at fair value		141	(141)
Common stock issued with unsecured subordinated debt at fair value (in shares)		1,411,351			1,411,351
Common stock issued with for settlement of debt at fair value		185	1,605,457		1,605,642
Common stock issued with for settlement of debt at fair value (in shares)		1,850,019			1,850,019
Original issue discount			92,662		92,662
Beneficial conversion feature on promissory notes			1,479,578		1,479,578
Options and warrant compensation expense			739,464		739,464
Stock issuance cost			(1,497)		(1,497)
Net loss				(10,570,029)	(10,570,029)
Balance at Dec. 31, 2012		$ 1,797	$ 27,024,419	$ (27,567,112)	$ (540,896)
Balance (in shares) at Dec. 31, 2012		17,967,544

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of OriginOil, Inc. 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 transferees 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.

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.

Property and Equipment

Property and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives:

Leasehold improvements	2 years
Computer equipment	5 Years
Furniture & fixtures	7 Years
Machinery & equipment	10 Years

Depreciation expense for the years ended December 31, 2012 and 2011, was $13,645 and $11,495, respectively.

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 December 31, 2012 and 2011, the balances reported for cash, prepaid expenses, accounts payable, and accrued expenses, 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 1measurements) 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 December 31, 2012:

	Total		(Level 1)		(Level 2)		(Level 3)
Other Asset
Investment	$	20,000	$	-	$	-	$	20,000
Total assets measured at fair value	$	20,000	$	-	$	-	$	20,000
Liabilities
Derivative Liability	$	355,526	$	-	$	-	$	355,526
Unsecured Promissory Notes, net of discount		171,361		-		-	$	171,361
Convertible Debenture, net of discount		435,365		-		-		435,365
Total liabilities measured at fair value	$	962,252	$	-	$	-	$	962,252

Investments

Certificate of Deposits with banking institutions are short-term investments with initial maturities of more than 90 days. The carrying amount of these investments is a reasonable estimate of fair value due to their short-term nature.

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 or consulting 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 years ended December 31, 2012 and 2011, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded  7,554,616 and  2,004,074 warrants for the years ended December 31, 2012 and 2011, respectively.

.

	For the year ended
	December 31,
	2012			2011
(Loss) to common shareholders (Numerator)	$	(10,570,029	)	$	(5,649,043	)
Basic and diluted weighted average number of common shares outstanding (Denominator)		11,474,316			7,014,861

Income Taxes

The Company uses the liability method of accounting for income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law.  The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.

Research and Development

Research and development costs are expensed as incurred.  Total research and development costs were $980,170 and $1,145,749 for the years ended December 31, 2012 and 2011, respectively.

Advertising Costs

The Company expenses the cost of advertising and promotional materials when incurred.  There were no advertising costs for the years ended December 31, 2012 and 2011, respectively.

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 will be 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 would then be amortized over the respective vesting period of the stock option. The adoption of share based compensation has no material impact on our results of operations.

Work-in-Process

The Company recognizes cost for work-in-process on internal projects to ensure that costs are capitalized on balance sheet accounts during the project. Cost is recognized when revenue is posted to a profit and loss account by temporarily capitalizing cost in the balance sheet. The WIP is calculated at the cost of materials and labor related to the construction of equipment, including algae appliances, sold to customers

Concentration of Credit Risk

As of December 31, 2012 and 2011, the Company bank deposits in excess of Federally insured limits of $252,270 and $0 respectively.

Accounts Receivable

An allowance for uncollectible accounts receivable is established by charges to operations for amounts required to maintain an adequate allowance, in management's judgment, to cover anticipated losses from customer accounts and sales returns. Such accounts are charged to the allowance when collection appears doubtful. Any subsequent recoveries are credited to the allowance account.

Reclassification

Certain expenses for the period ended December 31, 2011 were reclassified to conform to the expenses for the period ended December 31, 2012.

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the year ended December 31, 2012, and adopted the following pronouncements:

The Company adopted accounting pronouncement ASC TOPIC 605 for “Revenue Recognition”, to recognize revenue when earned. An entity’s revenue earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing operation and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.  The adoption of this pronouncement did not have a material effect on the Company's financial statements.

The Company adopted accounting pronouncement ASC TOPIC 855 for “Subsequent Events”, whereby an entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. The adoption of this pronouncement did not have a material effect on the Company’s financial statements.

The Company adopted ASC TOPIC 730 accounting pronouncement for “Research and Development Costs” associated with materials, equipment, and facilities. The cost of materials and equipment or facilities that are acquired or constructed for research and development activities and that have alternative future uses shall be capitalized as tangible assets when acquired or constructed. The cost of such materials consumed in research and development activities and the depreciation of such equipment or facilities used in those activities are research and development costs. However, the costs of materials, equipment, or facilities that are acquired or constructed for a particular research and development project and that have no alternative future uses and therefore no separate economic values are research and development costs at the time the costs are incurred.

Recently Issued Accounting Pronouncements (Continued)

The Company adopted ASC 815 "Accounting for Derivative Instruments and Hedging Activities". This pronouncement addresses the accounting for derivative instruments including certain derivative instruments embedded in other contracts, and hedging activities. Derivative instruments that meet the definition of assets and liabilities should be reported in the financial statements at fair value, and any gain or loss should be recognized in current earnings.  The adoption of this pronouncement did have a material effect on the financial statements of the Company.

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SECURITES PURCHASE AGREEMENT (Tables)

12 Months Ended

Dec. 31, 2012

Securities Purchase Agreement [Abstract]

Schedule of derivative valuation assumptions

Risk free interest rate		.0% - .16	%
Stock volatility factor		29.13% - 80.29	%
Weighted average expected option life	6 months
Expected dividend yield	None

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STOCK OPTIONS AND WARRANTS - Summary of company warrants activity (Details 4) (Warrant, USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Warrant
Class Of Warrant Or Right [Roll Forward]
Warrants, Outstanding -beginning of year	836,188	733,832
Warrants, Granted	6,361,918	192,337
Warrants, Exercised
Warrants, Forfeited	(100,002)	(89,980)
Warrants, Outstanding - end of year	7,098,104	836,188
Class Of Warrant Or Right, Weighted Average Exercise Price [Roll Forward]
Weighted average exercise price, Outstanding -beginning of year	$ 4.2	$ 4.2
Weighted average exercise price, Granted	$ 0.66	$ 3.3
Weighted average exercise price, Exercised
Weighted average exercise price, Forfeited	$ (4.1)
Weighted average exercise price, Outstanding - end of year	$ 0.79	$ 4.2

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CONVERTIBLE PROMISORY NOTES

12 Months Ended

Dec. 31, 2012

Convertible Promisory Notes [Abstract]

CONVERTIBLE PROMISORY NOTES

12.    CONVERTIBLE PROMISORY NOTES

During the year ended December 31, 2012, the Company issued convertible promissory notes (the “OID Notes”) to various investors in an aggregate principal amount of $430,000, with an Original Issue Discount (OID) of $143,330.  The OID Notes were originally convertible into the common stock of the Company at conversion prices ranging from $0.4375 to $0.65. The maturity dates of the Notes are ninety (90) days from their effective date, with a one-time interest charge of $57,330, which will be amortized over ninety (90) days and recorded as interest expense.  If the Notes are not repaid on maturity, then the maturity date shall be automatically extended for up to three further 30 day periods and an extension fee of 25% of the then outstanding principal, interest and other fees shall be added to the principal amount of the Notes at the end of each 30 day period that the Notes are still outstanding. The Notes provide that if shares issuable upon conversion of the Notes are not timely delivered then the Company shall be subject to a penalty of $2,000 per day until share delivery is made. The Notes include customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment.

In addition, it shall constitute an event of default under the Notes if the Company shall not be DTC eligible or the Company shall be delinquent in its filings with the SEC. In the event of default under the Notes, the Company shall be required to repay an amount in cash equal to the greater of (i) the outstanding principal amount of the Note plus accrued and unpaid interest divided by the then conversion price of the Notes multiplied by Company’s lowest trade price at the time of demand or payment, or (ii) 150% of the outstanding principal amount of the Notes plus accrued and unpaid interest and other fees due thereon. In addition, in an event of default, the Notes bear interest at 25% per annum. The Company also granted to the purchasers of the Notes piggyback registration rights, under which the Company is required to include all shares issuable upon conversion of the Note in any future registration statement filed by the Company subject to customary exceptions.

As the result of most favored nations protection accorded to holders of OID Notes in note issuances subsequent to December 31, 2012, the OID Notes are convertible into shares of the Company’s common stock at a conversion price of the lesser of $0.4375 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 70% of the average of the three lowest closing prices in the 25 trading days previous to a conversion, subject to, at the election of the Company, a conversion floor of $0.4375.  The conversion floor terminates in the event the Company issues or enters into an agreement providing for the issuance of shares at a price below the conversion floor. The conversion floor has since terminated.  In addition, as the result of the most favored nations protection, for as long as OID Notes or such other subsequent notes are outstanding, if the Company issues any security with terms more favorable than the terms of the OID Notes or such other subsequent notes or a term was not similarly provided to the purchaser of the OID Notes or such other subsequent notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the OID Notes and such other subsequent notes.  Subsequent to December 31, 2012, OID Notes in the aggregate principal of $125,000 plus interest and extension fees of $233,066 have converted into 1,432,285 shares of the Company’s common stock. (See Subsequent Events)

ASC Topic 815 provides guidance applicable to the convertible debt issued by the Company in instances where debt has embedded conversion options and net settlement. For example, when a convertible debt 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 debt 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 $264,085 representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount of $264,085 representing the imputed interest associated with the embedded derivative. The discount was amortized over the life of the convertible debt, and resulted in the recognition of $96,992 in interest expense for the year ended December 31, 2012.

The derivative liability is adjusted periodically according to the Company’s stock price fluctuations. For purpose of determining the fair market value of the derivative liability for the embedded conversion,  the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Risk free interest rate		.01% - .11	%
Stock volatility factor		6.41% - 30.96	%
Weighted average expected option life	3 months
Expected dividend yield	None

The value of the derivative liability at December 31, 2012 was $218,680.