0001213900-20-016728.txt : 20200706 0001213900-20-016728.hdr.sgml : 20200706 20200706155806 ACCESSION NUMBER: 0001213900-20-016728 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 64 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200706 DATE AS OF CHANGE: 20200706 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORIGINCLEAR, INC. CENTRAL INDEX KEY: 0001419793 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 000000000 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-147980 FILM NUMBER: 201013477 BUSINESS ADDRESS: STREET 1: 2535 E. UNIVERSITY DRIVE CITY: MCKINNEY STATE: TX ZIP: 75069 BUSINESS PHONE: 323.939.6645 MAIL ADDRESS: STREET 1: 2535 E. UNIVERSITY DRIVE CITY: MCKINNEY STATE: TX ZIP: 75069 FORMER COMPANY: FORMER CONFORMED NAME: ORIGINOIL INC DATE OF NAME CHANGE: 20071129 10-Q 1 f10q0320_originclearinc.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

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

 

FOR THE QUARTERLY PERIOD ENDED:  March 31, 2020

 

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

 

For the transition period from __________ to __________

 

Commission File Number: 333-147980

 

ORIGINCLEAR, INC.

(Exact name of registrant as specified in its charter)

 

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

 

2535 E. University Drive,

McKinney, TX 75069

(Address of principal executive offices, Zip Code)

 

(323) 939-6645

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Ticker symbol(s)   Name of each exchange on which
registered
N/A   N/A   N/A

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

 

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

  

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

As of July 2, 2020 there were 11,648,780 shares of common stock, par value $0.0001 per share, issued and outstanding.

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
PART I   1
   
Item 1. Financial Statements. 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 32
Item 4. Controls and Procedures. 32
     
PART II 33 
     
Item 1. Legal Proceedings. 33
Item 1A. Risk Factors. 33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 34
Item 3. Defaults Upon Senior Securities. 34
Item 4. Mine Safety Disclosures. 34
Item 5. Other Information. 34
Item 6. Exhibits. 34
     
SIGNATURES 35

 

i

 

 

EXPLANATORY NOTE

 

The Company previously filed a Current Report on Form 8-K with the Securities and Exchange Commission on May 15, 2020 (the “Current Report”) to avail itself of the relief provided by the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions From Specified Provisions of the Exchange Act and Certain Rules Thereunder dated March 25, 2020 (Release No. 34-88465) (the “Order”). By filing the Current Report on Form 8-K, the Company relied on the Order to receive until June 29, 2020 (an additional 45 days from the original filing deadline of May 15, 2020) to delay the filing of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) due to the circumstances related to COVID-19. In particular, COVID-19 has caused severe disruptions in transportation and limited access to the Company’s facilities resulting in limited support from its staff and professional advisors. This has, in turn, delayed the Company’s ability to prepare the Report.

 

ii

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ORIGINCLEAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,
2020
   December 31,
2019
 
   (Unaudited)     
ASSETS        
         
CURRENT ASSETS        
Cash  $297,300   $490,614 
Contracts receivable, less allowance for doubtful accounts of $0   327,334    522,911 
Contract assets   222,056    26,287 
Convertible note receivable   121,880    117,879 
Other receivable   2,500    2,500 
Prepaid expenses   9,571    47,483 
           
TOTAL CURRENT ASSETS   980,641    1,207,674 
           
NET PROPERTY AND EQUIPMENT   105,708    117,069 
           
OTHER ASSETS          
Fair value investment-securities   4,400    9,600 
Trademark   4,467    4,467 
Security deposit   3,500    3,500 
           
TOTAL OTHER ASSETS   12,367    17,567 
           
TOTAL ASSETS  $1,098,716   $1,342,310 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
           
Current Liabilities          
Accounts payable and other payable  $1,155,668   $1,144,545 
Accrued expenses   1,269,064    1,163,146 
Cumulative preferred stock dividends payable   109,899    92,472 
Contract liabilities   232,444    428,009 
Capital lease, current portion   9,088    9,088 
Customer deposit   143,503    136,765 
Warranty reserve   20,000    20,000 
Loan payable, merchant cash advance, net of finance fees of $0   366,577    427,214 
Loan payable, related party   165,172    187,054 
Promissory note, related party   5,000    - 
Derivative liabilities   9,109,600    31,640,470 
Series F 8% Convertible Preferred Stock, 1,678 shares issued and outstanding, redeemable value of $1,678,000   1,678,000    1,678,000 
Convertible promissory notes, net of discount of $0   1,891,613    2,879,325 
           
Total Current Liabilities   16,155,628    39,806,088 
           
Long Term Liabilities          
Capital lease, long term portion   14,801    17,073 
           
Series G 8% Convertible Preferred Stock, 430 and 530 shares issued and outstanding notes, respectively, redeemable value of $430,000 and $530,000, respectively   430,000    530,000 
Series I 8% Convertible Preferred Stock, 797 shares issued and outstanding notes, respectively, redeemable value of $797,400   797,400    797,400 
Series K 8% Convertible Preferred Stock, 2,896 and 2,001 shares issued and outstanding notes, respectively, redeemable value of $2,895,900 and $2,000,650, respectively   2,895,900    2,000,650 
Convertible promissory notes, net of discount of $0   1,473,325    552,975 
           
Total Long Term Liabilities   5,611,426    3,898,098 
           
Total Liabilities   21,767,054    43,704,186 
           
COMMITMENTS AND CONTINGENCIES (See Note 11)   -    - 
           
SHAREHOLDERS’ DEFICIT          
Preferred stock, $0.0001 par value, 550,000,000 shares authorized          
1,000 shares of Series C issued and outstanding, respectively   -    - 
38,500,000 shares of Series D-1 issued and outstanding, respectively   3,850    3,850 
1,537,213 and 2,139,649 shares of Series E issued and outstanding, respectively   154    214 
349 shares of Series J issued and outstanding, respectively   -    - 
1,405 and 1,000 shares of Series L issued and outstanding, respectively   -    - 
34,200 shares of Series M issued and outstanding, respectively   3    3 
Common stock, $0.0001 par value, 16,000,000,000 shares authorized          
8,563,384 and 4,854,993 equity shares issued and outstanding, respectively   857    486 
Preferred treasury stock,1,000 and 1,000 shares outstanding, respectively   -    - 
Additional paid in capital - Common stock   65,007,176    64,915,364 
Accumulated other comprehensive loss   (133)   (134)
Accumulated deficit   (85,680,338)   (107,281,659)
           
TOTAL SHAREHOLDERS’ DEFICIT   (20,668,338)   (42,361,876)
           
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT  $1,098,716   $1,342,310 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 

 

1

 

 

ORIGINCLEAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(Unaudited)

 

   Three Months Ended 
   March 31,
2020
   March 31,
2019
 
         
Sales  $1,092,438   $742,043 
           
Cost of Goods Sold   879,145    723,263 
           
Gross Profit   213,293    18,780 
           
Operating Expenses          
Selling and marketing expenses   374,923    482,659 
General and administrative expenses   549,911    587,070 
Research and development   28,982    23,950 
Depreciation and amortization expense   11,361    10,729 
           
Total Operating Expenses   965,177    1,104,408 
           
Loss from Operations   (751,884)   (1,085,628)
           
OTHER INCOME (EXPENSE)          
Other income   4,000    19,036 
Gain on conversion of preferred stock   1,229    - 
Unrealized gain(loss) on investment securities   (5,200)   (7,200)
Loss on settlement of convertible notes   -    (314,295)
Commitment fee   -    (34,378)
Loss on conversion of debt   -    (514,404)
Gain on net change in derivative liability and conversion of debt   22,530,870    1,944,589 
Interest expense   (177,601)   (338,992)
           
TOTAL OTHER (EXPENSE) INCOME   22,353,298    754,356 
           
NET INCOME (LOSS)  $21,601,414   $(331,272)
           
PREFERRED STOCK DIVIDENDS  $-   $(38,156)
           
NET AVAILABLE TO SHAREHOLDERS  $

21,601,414

   $(369,428)
           
BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO SHAREHOLDERS’  $3.33   $(0.38)
           
DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO SHAREHOLDERS’     $0.22   $(0.38)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING,          
BASIC   6,494,377    875,828 
DILUTED   100,433,377    875,828 

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

2

 

 

ORIGINCLEAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

 

   THREE MONTHS ENDED MARCH 31, 2019 
                   Additional            
   Preferred stock   Common stock   Paid-in
Capital
Common
   Accumulated
Other
Comprehensive
   Accumulated     
   Shares   Amount   Shares   Amount   Stock   loss   Deficit   Total 
Balance at December 31, 2018   40,640,649   $4,064    875,244   $88   $63,179,433   $(134)  $(79,807,981)  $(16,624,530)
                                         
Common stock issuance for conversion of debt and accrued interest   -    -    313,014    31    891,224    -    -    891,255 
                                         
Common stock issued at fair value for services   -    -    116,539    12    279,217    -    -    279,229 
                                         
Common stock issued through a private placement for purchase of Series G Preferred stock   -    -    82,799    8    (8)   -    -    - 
                                         
Cumulative preferred stock dividend   -    -    -    -    (38,156)   -    -    (38,156)
                                         
Other comprehensive gain   -    -    -    -    -    1    -    1 
                                         
Net loss   -    -    -    -    -    -    (331,272)   (331,272)
                                         
Balance at March 31, 2019 (unaudited)   40,640,649   $4,064    1,387,596   $139   $64,311,710   $(133)  $(80,139,253)  $(15,823,473)

 

   THREE MONTHS ENDED MARCH 31, 2020 
                       Accumulated         
   Preferred stock   Common stock   Additional
Paid-in
   Other
Comprehensive
   Accumulated     
   Shares   Amount   Shares   Amount   Capital   loss   Deficit   Total 
Balance at December 31, 2019   40,674,799    4,067    4,854,993    486    64,915,364    (134)   (107,281,659)   (42,361,876)
                                         
Common stock issuance for conversion of debt and accrued interest   -    -    2,180,848    218    77,529    -    -    77,747 
                                         
Common stock issued at fair value for services   -    -    622,181    62    61,803    -    -    61,865 
                                         
Common stock issued for conversion of Series E Preferred stock   (602,436)   (60)   30,124    3    57    -    -    - 
                                         
Common stock issued for conversion of Series L Preferred stock   (43)   -    875,238    88    (88)   -    -    - 
                                         
Issuance of Series K Preferred stock   50    -    -    -    -    -    -    - 
                                         
Issuance of Series L Preferred stock through a private placement associated with the Series K Preferred note   448    -    -    -    -    -    -    - 
                                         
Reclassification of non-cash adjustment   -    -    -    -    (46,260)   -    -    (46,260)
                                         
 Gain on conversion of Series L Preferred stock   -    -    -    -    (1,229)   -    -    (1,229)
                                         
Comprehensive gain   -    -    -    -    -    1    -    1 
                                         
Net Income   -    -    -    -    -    -    21,601,414    21,601,414 
Balance at March 31, 2020 (unaudited)   40,072,818   $4,007    8,563,384   $857   $65,007,176   $(133)  $(85,680,245)  $(20,668,338)

 

The accompany notes are an integral part of these unaudited condensed consolidated financial statements 

 

3

 

 

ORIGINCLEAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(Unaudited)

 

   Three Months Ended 
   March 31,
2020
   March 31,
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income (loss)  $21,601,414   $(331,272)
Adjustment to reconcile net loss to net cash used in operating activities          
Depreciation and amortization   11,361    10,729 
Common stock issued for services   61,865    279,229 
Loss on net change in valuation of derivative liability   (22,530,870)   (1,944,589)
Loss on conversion of debt   -    514,404 
Loss on settlement of debt   -    314,295 
Debt discount recognized as interest expense   -    132,477 
Net unrealized loss on fair value of security   5,200    7,200 
Gain on conversion of preferred stock   (1,229)   - 
Convertible note receivable   (4,000)   - 
Amortization of financing fees and cost   -    110,891 
Change in Assets (Increase) Decrease in:          
Contracts receivable   195,577    19,534 
Contract asset   (195,769)   6,618 
           
Prepaid expenses and other assets   37,912    (12,736)
Change in Liabilities Increase (Decrease) in:          
Accounts payable   11,123    143,784 
Accrued expenses   70,043    2,556 
Contract liabilities   (195,565)   19,497 
Customer deposit   6,738    (6,738)
Deferred income   -    28,500 
           
NET CASH USED IN OPERATING ACTIVITIES   (926,200)   (705,621)
           
CASH FLOWS USED FROM INVESTING ACTIVITIES:          
Net change in fair value investment security   -    (19,035)
           
CASH USED IN INVESTING ACTIVITIES   -    (19,035)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payments on capital lease   (2,272)   (2,272)
Loan payable financing, net   (60,637)   (41,749)
Loan payable, related party, net   (21,882)   (15,674)
Promissory note payable, related party   5,000    (21)
Net cumulative preferred stock dividends payable   17,427    13,358 
Payment on redemption of preferred stock   -    (65,000)
Net proceeds for issuance of preferred stock for cash   795,250    530,000 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   732,886    418,642 
           
NET (DECREASE) INCREASE IN CASH   (193,314)   (306,014)
           
CASH BEGINNING OF YEAR   490,614    609,144 
           
CASH END OF YEAR  $297,300   $303,130 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          
Interest paid  $7,086   $16,926 
Taxes paid  $-   $- 
           
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS          
Common stock issued at fair value for conversion of debt, plus accrued interest, and other fees  $77,747   $891,255 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 

 

4

 

 

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

MARCH 31, 2020

 

1. The accompanying unaudited condensed consolidated financial statements of OriginClear, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.  For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2019.

 

Going Concern

The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. These factors, among others raise substantial doubt about the Company’s ability to continue as a going concern.  Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2019 expressed substantial doubt about our ability to continue as a going concern.

 

The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, achieving a level of profitable operations and receiving additional cash. During the three months ended March 31, 2020, the Company obtained funds from sales of its preferred stock. Management believes this funding will continue from its current investors and from new investors. The Company also generated revenue of $1,092,438 and has standing purchase orders and open invoices with customers which will provide funds for operations. Management believes the existing shareholders, and prospective new investors and future sales will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the development of its core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity financing.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of OriginClear, Inc. and its wholly owned operating subsidiaries, Progressive Water Treatment, Inc., and OriginClear Technologies, Ltd. All material intercompany transactions have been eliminated upon consolidation of these entities.

 

Cash and Cash Equivalent

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

 

5

 

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, warranty reserves, inventory valuation, derivative liabilities and other conversion features, fair value investments, valuations of non-cash capital stock issuances and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Net Earnings (Loss) per Share Calculations

Basic loss per share calculations are computed by dividing income (loss) 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 securities or other contracts to issue common stock that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

 

   For the Three Months Ended
March 31,
 
   2020   2019 
Income (Loss) to common shareholders (Numerator)  $21,601,414   $(331,272)
           
Basic weighted average number of common shares outstanding (Denominator)   6,494,377    875,828 
           
Diluted weighted average number of common shares outstanding (Denominator)   100,433,377    875,828 

 

The Company excludes issuable shares from warrants, convertible notes and preferred stock, if their impact on the loss per share is anti-dilutive, and includes the issuable shares if their impact is dilutive.

 

    Anti-dilutive shares     Dilutive shares  
March 31, 2020            
             
Warrants shares     122,044       -  
Convertible debt shares     97,207,689       93,939,000  
Preferred shares     40,073,167       -  
                 
March 31, 2019                
                 
Warrants shares     125,456       -  
Convertible debt shares     4,051,573       -  
Preferred shares     40,639,649       -  

  

Revenue Recognition

We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

 

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

 

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Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined.

 

Contract receivables are recorded on contracts for amounts currently due based upon progress billings, as well as retention, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs. 

 

Contract Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers on a monthly basis. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The allowance for doubtful accounts were $0 as of March 31, 2020 and December 31, 2019, respectively. The net contract receivable balance was $327,334 and $522,911 at March 31, 2020 and December 31, 2019, respectively.

 

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

 

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at March 31, 2020, and determined there was no impairment of indefinite lived intangibles and goodwill.

 

Research and Development

Research and development costs are expensed as incurred. Total research and development costs were $28,982 and $23,950 for the three months ended March 31, 2020 and March 31, 2019, respectively.

 

Property and Equipment

Property and equipment are stated at cost. Gain or loss is recognized upon disposal of property and equipment, and the asset and related accumulated depreciation are removed from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred, while expenditures for addition and betterment are capitalized. Furniture and equipment are depreciated on the straight-line method and include the following categories:

 

Estimated Life        
Machinery and equipment     5-10 years  
Furniture, fixtures and computer equipment     5-7 years  
Vehicles     3-5 years  
Leasehold improvements     2-5 years  

 

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Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed following generally accepted accounting principles.

 

Depreciation expense during the three months ended March 31, 2020 and 2019, respectively was $11,361 and $10,729.

 

Stock-Based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

Accounting for Derivatives

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average series Binomial lattice option pricing models to value the derivative instruments at inception and on subsequent valuation dates.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2020, the balances reported for cash, contract receivables, cost in excess of billing, prepaid expenses, accounts payable, billing in excess of cost, and accrued expenses approximate the fair value because of their short maturities.

 

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

 

  Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. 

 

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The following table presents certain investments and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s balance sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2020.

 

   Total   (Level 1)   (Level 2)   (Level 3) 
                 
Investment at fair value-securities  $4,400   $4,400   $      -   $      - 
Total Assets measured at fair value  $4,400   $4,400   $-   $- 
                     
   Total   (Level 1)   (Level 2)   (Level 3) 
                 
Derivative Liability  $9,109,600   $      -   $      -   $9,109,600 
Total liabilities measured at fair value  $9,109,600   $-   $-   $9,109,600 

 

The following is a reconciliation of the derivative liability for which level 3 inputs were used in determining the approximate fair value:

 

Balance as of January 1, 2020  $31,640,470 
Gain on conversion of debt and change in derivative liability   (22,530,870)
Balance as of March 31, 2020  $9,109,600 

 

For purpose of determining the fair market value of the derivative liability, the Company used Binomial lattice formula valuation model. The significant assumptions used in the Binomial lattice formula valuation of the derivative are as follows:

 

    3/31/2020
Risk free interest rate   0.05% - 2.43%
Stock volatility factor   0.54% - 207.0%
Weighted average expected option life   6 months -  5 years
Expected dividend yield   None

 

Segment Reporting

The Company’s business currently operates in one segment based upon the Company’s organizational structure and the way in which the operations are managed and evaluated.

 

Marketable Securities

The Company adopted ASU 2016-01, “Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purpose, and separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. It eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The Company has evaluated the potential impact this standard may have on the condensed consolidated financial statements and determined that it had a significant impact on the condensed consolidated financial statements. The Company accounts for its investment in Water Technologies International, Inc. as available-for-sale securities, and the unrealized gain on the available-for-sale securities is recognized in net income.

 

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Licensing agreement

The Company analysed the licensing agreement using ASU 606 to determine the timing of revenue recognition. The licensing of the intellectual property (IP) is distinct from the non-license goods or services and has significant standalone functionality that provides a benefit or value. The functionality will not change during the license period due to the licensor’s activities. Because the significant standalone functionality is delivered immediately, the revenue is generally recognized when the license is delivered.

 

Reclassification of Certain Expenses

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operation.

 

Recently Issued Accounting Pronouncements 

Management reviewed currently issued pronouncements and does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.

 

3. CAPITAL STOCK

 

Preferred Stock 

 

Series C

The Company has designated 1,000 shares of its preferred stock as Series C Preferred Stock. Such 1,000 shares are outstanding and are held by T. Riggs Eckelberry, our chief executive officer. Shares of Series C Preferred Stock are not convertible to common stock, are not entitled to receive dividends, and do not have a liquidation preference. The Series C Preferred Stock have no pre-emptive or subscription rights, and there is no sinking fund provision applicable to the Series C Preferred Stock. The Series C Preferred Stock entitles the holder to 51% of the total voting power of our stockholders. Share of Series C Preferred Stock will automatically be redeemed by the Company at par value on the first to occur of the following events: (i) the date that Mr. Eckelberry ceases to serve as officer, director or consultant of the Company, or (ii) on the date that the Company’s shares of common stock first trade on any national securities exchange provided that (a) the listing rules of any such exchange prohibit preferential voting rights of a class of securities of the Company, or (b) listing on any such national securities exchange is conditioned upon the elimination of the preferential voting rights of the Series C Preferred Stock. As of March 31, 2020, there are 1,000 shares of Series C Preferred Stock issued and outstanding.

 

Series D-1

The Company has designated 50,000,000 shares of its preferred stock as Series D-1 Preferred Stock. Each share of Series D-1 Preferred Stock is convertible into 0.0005 shares of common stock. The Series D-1 Preferred Stock may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of our outstanding common stock. The holders of outstanding shares of Series D-1 Preferred Stock are not entitled to receive dividends, and do not have a liquidation preference. The Series D-1 Preferred Stock have no preemptive or subscription rights, and there is no redemption or sinking fund provisions applicable to the Series D-1 Preferred Stock. As of March 31, 2020, there were 38,500,000 shares of Series D-1 Preferred Stock issued and outstanding.

 

Series E

The Company has designated 4,000,000 shares of its preferred stock as Series E Preferred Stock. Each share of Series E Preferred Stock is convertible into the greater of (A) 0.05 shares of common stock and (B) the number of shares the holder would have received pursuant to the holder’s subscription agreement if the preferred shares were priced based on the average closing sale price of three trading days prior to the date the holder requests a conversion, provided the lowest price for which an adjustment will be made is 50% of the purchase price paid by any purchaser of the Series E Preferred Stock. The Series E Preferred Stock may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of our outstanding common stock. The holders of outstanding shares of Series E Preferred Stock are not entitled to receive dividends, and do not have a liquidation preference. The Series E Preferred Stock have no pre-emptive or subscription rights, and there is no redemption or sinking fund provisions applicable to the Series E Preferred Stock. The Series E Preferred Stock does not have voting rights, except as required by law and with respect to certain protective provisions set forth in the Certificate of Designation of Series E Preferred Stock. As of December 31, 2019, there were 2,139,649 shares of Series E Preferred Stock issued and outstanding. During the period ended March 31, 2020, the Company issued 30,124 shares of common stock upon conversion of 602,436 Series E Preferred Stock. As of March 31, 2020, there were 1,537,213 shares of Series E Preferred Stock issued and outstanding. The Company did not recognize any gain or loss on conversion.

  

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Series F

The Company has designated 6,000 shares of its preferred stock as Series F Preferred Stock. The Series F Preferred Stock has a stated value of $1,000 per share. The Series F Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series F Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series F Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to any other series of capital stock of the Company. The Series F Preferred Stock has no pre-emptive or subscription rights, and there is no sinking fund provision applicable to the Series F Preferred Stock. The Series F Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series F Preferred Stock on September 1, 2020, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series F Preferred Stock is outstanding, redeem all or any portion of the outstanding Series F Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series F Preferred Stock, subject to the Company’s payment of any accrued but unpaid dividends upon such redemption. As of March 31, 2020, there were 1,678 shares of Series F Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $33,560.

 

Series G

The Company has designated 6,000 shares of its preferred stock as Series G Preferred Stock. The Series G Preferred Stock has a stated value of $1,000 per share. The Series G Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series G Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series G Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to any other series of capital stock of the Company (other than the Series F Preferred Stock). The Series G Preferred Stock has no pre-emptive or subscription rights, and there is no sinking fund provision applicable to the Series G Preferred Stock. The Series G Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series G Preferred Stock on April 30, 2021, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series G Preferred Stock is outstanding, redeem all or any portion of the outstanding Series G Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series G Preferred Stock, subject to the Company’s payment of any accrued but unpaid dividends upon such redemption. On February 21, 2020, 100 shares of Series G Preferred Stock were exchanged for Series K Preferred Stock. As of March 31, 2020, there were 430 shares of Series G Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $9,740.

 

Series I

The Company has designated 4,000 shares of its preferred stock as Series I Preferred Stock. The Series I Preferred Stock has a stated value of $1,000 per share. The Series I Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series I Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series I Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to the common stock. The Series I Preferred Stock has no preemptive or subscription rights, and there is no sinking fund provision applicable to the Series I Preferred Stock. The Series I Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series I Preferred Stock two years following the date that is the later of the (i) final closing of the tranche (as designated in the subscription agreement under which such shares were sold) that such shares to be redeemed were part of (a “Series I Tranche”), or (ii) the expiration date of the Series I Tranche that such shares to be redeemed were part of, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series I Preferred Stock is outstanding, redeem all or any portion of the outstanding Series I Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series I Preferred Stock, subject to the Company’s payment of any accrued but unpaid dividends upon such redemption. The issuance of the shares were accounted for under ASC 480-10-25-4, which requires liability treatment for certain mandatorily redeemable financial instruments, and the cumulative dividends are recorded as interest expense. As of March 31, 2020, there were 797 shares of Series I Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $15,948. 

 

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Series J

The Company has designated 100,000 shares of its preferred stock as Series J Preferred Stock. The Series J Preferred Stock has a stated value of $1,000 per share. The Series J Preferred Stock is convertible into common stock in an amount determined by dividing the stated value by the conversion price, which is equal to lower of (a) the closing price of the common stock on the date the Company has banked funds and received and accepted executed subscription documents and the purchase price or (b) the average closing sale price of the common stock for the five trading days prior to the conversion date; certain prior investors are also entitled to certain make-good shares. The Series J Preferred Stock may not be converted to common stock to the extent such conversion would cause the holder to beneficially own more than 4.99% of the Company’s outstanding common stock. The Series J Preferred Stock are entitled to dividends on an as-converted basis with the common stock. The Series J Preferred Stock will entitle the holders to a payment on an as-converted and pari passu basis with the common stock upon any liquidation. The Series J Preferred Stock has no pre-emptive or subscription rights, and there are no sinking fund or redemption provisions applicable to the Series J Preferred Stock. The Series J Preferred Stock votes on an as-converted basis with the common stock, subject to the beneficial ownership limitation. As of March 31, 2020, there were 349 shares of Series J Preferred Stock issued and outstanding.

 

Series K

The Company has designated 4,000 shares of its preferred stock as Series K Preferred Stock. The Series K Preferred Stock has a stated value of $1,000 per share. The Series K Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series K Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series K Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to the common stock. The Series K Preferred Stock has no preemptive or subscription rights, and there is no sinking fund provision applicable to the Series K Preferred Stock. The Series K Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series K Preferred Stock two years following the date that is the later of the (i) final closing of the tranche (as designated in the subscription agreement under which such shares were sold) that such shares to be redeemed were part of (a “Series K Tranche”), or (ii) the expiration date of the Series K Tranche that such shares to be redeemed were part of, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series K Preferred Stock is outstanding, redeem all or any portion of the outstanding Series K Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series K Preferred Stock, subject to the Company’s payment of any accrued but unpaid dividends upon such redemption. The issuance of the shares were accounted for under ASC 480-10-25-4, which requires liability treatment for certain mandatorily redeemable financial instruments, and the cumulative dividends are recorded as interest expense. During the period ended March 31, 2020, the Company issued an aggregate of 895 shares of Series K Preferred Stock for an aggregate purchase price of $795,250. On February 21, 2020, an investor was issued 100 shares of Series K Preferred Stock in exchange for 100 shares of Series G Preferred Stock. As of March 31, 2020, there were 2,896 shares of Series K Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $50,620.

 

Series L

The Company has designated 100,000 shares of its preferred stock as Series L Preferred Stock. The Series L Preferred Stock has a stated value of $1,000 per share. The Series L Preferred Stock is convertible into common stock in an amount determined by dividing the stated value by the conversion price, which is equal to lower of(a) the closing price of the common stock on the date the Company has banked funds and received and accepted executed subscription documents and the purchase price or (b) the average closing sale price of the common stock for the five trading days prior to the conversion date; certain prior investors are also entitled to certain make-good shares. The Series L Preferred Stock may not be converted to common stock to the extent such conversion would cause the holder to beneficially own more than 4.99% of the Company’s outstanding common stock. The Series L Preferred Stock are entitled to dividends on an as-converted basis with the common stock. The Series L Preferred Stock will entitle the holders to a payment on an as-converted and pari passu basis with the common stock upon any liquidation. The Series L Preferred Stock has no pre-emptive or subscription rights, and there is no sinking fund or redemption provisions applicable to the Series L Preferred Stock. The Series L Preferred Stock votes on an as-converted basis with the common stock, subject to the beneficial ownership limitation. During the period ended March 31, 2020, the Company issued an aggregate of 875,238 shares of common stock upon conversion of 43 shares of Series L Preferred Stock. The Company also issued 448 shares of Series L Preferred Stock with the Series K Preferred Stock. As of March 31, 2020, there were an aggregate of 1,405 shares of Series L Preferred Stock issued and outstanding. The Company recognized a loss on the conversions of $1,229.

  

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Series M

Pursuant to the Amended and Restated Certificate of Designation of Series M Preferred Stock filed with the Secretary of State of Nevada on July 1, 2020, the Company has designated 800,000 shares of its preferred stock as Series M Preferred Stock. Each share of Series M Preferred Stock has a stated value of $25. The Series M Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series M Preferred Stock are entitled to receive dividends, at the annual rate of 10%, payable monthly, payable in preference and priority to any payment of any dividend on the common stock. The Series M Preferred Stock will be entitled to a liquidation preference in an amount equal to $25 per share plus any declared but unpaid dividends, before any payments to holders of common stock. The Series M Preferred Stock have no pre-emptive or subscription rights, and there are no sinking fund provisions applicable to the Series M Preferred Stock. The Series M Preferred Stock does not have voting rights, except as required by law and with respect to certain protective provisions set forth in the Certificate of Designation of Series M Preferred Stock. To the extent it may lawfully do so, the Company may, in its sole discretion, at any time when there are outstanding shares of Series M Preferred Stock, redeem any or all of the then outstanding shares of Series M Preferred Stock at a redemption price of $37.50 per share (150% of the stated value) plus any accrued but unpaid dividends. During the period ended March 31, 2020, the Company reclassified noncash accrued interest of $46,260 associated with the exchange of a note, from preferred additional paid in capital, which affected the balance sheet only. As of March 31, 2020, there were 34,200 shares of Series M Preferred Stock issued and outstanding that do not qualify to receive dividends.

 

Common Stock 

On April 23, 2019, the Company filed a certificate of amendment to its articles of incorporation, with the Secretary of the State of Nevada effectuate an increase to the number of authorized shares of common stock of the Company from 8,000,000,000 shares from 16,000,000,000.

 

Reverse Stock Split

On October 25, 2019, the Company effected a one-for-two thousand (1 for 2,000) reverse stock split of its common stock (the “Reverse Split”). All shares, options, warrants and per share information throughout these consolidated financial statements have been retroactively restated to reflect the Reverse Split.

 

March 31, 2020

The Company issued 2,180,848 shares of common stock for the settlement of convertible promissory notes in an aggregate principal in the amount of $67,362, plus interest in the amount of $10,385, at conversion prices of $0.025 to $0.045.

 

The Company issued 622,181 shares of common stock for services at fair value of $61,865.

 

The Company issued 30,124 shares of common stock upon conversion of 602,436 shares of Series E preferred stock.

 

The Company issued 875,238 shares of common stock upon conversion of 43 shares of Series L preferred stock.

 

March 31, 2019

The Company issued 313,014 shares of common stock for the settlement of convertible promissory notes in an aggregate principal in the amount of $284,973, plus interest in the amount of $51,578, plus a default settlement of $40,500, with an aggregate fair value loss on conversion of debt in the amount of $514,404, based upon conversion prices of $1.8 to $3.60.

 

The Company issued 116,539 shares of common stock for services at fair value of $279,229.

 

The Company issued 82,799 shares of common stock through a private placement as additional consideration for purchase of Series G preferred stock.

 

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4. RESTRICTED STOCKS AND WARRANTS

  

Restricted Stock to CEO

Between May 12, 2016, and August 14, 2019, the Company entered into Restricted Stock Grant Agreements (“the RSGAs”) with its Chief Executive Officer, Riggs Eckelberry, to create management incentives to improve the economic performance of the Company and to increase its value and stock price. All shares issuable under the RSGAs are performance based shares and none have yet vested nor have any been issued. The RSGAs provides for the issuance of up to an aggregate of 109,214 shares of the Company’s common stock to Mr. Eckelberry provided certain milestones are met in certain stages; a) If the Company’s consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company’s quarterly or annual financial statements, the Company will issue up to an aggregate of 54,607 shares of its common stock; b) If the Company’s consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company’s SEC reports, the Company will issue up to an aggregate of 54,607 shares of its common stock. The Company has not recognized any costs associated with the milestones, because achievement is not probable. As the performance goals are achieved, the shares shall become eligible for vesting and issuance.

  

Restricted Stock to Employees and Consultants

Between May 12, 2016, and August 14, 2019, the Company entered into Restricted Stock Grant Agreements (“the E&C RSGAs”) with its employees and consultants, to create management incentives to improve the economic performance of the Company and to increase its value and stock price. All shares issuable under the E&C RSGAs are performance based shares and none have yet vested nor have any been issued. The E&C RSGAs provide for the issuance of up to 378,750 shares of the Company’s common stock to employees and consultants provided certain milestones are met in certain stages; a) If the Company’s consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company’s quarterly or annual financial statements, the Company will issue up to an aggregate of 189,375 shares of its common stock; b) If the Company’s consolidated operating profit Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company’s SEC reports, the Company will issue up to an aggregate of 189,375 shares of its common stock. As of December 31, 2019, an aggregate of 30,250 shares issuable under the E&C RSGAs have been cancelled. The Company has not recognized any costs associated with the milestones, because achievement is not probable. As the performance goals are achieved, the shares shall become eligible for vesting and issuance.

 

On August 14, 2019, the Board of Directors approved an amendment to the RSGAs and E&C RSGAs to include an alternative vesting schedule for the Grantees. The Grantees can elect to participate in the alternate vesting schedule for grants received at least two years prior to the date requested. On the first day of each calendar month, an aggregate dollar amount of restricted stock equal to an aggregate of 5% of the total dollar amount of the Company’s common stock that traded during the prior calendar month, will vest, divided equally among all RSGAs and E&C RSGAs that have duly elected to participate in the alternate vesting schedule, with value based on the fair market value under the respective RSGAs and E&C RSGAs. The fair market value shall equal the average of the trailing ten (10) closing trade prices of the Company’s common stock on the last ten (10) trading days of the month immediately prior to the date of determination as quoted on the public securities trading market on which the Company’s common stock is then traded. If the fair market value of the Company’s common stock on the date the shares are vested is less than the fair market value of the Company’s common stock on the effective date of the RSGA or E&C RSGA, then the number of vested shares issuable (assuming all conditions are satisfied) shall be increased so that the aggregate fair market value of vested shares issuable on the vesting date equals the aggregate fair market value that such number of shares would have had on the effective date. Upon the occurrence of a Company performance goal, the right to participate in the alternate vesting schedule will terminate, and the vesting of the remaining unvested shares will be as set forth under the restricted stock award agreement. As of March 31 2020, there was no alternative vesting selected and no shares were issued.

 

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Warrants

During the period ended March 31, 2020, no warrants were issued by the Company. A summary of the Company’s warrant activity and related information follows for the three months ended March 31, 2020:

  

   March 31, 2020 
       Weighted 
   Number   average 
   of   exercise 
   Warrants   price 
Outstanding - beginning of period   122,044   $500 
Granted   -   $- 
Exercised   -   $- 
Forfeited   -   $- 
Outstanding - end of period   122,044   $500 

 

At March 31, 2020, the weighted average remaining contractual life of warrants outstanding:

 

    March 31, 2020 
            Weighted 
            Average 
            Remaining 
Exercisable   Warrants   Warrants   Contractual 
Prices   Outstanding   Exercisable   Life (years) 
$500.00    122,044    122,044    1.37 
      122,044    122,044      

 

At March 31, 2020, the aggregate intrinsic value of the warrants outstanding was $0.

 

5. CONVERTIBLE PROMISSORY NOTES

 

As of March 31, 2020, the outstanding convertible promissory notes are summarized as follows:

 

Convertible Promissory Notes  $3,364,938 
Less current portion   1,891,613 
Total long-term liabilities  $1,473,325 

 

Maturities of long-term debt for the next five years are as follows:

 

Period Ending March 31,  Amount 
2021   1,891,613 
2022   1,411,050 
2023   - 
2024   62,275 
   $3,364,938 

 

At March 31, 2020, the Company had $3,364,938 in convertible promissory notes.

 

On various dates from 2014 through May 2015, the Company issued unsecured convertible promissory notes (the “2014-2015 Notes”), that matured on various dates and were extended sixty (60) months from the effective date of each Note. The 2014-2015 Notes bear interest at 10% per annum. The 2014-2015 Notes may be converted into shares of the Company’s common stock at conversion prices ranging from the lesser of $4,200 to $9,800 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 50% of the lowest trade price on any trade day following issuance of the 2014-2015 Notes.  In addition, for as long as the 2014-2015 Notes or other convertible notes in effect between the purchaser and the Company are outstanding, if the Company issues any security with terms more favorable than the terms of the 2014-2015 Notes or such other convertible notes or a term was not similarly provided to the purchaser of the 2014-2015 Notes or such other convertible notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the 2014-2015 Notes and such other convertible notes. The conversion feature of the 2014-2015 Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the 2014-2015 Notes. During the period ended March 31, 2020, the Company issued 820,937 shares of common stock, upon conversion of $19,500 in principal, plus accrued interest of $10,385. As of March 31, 2020, the 2014-2015 Notes had an aggregate remaining balance of $1,081,050.

 

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The unsecured convertible promissory notes (the “OID Notes”) had an aggregate remaining balance of $184,124, plus accrued interest of $13,334. The OID Notes included an original issue discount and one-time interest, which has been fully amortized. The OID Notes matured on December 31, 2017, which were extended to June 30, 2018. The OID Notes were convertible into shares of the Company’s common stock at a conversion price initially of $30,620. After the amendment, the conversion price changed to the lesser of $5,600 per share, or b) fifty percent (50%) of the lowest trade price of common stock recorded since the original effective date of this note, or c) the lowest effective price per share granted to any person or entity after the effective date.  The conversion feature of the notes was considered a derivative in accordance with current accounting guidelines, because of the reset conversion features of the notes. During the period ended March 31, 2020, the Company issued 130,711 shares of common stock upon conversion of principal in the amount of $5,150. The remaining balance of the OID Notes as of March 31, 2020 was $62,275.  

 

The Company issued various, unsecured convertible promissory notes (the “2015-2016 Notes”), on various dates ending on May 19, 2016. The 2015-2016 Notes matured and were extended from the date of each tranche through maturity dates ending on May 19, 2020. The 2015-2016 Notes bear interest at 10% per annum. The 2015-2016 Notes may be converted into shares of the Company’s common stock at conversion prices ranging from the lesser of $1,400 to $5,600 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 50% of the lowest trade price on any trade day following issuance of the 2015-2016 Notes.  The conversion feature of the 2015-2016 Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the 2015-2016 Notes. The remaining balance of the 2015-2016 Notes as of March 31, 2020 was $1,200,000.

 

The Company issued a convertible note (the “Dec 2015 Note”) in exchange for accounts payable in the amount of $432,048, which could be converted into shares of the Company’s common stock after December 31, 2015. The Dec 2015 Note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The Dec 2015 Note did not meet the criteria of a derivative, and was accounted for as a beneficial conversion feature, which was amortized over the life of the Dec 2015 Note and recognized as interest expense in the financial statements. On January 1, 2016, the Dec 2015 Note met the criteria of a derivative and was accounted for under ASC 815. The Dec 2015 Note has zero stated interest rate, and the conversion price shall be equal to 75% of the average three lowest last sale prices traded during the 25 trading days immediately prior to conversion. As of March 31, 2020, the remaining balance of the Dec 2015 Note was $167,048.

 

The Company issued a convertible note (the “Sep 2016 Note”) in exchange for accounts payable in the amount of $430,896, which could be converted into shares of the Company’s common stock after September 15, 2016. The Sep 2016 Note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The Sep 2016 Note met the criteria of a derivative and was accounted for under ASC 815. The Sep 2016 Note has zero stated interest rate, and the conversion price shall be equal to 75% of the average three lowest last sale prices traded during the 25 trading days immediately prior to conversion. The Sep 2016 Note did not meet the criteria of a derivative at the date of the issuance, and was accounted for as a beneficial conversion feature, which was amortized over the life of the Sep 2016 Note and recognized as interest expense in the financial statements. The conversion feature of the Sep 2016 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion feature of the Sep 2016 Note. As of March 31, 2020, the remaining balance of the Sep 2016 Note was $430,896.

 

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The Company issued two (2) unsecured convertible promissory notes (the “Apr & May 2018 Notes”), in the aggregate amount of $300,000 on April 2, 2018 and May 31, 2018. The Apr & May 2018 Notes matured on April 2, 2019 and May 31, 2019, respectively. The Apr & May 2018 Notes bear interest at 10% per annum. The Apr & May 2018 Notes may be converted into shares of the Company’s common stock at a variable conversion price of 50% of the lesser of the lowest trading price twenty five (25) trading days prior to conversion. The conversion feature of the Apr & May 2018 Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Notes. During the nine months ended September 30, 2019, the Company issued 12,500 shares of common stock upon conversion of principal in the amount of $6,523, plus accrued interest of $4,727, with a fair value loss on conversion of $16,250. On March 13, 2019, the Company entered into a settlement agreement with the investor in the amount of $570,000, based on the outstanding balance due and payable under the Apr & May 2018 Notes. The Company set up a reserve of 2,630,769 shares of common stock of the Company for issuance upon conversion by the investor of the amounts owed under the Notes, in accordance with the terms of the Notes, including, but no limited to the beneficial ownership limitations contained in the Notes. In addition to the foregoing, upon the sale by the investor of the settlement shares as delivered to the investor by the Company, resulting in total net proceeds less than the settlement value, the investor is entitled to additional settlement shares of the Company’s common stock. If after the investor has sold all settlement shares, the investor delivers a written notice to the Company certifying that the investor is entitled to additional settlement shares of the Company’s common stock (the “Make-Whole Shares”). The number of make-whole shares being equal to the greater of ((i) zero and (ii) the quotient of (1) the difference of (x) the settlement value with respect to each sale of shares by the Investor after the delivery of the Settlement Shares, minus (y) the aggregate net consideration received by the Investor from the resale of all shares of common stock issued by the Company, divided by (2) the average trailing closing price for ten (10) trading days for the shares immediately preceding the date of delivery of the make-whole shares. During the period ended March 31, 2020, the Company issued 1,229,200 shares of common stock upon conversion of principal in the amount of $42,712. As of March 31, 2020, the remaining balance of the Apr & May 2018 Notes was $423,669. 

 

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations.

 

The derivative liability recognized in the financial statements as of March 31, 2020 was $9,109,600.

 

6.REVENUE FROM CONTRACTS WITH CUSTOMERS

 

Equipment Contracts

Revenues and related costs on equipment contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

 

The following table represents a disaggregation of revenue by type of good or service from contracts with customers for the period ended March 31, 2020. 

 

   Three Months Ended 
   March 31, 
   2020   2019 
Equipment Contracts  $763,157   $446,233 
Component Sales   318,074    263,259 
Services Sales   11,207    32,551 
   $1,092,438   $742,043 

 

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Revenue recognition for other sales arrangements, such as sales for components, service and licensing fees will remain materially consistent.

 

Contract assets represents revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represents billings in excess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of the contract completion. The contract asset for the three months ended March 31, 2020 was $222,056 and for the year ending December 31, 2019 was $26,287. The contract liability for the three months ended March 31, 2020 was $232,444 and for the year ending December 31, 2019 $428,009.

  

7. FINANCIAL ASSETS

 

 

Convertible Note Receivable

The Company purchased a 10% convertible note in the amount of $80,000, through a private placement with Water Technologies International, Inc (“WTII”). The Note is convertible into common stock of WTII at a price of 65% of the lowest trading price for the ten (10) trading days immediately prior to the conversion date. The conversion price shall not be lower than a price of $0.0001 per share. As of March 31, 2020, the note included principal of $80,000 plus accrued interest of $41,880.

 

Fair value investment in Securities

  On May 15, 2018, the Company received 4,000 shares of WTII preferred stock for the use of OriginClear, Inc. technology associated with their proprietary electro water separation system. The stock was valued at fair market value of $0.0075 for a price of $30,000 on the date of issuance. The preferred shares are convertible into 4,000,000 shares of common stock. The Company analysed the licensing agreement using ASU 606 to determine the timing of revenue recognition. The licensing of the intellectual property (IP) is distinct from the non-license goods or services and has significant standalone functionality that provides a benefit or value. The functionality will not change during the license period due to the licensor’s activities. Because the significant standalone functionality was delivered immediately, the revenue was recognized in the financial statements as of June 30, 2018. As of March 31, 2020, the fair value of the preferred shares was $4,400.

 

8. LOANS PAYABLE

 

Secured Loans Payable

The Company entered into short term loans with various lenders for capital expansion secured by the Company’s assets in the amount of $1,749,970, which included finance cost of $624,810. The finance cost was fully amortized over the terms of the loans, which have various maturity dates ranging from October 2018 through February 2019. The term of the loans ranged from two months to six months. The net balance as of March 31, 2020 was $366,577.

 

Promissory Note Payable, Related Party

The Company received an unsecured promissory note on February 6, 2020 for the sum of $5,000. The note bears interest at 10% per annum, with a maturity date of February 6, 2021. Upon maturity the note and accrued interest is to be paid upon the maturity date. The funds were used for operating expenses.

 

Loan Payable-Related Party  

The Company’s CEO loaned the Company $248,870 as of June 28, 2018. The loans bear interest at various rates to be repaid over a period of three (3) years at various maturity dates. The funds were used for operating expenses. Principal payments were made in the amount of $21,882, leaving a balance of $165,172 as of March 31, 2020.

 

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9. CAPITAL LEASES

 

The Company entered into a capital lease for the purchase of equipment during the period ended March 31, 2020. The lease is for a sixty (60) month term, with monthly payments of $757 per month, and a purchase option at the end of the lease for $1.00.

 

As of March 31, 2020, the maturities are summarized as follows:

 

Capital lease  $23,889 
Less current portion   9,088 
Total long-term liabilities  $14,801 

 

Long term maturities for the next three years are as follows:

 

Period Ending March 31,
2021   9,088 
2022   5,713 
   $14,801 

 

10. FOREIGN SUBSIDIARY

 

On December 31, 2014, the Company formed a wholly owned subsidiary, OriginClear Technologies Limited (OCT), in Hong Kong, China. The Company granted OCT a master license for the People’s Republic of China. In turn, OCT is expected to license regional joint ventures for water treatment.

 

11. COMMITMENTS AND CONTINGENCIES

 

Operating Lease

The Company holds an agreement for office space located in Los Angeles, California. The initial agreement was from May 1, 2016 to July 31, 2016 and the term has automatically renewed for successive periods and will continue until terminated in accordance with the agreement.

 

Facility Rental – Related Party

The Company rents from its subsidiary on a month-to-month basis a 12,000 square foot facility in McKinney, Texas at a base rent of $4,850 per month.

 

Warranty Reserve

Generally, a PWT project is guaranteed against defects in material and workmanship for one year from the date of completion, while certain areas of construction and materials may have guarantees extending beyond one year. The Company has various insurance policies relating to the guarantee of completed work, which in the opinion of management will adequately cover any potential claims. A warranty reserve has been provided under PWT based on the opinion of management and based on Company history in the amount of $20,000 for the period ending March 31, 2020.

 

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Litigation

In February 2019, a Complaint was filed in the Superior Court for the State of California, for breach of contract, common counts for sums due for services allegedly performed, and fraud. The Complaint was filed by RDI Financial, LLC (“RDI”), an assignee of Interdependence, Inc., and named the Company and our developmental subsidiary, WaterChain, Inc., as Defendants. RDI claimed that its assignor, Interdependence, Inc., entered into a contract with the Defendants for Interdependence to provide reputation and professional relationship management services. RDI claimed that Interdependence provided the services and that the Company was required to make certain payments of cash and our capital stock to Interdependence, but did not do so. RDI claims to be entitled to enforce the contract as the assignee, and is demanding monetary damages in the aggregate amount of $630,000.

 

While filed in February, 2019, the Company and WaterChain were unaware of the suit until September of 2019, when they received notice of a default judgment. Litigation counsel was engaged, the absence of prior notice, service of the suit and an improper default promptly challenged, and in October 2019 the Court vacated the default and judgment, and granted the Company and WaterChain leave to file an Answer and Cross-Complaint. Through these filings, the Company and WaterChain, Inc. contest the allegations and claims in the Complaint, and deny that Interdependence performed the required services and contends that we overpaid Interdependence $40,000 for whatever work was done. Specifically, in November, 2019, an Answer was filed denying the claims in the Complaint, along with a Cross-Complaint alleging fraudulent inducement to enter into the contract, negligent misrepresentations, breach of contract, and to rescind the underlying contract. Specifically, we have alleged that Interdependence misrepresented the nature and scope of the services which were to be provided and ability to provide them, misrepresented the results they would obtain from providing such services, and also failed to provide us with the services as required by the contract such that Interdependence was overpaid based on what it in fact did. For those reasons, and prior to any litigation, we terminated the contract for non-performance.

 

On February 6, 2020, the Superior Court set April 4, 2021 as the trial date for this matter. The Company and WaterChain are appropriately defending against the allegations and pursuing affirmative recovery on the cross-complaint. The Company disputes all claims and is appropriately litigating its defenses and pursuing recovery on its cross-suit. The parties are in the preliminary stages of settlement negotiations with the Plaintiff RDI and Interdependence, but we can provide no assurance that any settlement will be reached nor can we provide any assurances regarding any terms of such settlement. As of date of this report, legal fees and costs in this action have been substantial and it is impossible at this time to predict an exact amount, or even a meaningful estimate, of the aggregate sums that may be incurred in finally resolving or adjudicating this lawsuit.

 

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12. SUBSEQUENT EVENTS

 

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has determined that there are the following subsequent events:

 

Between April 28, 2020, and June 22, 2020 holders of convertible promissory notes converted an aggregate principal and interest amount of $45,138 into an aggregate of 1,781,080 shares of the Company’s common stock.

 

Between April 9, 2020 and April 24, 2020, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold an aggregate of 265 shares of the Company’s Series K preferred stock for an aggregate purchase price of $264,517. The Company also issued an aggregate of 132 shares of its Series L preferred stock to the investors.

 

Between April 2, 2020 and May 11, 2020, the Company sold an aggregate of 3,904 shares of the Company’s Series M preferred stock for an aggregate purchase price of $97,600.

 

Between April 15, 2020 and April 30, 2020, holders of Series M Preferred Stock converted an aggregate of 320 Series M shares into an aggregate of 137,052 shares of the Company’s common stock.

 

Between April 30, 2020 and June 30, 2020, the Company issued to consultants and two employees for performance an aggregate of 883,641 shares of the Company’s common stock for services in lieu of cash considerations including 295,141 shares issued in exchange for 6,000,000 shares of Series D-1 preferred stock.

 

On April 27, 2020, the Company filed a certificate of designation (the “Series O COD”) of Series O Preferred Stock (the “Series O”) and a certificate of designation (the “Series P COD”) of Series P Preferred Stock (the “Series P”) with the Secretary of State of Nevada.

 

Between May 4, 2020 and May 5, 2020, the Company received loan proceeds in the aggregate amount of $345,000 (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act. The principal and accrued interest under the Note is forgivable after eight weeks if the Company uses the PPP Loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and otherwise complies with PPP requirements. In order to obtain forgiveness of the PPP Loan, the Company must submit a request and provide satisfactory documentation regarding its compliance with applicable requirements.  The Company must repay any unforgiven principal amount of the Note, with interest, on a monthly basis following the Deferral Period.  The Company intends to use the proceeds of the PPP Loan specifically for eligible purposes and to pursue forgiveness, although no assurance is provided that forgiveness for all or any portion of the PPP Loan will be obtained.

 

On May 18, 2020, the Company entered into Restricted Stock Grant Agreements (the “May RSGAs”) with its Chief Executive Officer, T. Riggs Eckelberry, members of the Board, employees and consultants to create management incentives to improve the economic performance of the Company and to increase its value and stock price. All shares issuable under the May RSGAs are performance based shares and none have yet vested nor have any been issued. The May RSGAs provide for the issuance of up to an aggregate of 10,500,000 shares of the Company’s common stock as follows: 2,000,000 to Mr. Eckelberry, 500,000 to each of the other three members of the Board, and an aggregate of 7,000,000 to employees and consultants provided certain milestones are met in certain stages; a) If the Company’s consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period, the Company will issue up to an aggregate of 5,250,000 shares of its common stock; b) If the Company’s consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company’s SEC Reports, the Company will issue up to an aggregate of 5,250,000 shares of its common stock. As the performance goals are achieved or if alternate vesting is qualified and selected, the shares shall become eligible for vesting and issuance.

 

On July 2, 2020, the Company issued to Mr. Eckelberry an aggregate of 115,344 shares of common stock per qualifying alternate vesting schedule relating to his May 2016 Restricted Stock Grant Agreement. 

 

On June 12, 2020, a holder of Series J Preferred Stock converted an aggregate of 2.5 Series J shares into an aggregate of 41,541 shares, including make-good shares, of the Company’s common stock.

 

On June 22, 2020, a holder of Series L Preferred Stock converted an aggregate of 7.5 Series L shares into an aggregate of 126,738 shares, including make-good shares, of the Company’s common stock.

 

Between June 4, 2020 and July 2, 2020, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold an aggregate of 110 shares of the Company’s Series O preferred stock for an aggregate purchase price of $110,000. The Company also issued an aggregate of 55 shares of its Series P preferred stock to the investors.

 

On July 1, 2020, the Company filed an Amended and Restated Certificate of Designation of Series M Preferred Stock (the “Amended Series M COD”) with the Secretary of State of Nevada. The Amended Series M COD amended the terms of the Company’s Series M Preferred Stock, such that, the Series M Preferred Stock will not be convertible into common stock, and the Company may redeem outstanding shares of Series M Preferred Stock at any time at a redemption price of $37.50 per share (150% of the stated value of $25.00), plus any accrued but unpaid dividends.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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

 

business strategy;

 

financial strategy;

 

intellectual property;

 

production;

 

future operating results; and

 

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

 

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

 

Organizational History

 

OriginClear, Inc. (“we”, “us”, “our”, the “Company” or “OriginClear”) was incorporated on June 1, 2007 under the laws of the State of Nevada. We have been engaged in business operations since June 2007. We moved into the commercialization phase of our business plan having previously been primarily involved in research, development and licensing activities. Our principal offices are located at 2535 E. University Drive, McKinney, TX 75069. Our main telephone number is (323) 939-6645. Our website address is www.OriginClear.com. In addition to announcing material financial information through our investor relations website, press releases, SEC filings and webcasts, we also intend to use the following social media channels as a means of disclosing information about our products, our planned financial and other announcements, our attendance at upcoming investor and industry conferences, and other matters and for complying with our disclosure obligations under Regulation FD:

 

OriginClear’s Twitter Account (https://twitter.com/OriginClear)

 

OriginClear’s Facebook Page (https://www.facebook.com/OriginClear)

 

OriginClear’s LinkedIn Page (https://www.linkedin.com/company/2019598)

 

The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts, in addition to following the company’s press releases, SEC filings, public conference calls and webcasts. This list may be updated from time to time.

 

We have not incorporated by reference into this report the information in, or that can be accessed through, our website or social media channels, and you should not consider it to be a part of this report.

 

On April 21, 2020, OriginClear announced the relocation of its headquarters from California to its PWT unit near Dallas, Texas. Efficiency of operations, personnel and revenue, and the importance of the regional water market were cited as key factors.

 

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Overview of Business

 

Our mission is to provide expertise and technology to help make clean water available for all. Specifically, we have the following initiatives:

 

1.We license our technology worldwide to treat heavily polluted waters and also to remove harmful micro-contaminants from drinking water, using minimal energy, chemicals, and materials.

 

2.We are building a network of customer-facing water brands to expand our global market presence and our technical expertise.

 

3.We develop new business models, such as Investor Water™ and WaterChain™, both of which are designed to help achieve funding for water treatment and management systems. Both projects are in a research and development phase.

 

Water is our most valuable resource, and the mission of OriginClear is to improve the quality of water and help return it to its original and clear condition.

 

Technology Licensing Division

 

For its first eight years of operations, OriginClear focused on development and commercialization of its Electro Water Separation™ technology. In 2015, the technology went into commercial phase, and the Company launched it as OriginClear Technologies. The mission of OriginClear Technologies is to develop Electro Water Separation™ and achieve its full recognition as an international industry standard in treating our increasingly complex wastewater treatment challenges. For this purpose, OriginClear Technologies relies on an ongoing strong R&D and engineering activity for the development of its technology, while actively building its network of partners, licensees and joint venture partners for commercial development. The Company had established OriginClear (HK) as its wholly-owned subsidiary in Hong Kong to manage Asia-Pacific market development, but beginning on January 22, 2020, the Company named India’s Permionics as its Strategic Partner for Asia-Pacific Region in an expansion of the existing licensing partnership intended to better address regional opportunities. Permionics is also a key channel partner for PWT. The Company believes this is a more productive way to access the region, and it is in the process of closing OriginClear (HK); OriginClear continues to manage China opportunities from the United States.

 

While OriginClear Technologies focuses on developing and monetizing the Company’s internally-developed intellectual property, best practices and trade secrets, it is expected to do the same for technologies which may come in the future with the Group’s acquisition of profitable water treatment companies. 

 

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The Technology

 

OriginClear is the proprietary developer of EWS, the high-speed, primarily chemical-free technology to clean up large quantities of water. It removes oils, suspended solids, certain dissolved solids, and pathogens, in a continuous and energy-efficient process. The Company originally developed this technology to solve the challenge of removing microalgae from a highly dilute state. We believe EWS technology remains the most efficient non-chemical, continuous mechanism for the concentration of live algae cells from water.

 

The electro-chemical process was then extended, first to cleaning up oil and gas waste water and most recently, to industrial, agricultural and urban effluents. These water treatment applications are entirely electrochemical in nature and do not rely on algae for its cleaning capabilities, which is a separate application of the technology. EWS is designed to be an early step in removal of oils, solids and pathogens; reducing the work that more expensive, downstream processes such as Ultra Filtration or Reverse Osmosis must do, therefore enabling more cost-efficient and high-volume water cleanup overall.

 

In March of 2016, OriginClear announced that it had successfully developed and proved Advanced Oxidation for its breakthrough water cleanup system, EWS. University laboratory tests have shown that EWS with Advanced Oxidation (EWS:AOx™) can now extract dissolved contaminants, which are otherwise difficult to remove without chemicals such as chlorine. Overall, the system has shown a dramatic reduction in Total Organic Compounds which includes all forms of organic contamination, solids, miscible or dissolved, to meet new stringent global discharge requirements.

 

Today, we are capable of pairing the two technologies as EWS:AOx™, or separately, as the application requires. OriginClear believes that its technology is valuable to the industry because it has the potential to greatly extend the life of membranes and filters by effectively treating very dirty, oily water, while reducing chemical use significantly.

 

OriginClear also believes that its Advanced Oxidation technology will help neutralize harmful micro-contaminants, such as industrial solvents, which is difficult or impossible to achieve with other technologies.

 

Overall, the system has shown a dramatic reduction in Total Organic Compounds which includes all forms of organic contamination, solids, miscible or dissolved, to meet new stringent global discharge requirements.

 

Technology Division Milestones

 

On December 5, 2019, OriginClear announced that its Spanish partner Depuporc unveiled an integrated manure treatment system using OriginClear technology. The demonstration system processes 30 metric tons per day, with client-validated reduction of contaminants.

 

On January 22, 2020, OriginClear named India’s Permionics as Strategic Partner for Asia-Pacific Region in an expansion of the existing licensing partnership intended to better address regional opportunities. Permionics is also a key channel partner for PWT.

 

On June 25, 2020, the Company announced it has entered into an Agency Agreement with AlMansoori Specialized Engineering (MSE), a unit of AlMansoori Group. MSE is the leading provider of oilfield services in the Middle East. Founded in 1977, the company has grown to a skilled workforce of over 3,000 across 24 countries throughout the region.

 

The alliance is intended to capitalize on efforts by OriginClear’s licensee in Oman, Special Oilfield Services, with which MSE has a joint venture, so that achievements in Oman can be expanded throughout the region.

 

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OriginClear Group™

 

Outsourcing is a fast-growing reality in water treatment. Tougher regulations, water scarcities and general outsourcing trends are driving industrial and agricultural water treatment users to delegate their water problem to service providers. As Global Water Intelligence pointed out in their report on October 30, 2015, “Water is often perceived as a secondary importance, with end-users increasingly wanting to focus solely on their own core business. This is driving a move away from internal water personnel towards external service experts to take control of water aspects.” External service experts are typically small–privately owned and locally operated. Consolidating these companies, and creating new players where appropriate, could lead to enormous economies of scale through sharing of best practices, technologies, and customers.

 

OriginClear seeks to incubate or acquire businesses that help industrial water users treat their water themselves, and often reuse it. We believe that assembling a group of such water treatment and water management businesses is an opportunity for significant growth and increased Company value for the stockholders.

   

The Company cautions that suitable acquisition candidates may not be identified and even if identified, the Company may not have adequate capital to complete the acquisition and/or definitive agreement may not be reached. Internally-incubated businesses are an ongoing laboratory, and similarly, may not become commercial successes.

 

Group Development Milestones

 

Investor Water™

 

On March 12, 2020, the Company first discussed investor-financed water systems (www.originclear.com/ceo/water-management-increasing-real-estate-value). The concept became a new lab incubation, Investor Water, first outlined in detail on April 9, 2020 (www.originclear.com/ceo/regulation-a-takes-off). A CEO Briefing on April 23, 2020 (www.originclear.com/ceo/rolling-out-investor-water) discussed the first field pilot of the experimental program, a pool-cleaning system rental application. The Company continues to develop this unique marketplace concept to connect investors with secured water projects but cautions that it is still very early; and based on the ongoing experiments, the Company may modify or abandon the program without notice.

 

Daniel M. Early/Modular Water Systems™

 

On June 22, 2018, OriginClear signed an exclusive worldwide licensing agreement with Daniel “Dan” Early for his proprietary technology for prefabricated water transport and treatment systems. On July 19, 2018, the Company began incubating its Modular Water Treatment product line (MWS) around Mr. Early’s technology and perspective customers. The Company has funded the development of this product line with internal cash flow. In Q1 of 2020, the Company fully integrated MWS with wholly-owned Progressive Water Treatment Inc. On June 4, 2020, the Company named Daniel Early as Corporate Chief Engineer. One of Early’s key roles will be to provide technology oversight for early stage ventures such as Investor Water.

 

As disclosed in its annual report, the Company agreed to renew its 2018 license with inventor Daniel M. Early for an additional ten years, for the five patents covering packaged water treatment systems built into containers. We also gained the right to sublicense, and, with Mr. Early’s approval, to create ISO-compliant manufacturing joint ventures.

 

Water Technologies International

 

On May 17, 2018, in concert with a purchase of a minority stake in the firm, the Company entered into a licensing agreement with Water Technologies International, Inc. (OTC: WTII), which commercializes the innovative SIMPOD portable waste water treatment plant, and has developed a line of atmospheric water generators. The licensing agreement gave Water Technologies access to OriginClear’s patented electrochemical treatment process, Electro Water Separation with Advanced Oxidation™ (EWS:AOx™), and support to enter the oil and gas and other markets. The Technical Assistance Program fee, another part of OriginClear’s licensing agreement, was paid to OCLN in WTII preferred shares. The license also calls for standard royalty payments to OriginClear. OCLN has retained these shares, while the two organizations are not actively collaborating today.

 

25

 

 

WaterChain, Inc.

 

WaterChain, Inc. was incorporated in December 2017 and is today a research and development project of the Company.

 

Progressive Water Treatment Inc.

 

On October 1, 2015, the Company completed its acquisition of Dallas-based Progressive Water Treatment Inc. (“PWT”), a designer, builder and service provider for a wide range of industrial water treatment applications.

 

With the PWT and future potential acquisitions, the creation of the Modular Water Systems product line as an integral part of PWT, and integrating its proprietary technology, OriginClear aims to offer a complementary, end-to-end offering to serve growing corporate demand for outsourced water treatment.

 

PWT’s Business

 

Since 1995, PWT has been designing and manufacturing a complete line of water treatment systems for municipal, industrial and pure water applications. PWT designs and manufactures a complete line of water treatment systems for municipal, industrial and pure water applications. Its uniqueness is its ability to gain an in-depth understanding of customer’s needs and then to design and build an integrated water treatment system using multiple technologies to provide a complete, not partial solution.

   

To help address customer needs, PWT utilizes a wide range of technologies, including chemical injection, media filters, membrane, ion exchange and SCADA (supervisory control and data acquisition) technology in turnkey systems. The Company also offers a broad range of services including maintenance contracts, retrofits and replacement assistance. In addition, PWT rents equipment in contracts of varying duration. Customers are primarily served in the United States and Canada, with the company’s reach extending worldwide from Siberia to Argentina to the Middle East.

 

PWT is also a certified manufacturer of products using OriginClear’s proprietary Electro Water Separation™ and Advanced Oxidation (AOx™) technologies, building these on behalf of OriginClear licensees.

 

PWT Milestones

 

In the first quarter of 2019, the Company increased the number of the manufacturer’s representatives for its operating units, PWT and Modular Water Systems (“MWS”).

 

On Nov 7, 2019, OriginClear published a case study showing how its Modular Water System may help automotive dealership expand into rural land. The case study shows how point-of-use treatment solves lack of access to the public sewer system.

 

On March 5, 2020, OriginClear announced disruptive pump and lift station pricing, stating that its prefabricated modules with a lifespan of up to 100 years now compete with precast concrete.

 

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Modular Water Systems

 

On July 19, 2018, the Company announced the launch of its Modular Water Treatment product line, offering a unique product line of prefabricated water transport and treatment systems. Daniel “Dan” Early P.E. (Professional Engineer) heads the project and along with the intellectual property, which the Company licensed exclusively worldwide for three years (since renewed for ten years beginning in 2020, with sublicensing rights), brought a following of prospective customers. On July 25, 2018, MWS received its first order, for a brewery wastewater treatment plant.

 

With PWT and other companies as fabricators and assemblers, MWS designs, manufactures and delivers prefabricated water transport (pump stations) and wastewater treatment plant (“WWTP”) products to customers and end-users that have to clean their own wastewater. It uses Structurally Reinforced Thermoplastic (“SRTP”) materials to focus on patented developing water and wastewater collection, conveyance, and treatment systems that have high performance and sustainability. Typical customers may include schools, small communities, institutional facilities, real estate developments, factories, and industrial parks. Dan Early has pioneered the use of heavy reinforced plastic materials to create modular “water-systems-in-a-box”. Not only is reinforced thermoplastic faster and cheaper to build, but it can have three times the lifespan, or more, compared with concrete-and-steel construction. Mr. Early’s inventions have led to the patented Wastewater System & Method and four other patents, which OriginClear has licensed exclusively for the world.

 

Dan Early has been designing and building prepackaged pump stations and municipal wastewater treatment systems for over five years, with a career background of more than two decades of water engineering experience.

 

MWS designs, manufactures and implements advanced prepackaged wastewater treatment, pump stations and custom systems with primary focus on decentralized opportunities away from the very competitive large municipal wastewater treatment plants. These decentralized opportunities include: rural communities, housing developments, industrial sites, schools and many more. 

 

Today, MWS is fully integrated with PWT in Texas.

 

Patents

 

On June 25, 2018, Daniel Early granted the Company a worldwide, exclusive non-transferable license to intellectual property consisting of five issued US patents, and design software, CAD, marketing, design and specification documents (“Early IP”).

 

On May 20, 2020, we agreed on a renewal of the license for an additional ten years, with three-year extensions. We also gained the right to sublicense, and, with approval, to create ISO-compliant manufacturing joint ventures. All royalties surviving the 2018 license were settled.

 

We may contract with distribution channels (equipment distributors, oil service companies, water treatment companies, system integrators and engineering companies) of our choice to act on our behalf for the purpose of selling and integrating the Early IP.

 

The Early IP consists of combined protection on the materials and configurations of complete packaged water treatment systems, built into containers. The parents consist of the following:

 

#  Description  Patent No.  Date Patent
Issued
  Expiration
Date
1  Wastewater System & Method  US 8,372,274 B2
Applications: WIPO, Mexico
  02/12/13  07/16/31
2  Steel Reinforced HDPE Rainwater Harvesting  US 8,561,633 B2  10/22/13  05/16/32
3  Wastewater Treatment System CIP  US 8,871,089 B2  10/28/14  05/07/32
4  Scum Removal System for Liquids  US 9,205,353 B2  12/08/15  02/19/34
5  Portable, Steel Reinforced HDPE Pump Station CIP  US 9,217,244 B2  12/22/15  10/20/31

  

27

 

 

With the rising need for local, point-of-use or point-of-discharge water treatment solutions, the Modular Water Systems licensed IP family is the core to a portable, integrated, transportable, plug-and-play system that, unlike other packaged solutions, can be manufactured in series, have a longer life and are more respectful of the environment.

 

The common feature of this IP family is the use of a construction material (SRTP), for the containers that is:

 

more durable: an estimated 75 to 100-year life cycle as opposed to a few decades for metal, or 40 to 50 years maximum for concrete;

 

easier to manufacture: vessels manufacturing process can be automated; and

 

recyclable and can be made out of biomaterials 

 

In addition, patents US 8,372,274 and US 8,871,089 (1 and 3) relate to the use of vessels or containers made out of this material combined with a configuration of functional modules, or process, for general water treatment.

 

Other subsequent patents, while keeping the original claims and therefore making them stronger, focus on more targeted applications. These patents outline a given combination of modules engineered inside the vessel to address a specific water treatment challenge.

  

Expansion of the PWT and MWS Business-Lines

 

Beginning with its first installation, PWT built MWS components. PWT and MWS are now fully integrated as a single profit and manufacturing center. 

 

In April 2019, we completed the expansion of our manufacturer’s representative network to serve both PWT and MWS for customer lead generation. 

 

On June 1, 2020, the Company reported sales stable amid COVID-19 recovery, and that it has dedicated the duties of Chief Operating Officer Tom Marchesello, to seeking to increase revenues from existing profit centers of PWT and MWS at its Texas headquarters.

 

On June 4, 2020, the Company announced it named Daniel Early as Corporate Chief Engineer, the two-year integration process of Early’s modular patents now considered complete. In this capacity, Early oversees and supports PWT and MWS, in addition to the creation of corporate brands and supporting the Investor Water startup technically.

 

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.

 

28

 

 

Revenue Recognition

 

We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

 

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss, as it is determined. Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined.

 

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 reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, valuations of non-cash capital stock issuances and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

 

Fair Value of Financial Instruments

 

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2020, 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 currently issued pronouncements during the three months ended March 31, 2020, and does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

 

Results of Operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

 

Revenue and Cost of Sales

 

For the three months ended March 31, 2020, we had revenue of $1,092,438 compared to $742,043 for the three months ended March 31, 2019. Cost of sales for the three months ended March 31, 2020 was $879,145 compared to $723,263 for the three months ended March 31, 2019. Revenue and cost of sales increased primarily due to our subsidiary’s increase in revenue, due to focusing on marketing of its products.

 

Our gross profit was $213,293 and $18,780 for the three months ended March 31, 2020 and 2019, respectively. 

  

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Selling and Marketing Expenses

 

For the three months ended March 31, 2020, we had selling and marketing expenses of $374,923, compared to $482,659 for the three months ended March 31, 2019.  The decrease in selling and marketing expenses was primarily due to a decrease in marketing and investor relations expense.

 

General and Administrative Expenses

 

For the three months ended March 31, 2020, we had general and administrative expenses of $549,911 compared to $587,070 for the three months ended March 31, 2019. The decrease in general and administrative expenses was primarily due to a decrease in professional fees, outside services and overall cost cutting measures. 

 

Research and Development Cost

 

For the three months ended March 31, 2020, our research and development cost was $28,982 compared to $23,950 for the three months ended March 31, 2019. The increase in research and development costs was primarily due to an increase in salary expense.

 

Other Income and (Expenses)

 

Other income and (expenses) increased by $21,598,942 to $22,353,298 for the three months ended March 31, 2020, compared to $754,356 for the three months ended March 31, 2019. The increase was due primarily to an increase in non-cash accounts associated with the fair value of the derivatives in the amount of $20,586,281, a decrease in commitment fees of $34,378, a decrease in loss on conversion of debt in the amount of $514,404, a decrease in loss on settlement of debt in the amount of $314,295, a decrease in unrealized loss on investment securities in the amount of $2,000, decrease in interest expense of $161,391, and a decrease in other income of $15,036, with an increase in gain on conversion of preferred stock of $1,229. 

 

Net Income/(Loss)

 

Our net income increased by $21,932,686 to $21,601,414 for the three months ended March 31, 2020, compared to a net loss of $(331,272) for the prior three months ended March 31, 2019. The majority of the increase in net income was due primarily to an increase in other expenses associated with the net change in derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

 

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.

 

The condensed consolidated 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 condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated 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, raising additional capital and increasing sales. We obtained funds from investors during the three months ending March 31, 2020. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing.

 

In connection with our sale of Series M Preferred Stock conducted under Regulation A under the Securities Act, we may be subject to claims for rescission. If this occurs, it may have a material negative effect on our liquidity.

 

At March 31, 2020 and December 31, 2019, we had cash of $297,300 and $490,614, respectively, and working capital deficit of $15,174,987 and $38,598,414, respectively.  The decrease in working capital deficit was due primarily to a decrease in non-cash derivative liabilities and convertible notes, a decrease in cash, contracts receivable, prepaid expenses, contracts liabilities, capital lease and loans payable, with an increase in accounts payable, accrued expenses, contract assets, and convertible note receivable. ..

 

30

 

 

During the period ended March 31, 2020, we raised an aggregate of $795,250 from the sale of preferred stock in private placements. Our ability to continue as a going concern is dependent upon raising capital from financing transactions and future revenue.

 

Net cash used in operating activities was $926,200 for the three months ended March 31, 2020, compared to $705,621 for the prior period ended March 31, 2019. The increase in cash used in operating activities was primarily due to an increase in contract liabilities and accounts payable.

 

Net cash flows provided by investing activities for the three months ended March 31, 2020 and 2019, were $0 and $19,035, respectively. The decrease in investing activities was due to a decrease in net change in fair value of investment.

  

Net cash flows provided by financing activities was $732,886 for the three months ended March 31, 2020, as compared to $418,642 for the three months ended March 31, 2019. The increase in cash provided by financing activities was due primarily to an increase in proceeds for issuance of preferred stock, and cumulative dividends payable, with a decrease in debt financing through convertible promissory notes. To date we have principally financed our operations through the sale of our common and preferred 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 the issuance of securities together with revenue from operations are currently sufficient to fund our operating expenses in the near future, 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, which may not be available on acceptable terms, or at all. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. 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 for a limited time, 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 immediate future and will be able to realize assets and discharge liabilities in the normal course of operations. However, there cannot be any assurance that any of the aforementioned assumptions will come to fruition and as such we may only be able to function for a short time.

 

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.

  

31

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

ITEM 4. CONTROLS AND PROCEDURES  

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, due to small staff size, our disclosure controls and procedures were ineffective to ensure that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

To address the deficiency, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this quarterly report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15f of the Exchange Act) that occurred during the fiscal quarter ended March 31, 2020 that has materially affected, or are reasonably likely to materially affect, the our internal control over financial reporting.

 

Limitations on Internal Controls

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

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PART II

 

Item 1. Legal Proceedings.

 

In February 2019, a Complaint was filed in the Superior Court for the State of California, for breach of contract, common counts for sums due for services allegedly performed, and fraud. The Complaint was filed by RDI Financial, LLC (“RDI”), an assignee of Interdependence, Inc., and named the Company and our developmental subsidiary, WaterChain, Inc., as Defendants. RDI claimed that its assignor, Interdependence, Inc., entered into a contract with the Defendants for Interdependence to provide reputation and professional relationship management services. RDI claimed that Interdependence provided the services and that the Company was required to make certain payments of cash and our capital stock to Interdependence, but did not do so. RDI claims to be entitled to enforce the contract as the assignee, and is demanding monetary damages in the aggregate amount of $630,000.

 

While filed in February, 2019, the Company and WaterChain were unaware of the suit until September of 2019, when they received notice of a default judgment. Litigation counsel was engaged, the absence of prior notice, service of the suit and an improper default promptly challenged, and in October 2019 the Court vacated the default and judgment, and granted the Company and WaterChain leave to file an Answer and Cross-Complaint. Through these filings, the Company and WaterChain, Inc. contest the allegations and claims in the Complaint, and deny that Interdependence performed the required services and contends that we overpaid Interdependence $40,000 for whatever work was done. Specifically, in November, 2019, an Answer was filed denying the claims in the Complaint, along with a Cross-Complaint alleging fraudulent inducement to enter into the contract, negligent misrepresentations, breach of contract, and to rescind the underlying contract. Specifically, we have alleged that Interdependence misrepresented the nature and scope of the services which were to be provided and ability to provide them, misrepresented the results they would obtain from providing such services, and also failed to provide us with the services as required by the contract such that Interdependence was overpaid based on what it in fact did. For those reasons, and prior to any litigation, we terminated the contract for non-performance.

 

On February 6, 2020, the Superior Court set April 4, 2021 as the trial date for this matter. The Company and WaterChain are appropriately defending against the allegations and pursuing affirmative recovery on the cross-complaint. The Company disputes all claims and is appropriately litigating its defenses and pursuing recovery on its cross-suit. The parties are in the preliminary stages of settlement negotiations with the Plaintiff RDI and Interdependence, but we can provide no assurance that any settlement will be reached nor can we provide any assurances regarding any terms of such settlement. As of date of this report, legal fees and costs in this action have been substantial and it is impossible at this time to predict an exact amount, or even a meaningful estimate, of the aggregate sums that may be incurred in finally resolving or adjudicating this lawsuit.

  

Item 1A. Risk Factors.  

 

In addition to the other information set forth in this report you should carefully consider the factors discussed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2019. The risks discussed in our 2019 annual report and described below could materially affect our business, financial condition and future results.

 

The COVID-19 pandemic may negatively affect our operations.

 

The COVID-19 pandemic may negatively affect our operations. The Covid-19 pandemic has resulted in social distancing, travel bans and quarantine, which has limited access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. These factors have hampered our efforts to comply with our filing obligations with the Securities and Exchange Commission.

 

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

 

None 

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6.  Exhibits.

 

Exhibit
Number
  Description of Exhibit
     
3.1  

Amended and Restated Certificate of Designation of Series M Preferred Stock* 

31   Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.*
32   Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS   XBRL Instance Document.*
101.SCH   XBRL Taxonomy Extension Schema.*
101.CAL   XBRL Taxonomy Extension Calculation Linkbase.*
101.DEF   XBRL Taxonomy Extension Definition Linkbase.*
101.LAB   XBRL Taxonomy Extension Label Linkbase.*
101.PRE   XBRL Extension Presentation Linkbase.*

 

* Filed herewith.

** Furnished herewith. 

 

34

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

July 6, 2020 ORIGINCLEAR, INC.
   
  /s/ T. Riggs Eckelberry
  T. Riggs Eckelberry
  Chief Executive Officer
  (Principal Executive Officer) and
  Acting Chief Financial Officer
  (Principal Accounting and Financial Officer)

 

 

 

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EX-3.1 2 f10q0320ex3-1_originclear.htm AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF SERIES M PREFERRED STOCK

Exhibit 3.1

 

AMENDED AND RESTATED CERTIFICATE OF DESIGNATION

OF

ORIGINCLEAR, INC.

ESTABLISHING THE DESIGNATIONS, PREFERENCES,

LIMITATIONS AND RELATIVE RIGHTS OF ITS

SERIES M PREFERRED STOCK

 

This Amended and Restated Certificate of Designation of OriginClear, Inc. amends and restates the Certificate of Designation of Series M Preferred Stock filed by the Company on December 11, 2019.

 

OriginClear, Inc. (the “Company”), a corporation organized and existing under the laws of Nevada, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by the Articles of Incorporation of the Company, it has adopted resolutions (a) authorizing the issuance of up to eight hundred thousand (800,000) shares of Series M Preferred Stock of the Company and (b) providing for the designations, preferences and relative participating, optional or other rights, and the qualifications, limitations or restrictions thereof, as follows:

 

SECTION 1. DESIGNATION OF SERIES. There shall hereby be created and established a series of “Series M Preferred Stock” and the number of shares initially constituting such series shall be up to eight hundred thousand (800,000) shares.

 

SECTION 2. STATED VALUE. The Stated Value of the Series M Preferred Stock will be $25.00 per share.

 

SECTION 3. DIVIDENDS. The holders of outstanding shares of Series M Preferred Stock (the “Holders”) will be entitled to receive, out of any funds and assets of the Company legally available therefor, dividends payable monthly, at the annual rate of 10% of the Stated Value, payable in preference and priority to any payment of any dividend of the common stock of the Company (the “Common Stock”). The monthly record and payment date for such dividends will be set by the Board of Directors of the Company. The right to such dividends of the Holders of Series M Preferred Stock will be cumulative.

 

SECTION 4. LIQUIDATION. Upon any liquidation, dissolution or winding- up of the Company, the Series M Preferred Stock will entitle the Holders, out of the assets of the Company available for distribution to its shareholders upon such liquidation, an amount equal to the Stated Value, for each share of Series M Preferred Stock, plus any accrued but unpaid dividends on such shares, before any payment may be made or any assets distributed to the holders of the Common Stock.

 

SECTION 5. VOTING AND PROTECTIVE PROVISIONS. (a) Except as required by law or as specifically provided herein, the Holders of Series M Preferred Stock will not be entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting).

 

(b) So long as any shares of Series M Preferred Stock remain outstanding, the Company will not, without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of at least a majority of the then outstanding shares of Series M Preferred Stock voting together as one class, alter or change the rights, preferences or privileges of the shares of the Series M Preferred Stock so as to affect materially and adversely such shares.

 

SECTION 6. REDEMPTION.

 

The Company may in its sole discretion (to the extent it may lawfully do so), at any time, redeem any outstanding shares of Series M Preferred Stock at a price equal to 150% of the Stated Value plus any accrued but unpaid dividends thereon. In the event the Company exercises such redemption right for less than all of the then-outstanding shares of Series M Preferred Stock, the Company shall redeem the outstanding shares of the Holders of a pro rata basis. The Company may exercise such redemption right at any time by providing 30 days’ prior written notice of such redemption and payment of the redemption price to the Holders. Upon payment of the redemption price by the Company in accordance herewith, the shares of Series M Preferred Stock that have been redeemed will revert to the status of authorized but unissued preferred stock.

 

  

 

 

SECTION 7. NOTICES. Any notice required hereby to be given to the Holders shall be deemed given if deposited in the United States mail, postage prepaid, or provided by fax or e-mail, to the Holders of record at their respective addresses appearing on the books of the Company. Any notice to the Company will be by United States mail, postage prepaid, or provided by e-mail to the address below:

 

OriginClear, Inc.

355 So. Grand Avenue

Suite 2450 PMB #1051

Los Angeles, CA 90071

Email: riggs@originclear.com

 

SECTION 8. MISCELLANEOUS.

 

(a) The headings of the various sections and subsections of this Certificate of Designation are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Certificate of Designation.

 

(b) Whenever possible, each provision of this Certificate of Designation shall be interpreted in a manner as to be effective and valid under applicable law and public policy. If any provision set forth herein is held to be invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions of this Certificate of Designation. No provision herein set forth shall be deemed dependent upon any other provision unless so expressed herein. If a court of competent jurisdiction should determine that a provision of this Certificate of Designation would be valid or enforceable if a period of time were extended or shortened, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.

 

(c) Except as may otherwise be required by law, the Series M Preferred Stock shall not have any powers, designations, preferences or other special rights, other than those specifically set forth in this Certificate of Designation.

 

 

 

 

EX-31 3 f10q0320ex31_originclear.htm CERTIFICATION

Exhibit 31

 

CERTIFICATION

 

I, T Riggs Eckelberry, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of OriginClear, Inc., for the quarter ended March 31, 2020;

 

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. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

July 6, 2020 /s/ T. Riggs Eckelberry
  T. Riggs Eckelberry
  Chief Executive Officer
(Principal Executive Officer) and
  Acting Chief Financial Officer
(Principal Accounting and Financial Officer)

EX-32 4 f10q0320ex32_originclear.htm CERTIFICATION

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 the Quarterly Report of OriginClear, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, T. Riggs Eckelberry, Chief Executive Officer and Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

 

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

 

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

 

July 6, 2020 By: /s/ T. Riggs Eckelberry
    T. Riggs Eckelberry
    Chief Executive Officer
(Principal Executive Officer) and
    Acting Chief Financial Officer
(Principal Financial Officer)

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DEFICIT Current Liabilities Accounts payable and other payable Accrued expenses Cumulative preferred stock dividends payable Contract liabilities Capital lease, current portion Customer deposit Warranty reserve Loan payable, merchant cash advance, net of finance fees of $0 Loan payable, related party Promissory note, related party Derivative liabilities Series F 8% Convertible Preferred Stock, 1,678 shares issued and outstanding, redeemable value of $1,678,000 Convertible promissory notes, net of discount of $0 Total Current Liabilities Long Term Liabilities Capital lease, long term portion Convertible Preferred Stock value Convertible promissory notes, net of discount of $0 Total Long Term Liabilities Total Liabilities COMMITMENTS AND CONTINGENCIES (See Note 11) SHAREHOLDERS' DEFICIT Preferred stock value Common stock, $0.0001 par value, 16,000,000,000 shares authorized 8,563,384 and 4,854,993 equity shares issued and outstanding, respectively Preferred treasury stock,1,000 and 1,000 shares outstanding, respectively Additional paid in capital - Common stock Accumulated other comprehensive loss Accumulated deficit TOTAL SHAREHOLDERS' DEFICIT TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT Series F 8% Preferred Stock Series G 8% Preferred Stock Series I 8% Preferred Stock Series K 8% Preferred Stock Series D-1 Preferred stock Series E Preferred stock Series J Preferred stock Series L Preferred stock Series M Preferred stock Allowance for doubtful accounts Merchant cash advances, net of finance fees Net of discount current Net of discount non current Convertible preferred stock, redeemable value Convertible preferred stock, share issued Convertible preferred stock, share outstanding Convertible preferred stock, value issued Preferred stock, par value Preferred stock, shares authorized Preferred stock, shares issued Preferred stock, shares outstanding Common stock, par value Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Preferred treasury stock, shares outstanding Income Statement [Abstract] Sales Cost of Goods Sold Gross Profit Operating Expenses Selling and marketing expenses General and administrative expenses Research and development Depreciation and amortization expense Total Operating Expenses Loss from Operations OTHER INCOME (EXPENSE) Other income Gain on conversion of preferred stock Unrealized gain(loss) on investment securities Loss on settlement of convertible notes Commitment fee Loss on conversion of debt Gain on net change in derivative liability and conversion of debt Interest expense TOTAL OTHER (EXPENSE) INCOME NET INCOME (LOSS) PREFERRED STOCK DIVIDENDS NET AVAILABLE TO SHAREHOLDERS BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO SHAREHOLDERS' DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO SHAREHOLDERS' WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, BASIC WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, DILUTED Preferred stock Common stock Additional Paid-in Capital Accumulated Other Comprehensive loss Accumulated Deficit Balance Balance, shares Common stock issuance for conversion of debt and accrued interest Common stock issuance for conversion of debt and accrued interest, shares Common stock issued at fair value for services Common stock issued at fair value for services, shares Common stock issued for conversion of Series E Preferred stock Common stock issued for conversion of Series E Preferred stock, shares Common stock issued for conversion of Series L Preferred stock Common stock issued for conversion of Series L Preferred stock, shares Issuance of Series K Preferred stock Issuance of Series K Preferred stock, shares Issuance of Series L Preferred stock through a private placement associated with the Series K Preferred note Issuance of Series L Preferred stock through a private placement associated with the Series K Preferred note, shares Common stock issued through a private placement for purchase of Series G Preferred stock Common stock issued through a private placement for purchase of Series G Preferred stock, shares Common stock reverse split share adjustment Common stock reverse split share adjustment, shares Reclassification of non-cash adjustment Cumulative preferred stock dividend Gain on conversion of Series L Preferred stock Other comprehensive gain Loss on conversion of debt Net loss Balance Balance, shares Statement of Cash Flows [Abstract] CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (loss) Adjustment to reconcile net loss to net cash used in operating activities Depreciation and amortization Common stock issued for services Loss on net change in valuation of derivative liability Loss on conversion of debt Loss on settlement of debt Debt discount recognized as interest expense Net unrealized loss on fair value of security Gain on conversion of preferred stock Convertible note receivable Amortization of financing fees and cost Change in Assets (Increase) Decrease in: Contracts receivable Contract asset Prepaid expenses and other assets Change in Liabilities Increase (Decrease) in: Accounts payable Accrued expenses Contract liabilities Customer deposit Deferred income NET CASH USED IN OPERATING ACTIVITIES CASH FLOWS USED FROM INVESTING ACTIVITIES: Net change in fair value investment security CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES: Payments on capital lease Loan payable financing, net Loan payable, related party, net Promissory note payable, related party Net cumulative preferred stock dividends payable Payment on redemption of preferred stock Net proceeds for issuance of preferred stock for cash NET CASH PROVIDED BY FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH CASH BEGINNING OF YEAR CASH END OF YEAR SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid Taxes paid SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS Common stock issued at fair value for conversion of debt, plus accrued interest, and other fees Organization, Consolidation and Presentation of Financial Statements [Abstract] ORGANIZATION AND LINE OF BUSINESS Accounting Policies [Abstract] SUMMARY OF SIGNIFICANT ACCOUNTING POLICES Equity [Abstract] CAPITAL STOCK Share-based Payment Arrangement [Abstract] RESTRICTED STOCKS AND WARRANTS Debt Disclosure [Abstract] CONVERTIBLE PROMISSORY NOTES Revenue from Contracts with Customers [Abstract] REVENUE FROM CONTRACTS WITH CUSTOMERS Goodwill and Intangible Assets Disclosure [Abstract] FINANCIAL ASSETS Loans Payable [Abstract] LOANS PAYABLE Leases [Abstract] CAPITAL LEASES Foreign Subsidiary [Abstract] FOREIGN SUBSIDIARY Commitments and Contingencies Disclosure [Abstract] COMMITMENTS AND CONTINGENCIES Subsequent Events [Abstract] SUBSEQUENT EVENTS Principles of Consolidation Cash and Cash Equivalent Concentration Risk Use of Estimates Net Earnings (Loss) per Share Calculations Revenue Recognition Contract Receivable Indefinite Lived Intangibles and Goodwill Assets Research and Development Advertising Costs Property and Equipment Stock-Based Compensation Accounting for Derivatives Fair Value of Financial Instruments Segment Reporting Marketable Securities Licensing agreement Reclassification of Certain Expenses Recently Issued Accounting Pronouncements Schedule of loss per share anti-dilutive effect Schedule of loss per share is anti-dilutive and includes dilutive Schedule of estimated useful life Schedule of property plant and equipment Schedule of fair value of financial instruments Schedule of fair value of (liability) financial instruments Schedule of reconciliation of the derivative liability for which level 3 inputs Schedule of fair market value of derivative liability assumptions Schedule of stock option activity Schedule of weighted average remaining contractual life of options outstanding issued plan Schedule of warrant activity Schedule of weighted average remaining contractual life of warrants outstanding Schedule of outstanding convertible promissory notes Schedule of maturities of long-term debt Schedule of disaggregation of revenue by type of good or service from contracts with customers Schedule of maturities Schedule of long term maturities Organization and Line of Business (Textual) Percentage of stock issued and outstanding acquired Revenue Working capital deficiency Income (Loss) to common shareholders (Numerator) Basic weighted average number of common shares outstanding (Denominator) Diluted weighted average number of common shares outstanding (Denominator) Anti-dilutive shares Dilutive shares Property, Plant and Equipment [Table] Property, Plant and Equipment [Line Items] Machinery and equipment [Member] Furniture, fixtures and computer equipment [Member] Leasehold improvements [Member] Statistical Measurement [Axis] Estimated Life Fair Value, Recurring and Nonrecurring [Table] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Fair Value Hierarchy and NAV [Axis] Level 1 [Member] Level 2 [Member] Level 3 [Member] Investment at fair value-securities Total Assets measured at fair value Derivative Liability Total liabilities measured at fair value Balance as of January 1, 2020 Gain on conversion of debt and change in derivative liability Balance as of March 31, 2020 Fair Value Measurement Inputs and Valuation Techniques [Table] Fair Value Measurement Inputs and Valuation Techniques [Line Items] Risk free interest rate Stock volatility factor Weighted average expected option life Expected dividend yield Summary of Significant Accounting Polices (Textual) Federal deposit insurance amount Antidilutive securities excluded from computation of earnings per share Issuance of common stock Contract receivable Total research and development costs Depreciation expense Number of segment reporting Derivative instrument Schedule of Stock by Class [Table] Class of Stock [Line Items] Capital Stock (Textual) Preferred stock, shares issued Preferred stock, par value Conversion price Preferred stockholder voting percentage, description Conversion of stock, description Designated preferred stock Dividend annual rate Liquidation preference, per share Common stock for settlement of convertible promissory notes Accrued dividends Benificially own outstanding common stock percentage Aggregate principal amount Interest amount Purchase price of the Series C preferred stock Total purchase price Series C preferred stock, shares Common stock issued Conversion of shares Common stock issued for services, shares Common stock issued for services Private placement price per share Share exchange agreement, description Fair value loss on settlement Description of convertible preferred stock terms Debt conversion amount Description of reverse split Issuance of series M preferred stock shares Issuance of Series M preferred stock for settlement of debt Accrued interest Schedule of Share-based Compensation Arrangements by Share-based Payment Award [Table] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Number of Warrants Outstanding - beginning of period Granted Exercised Forfeited Outstanding - end of period Weighted average exercise price Outstanding - beginning of period Granted Exercised Forfeited Outstanding - end of period Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] 500.00 [Member] Exercisable Prices Warrants Outstanding Warrants Exercisable Weighted Average Remaining Contractual Life (years) Employee Consultants and Restricted Stock Grant Agreements [Member] Restricted Stocks and Warrants (Textual) Common stock shares reserves and sets aside for the granting of options (in shares) Stock options mature, description Employee termination, description Issuance of shares Stock options mature Stock options prices Issuance of common stock, shares Fair market value of stock grant, description Restricted stock grant agreement, description Purchase of warrants Warrants outstanding Convertible Promissory Notes Less current portion Total long-term liabilities Maturities of long-term debt 2021 2022 2023 2024 Total Schedule of Short-term Debt [Table] Short-term Debt [Line Items] OID Notes [Member] Convertible Promissory Notes (Textual) Convertible promissory notes Remaining debt discount Net balance Debt instrument interest rate Debt instrument, maturity date Debt instrument debt default Additional notes issuance Converted an aggregate principal amount Conversion prices from lesser Notes bear interest Reserved shares Number of shares converted into common stock Derivative liability Aggregate remaining amount Recognized interest expense Accrued interest Description of debt instrument Conversion price of debt Conversion price Investor amount Conversion into common stock Share price Conversion price per share of debt, description Original issue discount on promissory notes Conversion of accounts payable into a convertible note Percentage of average of lowest closing prices Number of trading days previous to conversion Fair value loss on convertible debt Fair value loss on settlement Aggregate principal each amount Notes maturity date Equipment Contracts Component Sales Services Sales Total Revenue from Contracts with Customers (Textual) Contract liability Convertible Note Receivable [Member] Financial Assets (Textual) Convertible note percentage Convertible note amount Convertible note price Conversion price per share Number of trading days Convertible note principal amount Convertible note accrued interest Fair value investment in Securities Preferred shares fair value Schedule of Long-term Debt Instruments [Table] Debt Instrument [Line Items] Secured Loans Payable [Member] Promissory Note Payable [Member] Loans Payable (Textual) Loaned amount Loan payable, net Maturity date, description Payments balance Principal amount Notes payable Interest payable Capital lease Less current portion Total long-term liabilities Period Ending March 31, 2020 2021 Total Capital Leases (Textual) Capital lease term Lease price Monthly payments for lease Other Commitments [Table] Other Commitments [Line Items] Commitments and Contingencies (Textual) Area of land Base rent Warrant reserve Aggregate amount demanding monetary damages Services amount overpaid Equipment lease term Capital lease amount Description of operating lease Future minimum lease payments due Common stock transfer Settlement agreement, description Litigation Settlement amount Subsequent Event [Table] Subsequent Event [Line Items] Subsequent Events (Textual) Aggregate principal and interest amount Aggregate shares of common stock Subsequent event, description Shares issued Shares issued to consultants and one employee Description of common stock shares authorized Shares issued per share Aggregate shares sold Aggregate purchase price Aggregate converted shares Adjusted reverse split common stock Outstanding common stock ownership percentage Agreement terms. Capital lease purchase option price. Capital lease term. Aggregate amount of each class of warrants or rights exercised. The weighted average exercise price of each class of warrants or rights exercised. Aggregate amount of each class of warrants or rights forfeited. The weighted average exercise price of each class of warrants or rights forfeited. Aggregate amount of each class of warrants or rights granted. The weighted average exercise price of each class of warrants or rights granted. The weighted average exercise price of each class of warrants or rights outstanding. It represent Commitment Fee for the reporting period. Revenue from sale of components. Conversion of accounts payable into convertible note. Represents the description related to conversion price per share of debt. Borrowing which can be exchanged for a specified number of another security at the option of the issuer or the holder, for example, but not limited to, the entity's common stock. It represents the amount of convertible note receivable. Convertible preferred stock, value issued. Amount of paid and unpaid cumulative preferred stock dividends declared with the form of settlement in cash, stock. The current portion of money or property received from customers which is either to be returned upon satisfactory contract completion or applied to customer receivables in accordance with the terms of the contract or the understanding. The value of the financial instrument(s) that the original debt is being converted into in a noncash (or part noncash) transaction. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period. The amount of debt discount. Represents Debt discount and beneficial conversion feature recognized as interest expense loss on settlement of debt Expected dividends to be paid to holders of the underlying shares or financial instruments (expressed as a percentage of the share or instrument's price). Period the instrument, asset or liability is expected to be outstanding, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Measure of dispersion, in percentage terms (for instance, the standard deviation or variance), for a given stock price. Risk-free interest rate assumption used in valuing an instrument. The entire disclosure for foreign subsidiaries. Gain loss on net in valuation of derivative liability. Amount of loss on conversion of debt. The increase (decrease) during the reporting period in receivables arising from the contracting of goods and services, net for uncollectible account. The increase (decrease) during the period in the amount of customer money held in customer accounts, including security deposits, collateral for a current or future transactions, initial payment of the cost of acquisition or for the right to enter into a contract or agreements. The increase (decrease) during the reporting period, excluding the portion taken into income, in the liability reflecting revenue yet to be earned for which cash or other forms of consideration was received or recorded as a receivables. Term of lessee's operating lease, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents reported fact of one year, five months, and thirteen days. The entire disclosure of loans payable. It represents the amount of loans payable to related party Loss on settlement fair value. Amount of loss on settlement of payable for the period. The value represents merchant cash advances. Notes maturity date CCYY-MM-DD format. Represents the number of days previous to the conversion. Original issue discount on promissory notes. Represents the percentage of average of three lowest closing prices. Preferred treasury stock shares outstanding. Private placement price per share. The cash inflow from a borrowing supported by a written promise to pay. The amount of purchase of warrants This element refer to the purchase of preferred stock. This element refer to total purchase price of preferred stock. Range one. Range thee. Range two. Description of restricted stock grant agreement The entire disclosure for revenue from contracts with customers. It represents the amount of revenue from equipment contracts Amount of revenue recognized from services sales. Tabular disclosure of the number and weighted-average exercise prices (or conversion ratios) for Warrant (or share units) that were outstanding at the beginning and end of the year, vested and expected to vest, exercisable or convertible at the end of the year, and the number of share Warrant or share units that were granted, exercised or converted, forfeited, and expired during the year. Tabular disclosure of the number and Weighted average remaining contractual term for vested portions of Warrant outstanding and currently exercisable or convertible during the year. The number of shares reserved for issuance pertaining to the outstanding exercisable stock warrants as of the balance sheet date in the customized range of exercise prices for which the market and performance vesting condition has been satisfied. The number of shares reserved for issuance pertaining to the outstanding stock warrant as of the balance sheet date for all option plans in the customized range of exercise prices. Stock issued during period share issued for cash. Stock Issued During Period, Share, Issued For Services Private Placement. Value of stock issued in lieu of cash for private placement. Description of stock options mature. Summary of significant accounting policies textual. It represents the amount of warrant reserve. Carrying amount as of the balance sheet date of warranty reserve. Amoun of working capital deficit. Loss on settlement of convertible notes. Amortization of financing cost Reserved shares to be issued. Tabular disclosure of estimated useful life. Aggregate amount demanding monetary damages. Issuance of Series M preferred stock for settlement of debt. The number of new shares issued in the conversion of stock in a noncash (or part noncash) transaction. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period. Common stock issued at fair value for conversion of debt, plus accrued interest, and other fees. Issuance of Series K Preferred stock. Issuance of Series L Preferred stock through a private placement with the purchase of Series K Preferred stock. Issuance of Series L Preferred stock through a private placement with the purchase of Series K Preferred stock shares. Issuance of Series K Preferred stock shares. Stock issued during period value of reclassification of non-cash adjustment. Net cumulative preferred stock dividends payable. Designated preferred stock. Benificially own outstanding common stock percentage. Amount of gain (loss) on conversion of preferred stock. Gain (loss) on conversion of series L preferred stock. Securities include of dilutive shares to earnings per share. The amount of convertible note receivable. Amount of accrued but unpaid interest on deposit liabilities. SeriesLPreferredStockMember Assets, Current Other Assets Assets Liabilities, Current Liabilities, Noncurrent Liabilities Stockholders' Equity Attributable to Parent Liabilities and Equity Gross Profit Operating Expenses [Default Label] Operating Income (Loss) LossOnSettlementOfConvertibleNotes Interest Expense Nonoperating Income (Expense) Preferred Stock Dividends, Income Statement Impact Shares, Outstanding Stock Issued During Period, Value, Stock Dividend LossOnConversionOfDebt Gain Loss On Net In Valuation Of Derivative Liability Original Issue Discount On Promissory Notes ConvertibleNotesReceivable Preferred Treasury Stock Shares Outstanding Increase (Decrease) in Other Current Assets Increase (Decrease) in Prepaid Expense and Other Assets Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Other Current Liabilities Private Placement Price Per Share Net Cash Provided by (Used in) Operating Activities Payments to Acquire Investments Net Cash Provided by (Used in) Investing Activities Repayments of Debt and Lease Obligation Repayments of Related Party Debt Payments for Repurchase of Redeemable Convertible Preferred Stock Net Cash Provided by (Used in) Financing Activities Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Excluding Exchange Rate Effect Derivative Liability Derivative, Gain on Derivative Preferred Series C Issued Stock Issued During Period, Value, Issued For Services Private Placement Class of Warrant or Right, Outstanding Class Of Warrant Or Right, Outstanding Weighted Average Exercise Price Class Of Warrant Or Right Granted Weighted Average Exercise Price Class Of Warrant Or Right, Exercised Weighted Average Exercise Price Class Of Warrant Or Right, Forfeited Weighted Average Exercise Price Long-term Debt Deposit Liabilities, Accrued Interest Conversion of Stock, Amount Converted Loss On Settlement Fair Value Long-term Debt and Capital Lease Obligations, Maturities, Repayments of Principal in Year Two EX-101.PRE 10 ocln-20200331_pre.xml XBRL PRESENTATION FILE XML 11 R1.htm IDEA: XBRL DOCUMENT v3.20.2
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
Jul. 02, 2020
Document and Entity Information [Abstract]    
Entity Registrant Name ORIGINCLEAR, INC.  
Entity Central Index Key 0001419793  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2020  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   11,648,780
Entity File Number 333-147980  
Entity Interactive Data Current Yes  
Entity Incorporation State Country Code NV  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2020
Dec. 31, 2019
CURRENT ASSETS    
Cash $ 297,300 $ 490,614
Contracts receivable, less allowance for doubtful accounts of $0 327,334 522,911
Contract assets 222,056 26,287
Convertible note receivable 121,880 117,879
Other receivable 2,500 2,500
Prepaid expenses 9,571 47,483
TOTAL CURRENT ASSETS 980,641 1,207,674
NET PROPERTY AND EQUIPMENT 105,708 117,069
OTHER ASSETS    
Fair value investment-securities 4,400 9,600
Trademark 4,467 4,467
Security deposit 3,500 3,500
TOTAL OTHER ASSETS 12,367 17,567
TOTAL ASSETS 1,098,716 1,342,310
Current Liabilities    
Accounts payable and other payable 1,155,668 1,144,545
Accrued expenses 1,269,064 1,163,146
Cumulative preferred stock dividends payable 109,899 92,472
Contract liabilities 232,444 428,009
Capital lease, current portion 9,088 9,088
Customer deposit 143,503 136,765
Warranty reserve 20,000 20,000
Loan payable, merchant cash advance, net of finance fees of $0 366,577 427,214
Loan payable, related party 165,172 187,054
Promissory note, related party 5,000
Derivative liabilities 9,109,600 31,640,470
Series F 8% Convertible Preferred Stock, 1,678 shares issued and outstanding, redeemable value of $1,678,000 1,678,000 1,678,000
Convertible promissory notes, net of discount of $0 1,891,613 2,879,325
Total Current Liabilities 16,155,628 39,806,088
Long Term Liabilities    
Capital lease, long term portion 14,801 17,073
Convertible promissory notes, net of discount of $0 1,473,325 552,975
Total Long Term Liabilities 5,611,426 3,898,098
Total Liabilities 21,767,054 43,704,186
COMMITMENTS AND CONTINGENCIES (See Note 11)
SHAREHOLDERS' DEFICIT    
Preferred stock value
Common stock, $0.0001 par value, 16,000,000,000 shares authorized 8,563,384 and 4,854,993 equity shares issued and outstanding, respectively 857 486
Preferred treasury stock,1,000 and 1,000 shares outstanding, respectively
Additional paid in capital - Common stock 65,007,176 64,915,364
Accumulated other comprehensive loss (133) (134)
Accumulated deficit (85,680,338) (107,281,659)
TOTAL SHAREHOLDERS' DEFICIT (20,668,338) (42,361,876)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 1,098,716 1,342,310
Series G Preferred Stock [Member]    
Long Term Liabilities    
Convertible Preferred Stock value 430,000 530,000
Series I Preferred Stock [Member]    
Long Term Liabilities    
Convertible Preferred Stock value 797,400 797,400
Series K Preferred Stock [Member]    
Long Term Liabilities    
Convertible Preferred Stock value 2,895,900 2,000,650
Series D-1 Preferred Stock    
SHAREHOLDERS' DEFICIT    
Preferred stock value 3,850 3,850
Series E Preferred Stock    
SHAREHOLDERS' DEFICIT    
Preferred stock value 154 214
Series J Preferred Stock [Member]    
SHAREHOLDERS' DEFICIT    
Preferred stock value
Series L Preferred Stock [Member]    
SHAREHOLDERS' DEFICIT    
Preferred stock value
Series M Preferred Stock [Member]    
SHAREHOLDERS' DEFICIT    
Preferred stock value $ 3 $ 3
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Allowance for doubtful accounts $ 0  
Merchant cash advances, net of finance fees 0  
Net of discount current 0  
Net of discount non current $ 0  
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 550,000,000 550,000,000
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 16,000,000,000 16,000,000,000
Common stock, shares issued 8,563,384 4,854,993
Common stock, shares outstanding 8,563,384 4,854,993
Preferred treasury stock, shares outstanding 1,000 1,000
Series F 8% Preferred Stock    
Convertible preferred stock, redeemable value $ 1,678,000 $ 1,678,000
Convertible preferred stock, share issued 1,678 1,678
Convertible preferred stock, share outstanding 1,678 1,678
Preferred stock, shares outstanding 1,678  
Series G 8% Preferred Stock    
Convertible preferred stock, redeemable value $ 430,000 $ 530,000
Convertible preferred stock, share issued 430 530
Convertible preferred stock, share outstanding 430 530
Preferred stock, shares outstanding 430  
Series I 8% Preferred Stock    
Convertible preferred stock, redeemable value $ 797,400 $ 797,400
Convertible preferred stock, share issued 797 797
Convertible preferred stock, share outstanding 797 797
Preferred stock, shares outstanding 797  
Series K 8% Preferred Stock    
Convertible preferred stock, redeemable value $ 2,895,900 $ 2,000,650
Convertible preferred stock, share issued 2,896 2,896
Convertible preferred stock, share outstanding 2,896 2,896
Preferred stock, shares outstanding 2,896 2,001
Series D-1 Preferred stock    
Preferred stock, shares issued 38,500,000 38,500,000
Preferred stock, shares outstanding 38,500,000 38,500,000
Series E Preferred stock    
Preferred stock, shares issued 1,537,213 2,139,649
Preferred stock, shares outstanding 1,537,213 2,139,649
Series J Preferred stock    
Preferred stock, shares issued 349 349
Preferred stock, shares outstanding 349 349
Series L Preferred stock    
Preferred stock, shares issued 1,405 1,405
Preferred stock, shares outstanding 1,000 1,000
Series M Preferred stock    
Preferred stock, shares issued 34,200 34,200
Preferred stock, shares outstanding 34,200 34,200
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Statement [Abstract]    
Sales $ 1,092,438 $ 742,043
Cost of Goods Sold 879,145 723,263
Gross Profit 213,293 18,780
Operating Expenses    
Selling and marketing expenses 374,923 482,659
General and administrative expenses 549,911 587,070
Research and development 28,982 23,950
Depreciation and amortization expense 11,361 10,729
Total Operating Expenses 965,177 1,104,408
Loss from Operations (751,884) (1,085,628)
OTHER INCOME (EXPENSE)    
Other income 4,000 19,036
Gain on conversion of preferred stock 1,229
Unrealized gain(loss) on investment securities (5,200) (7,200)
Loss on settlement of convertible notes (314,295)
Commitment fee (34,378)
Loss on conversion of debt (514,404)
Gain on net change in derivative liability and conversion of debt 22,530,870 1,944,589
Interest expense (177,601) (338,992)
TOTAL OTHER (EXPENSE) INCOME 22,353,298 754,356
NET INCOME (LOSS) 21,601,414 (331,272)
PREFERRED STOCK DIVIDENDS (38,156)
NET AVAILABLE TO SHAREHOLDERS $ 21,601,414 $ (369,428)
BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO SHAREHOLDERS' $ 3.33 $ (0.38)
DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO SHAREHOLDERS' $ 0.22 $ (0.38)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, BASIC 6,494,377 875,828
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, DILUTED 100,433,377 875,828
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Statements of Shareholders' Deficit - USD ($)
Preferred stock
Common stock
Additional Paid-in Capital
Accumulated Other Comprehensive loss
Accumulated Deficit
Total
Balance at Dec. 31, 2018 $ 4,064 $ 88 $ 63,179,433 $ (134) $ (79,807,981) $ (16,624,530)
Balance, shares at Dec. 31, 2018 40,640,649 875,244        
Common stock issuance for conversion of debt and accrued interest $ 31 891,224 891,255
Common stock issuance for conversion of debt and accrued interest, shares 313,014        
Common stock issued at fair value for services $ 12 279,217 279,229
Common stock issued at fair value for services, shares 116,539        
Common stock issued through a private placement for purchase of Series G Preferred stock $ 8 (8)
Common stock issued through a private placement for purchase of Series G Preferred stock, shares 82,799        
Cumulative preferred stock dividend (38,156) (38,156)
Gain on conversion of Series L Preferred stock          
Other comprehensive gain 1 1
Net loss $ (331,272) $ (331,272)
Balance at Mar. 31, 2019 $ 4,064 $ 139        
Balance, shares at Mar. 31, 2019 40,640,649 1,387,596 64,311,710 (133) (80,139,253) (15,823,473)
Balance at Dec. 31, 2019 $ 4,067 $ 486 $ 64,915,364 $ (134) $ (107,281,659) $ (42,361,876)
Balance, shares at Dec. 31, 2019 40,674,799 4,854,993        
Common stock issuance for conversion of debt and accrued interest $ 218 77,529 77,747
Common stock issuance for conversion of debt and accrued interest, shares 2,180,848        
Common stock issued at fair value for services $ 62 61,803 61,865
Common stock issued at fair value for services, shares 622,181        
Common stock issued for conversion of Series E Preferred stock $ (60) $ 3 57
Common stock issued for conversion of Series E Preferred stock, shares (602,436) 30,124        
Common stock issued for conversion of Series L Preferred stock $ 88 (88)
Common stock issued for conversion of Series L Preferred stock, shares (43) 875,238        
Issuance of Series K Preferred stock
Issuance of Series K Preferred stock, shares 50          
Issuance of Series L Preferred stock through a private placement associated with the Series K Preferred note
Issuance of Series L Preferred stock through a private placement associated with the Series K Preferred note, shares 448          
Reclassification of non-cash adjustment (46,260)
Gain on conversion of Series L Preferred stock (1,229) (1,229)
Other comprehensive gain 1
Net loss 21,601,414 21,601,414
Balance at Mar. 31, 2020 $ 4,007 $ 857 $ 65,007,176 $ (133) $ (85,680,245) $ (20,668,338)
Balance, shares at Mar. 31, 2020 40,072,818 (8,563,384)        
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net Income (loss) $ 21,601,414 $ (331,272)
Adjustment to reconcile net loss to net cash used in operating activities    
Depreciation and amortization 11,361 10,729
Common stock issued for services 61,865 279,229
Loss on net change in valuation of derivative liability (22,530,870) (1,944,589)
Loss on conversion of debt 514,404
Loss on settlement of debt 314,295
Debt discount recognized as interest expense 132,477
Net unrealized loss on fair value of security 5,200 7,200
Gain on conversion of preferred stock (1,229)
Convertible note receivable (4,000)  
Amortization of financing fees and cost 110,891
Change in Assets (Increase) Decrease in:    
Contracts receivable 195,577 19,534
Contract asset (195,769) 6,618
Prepaid expenses and other assets 37,912 (12,736)
Change in Liabilities Increase (Decrease) in:    
Accounts payable 11,123 143,784
Accrued expenses 70,043 2,556
Contract liabilities (195,565) 19,497
Customer deposit 6,738 (6,738)
Deferred income 28,500
NET CASH USED IN OPERATING ACTIVITIES (926,200) (705,621)
CASH FLOWS USED FROM INVESTING ACTIVITIES:    
Net change in fair value investment security (19,035)
CASH USED IN INVESTING ACTIVITIES (19,035)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments on capital lease (2,272) (2,272)
Loan payable financing, net (60,637) (41,749)
Loan payable, related party, net (21,882) (15,674)
Promissory note payable, related party 5,000 (21)
Net cumulative preferred stock dividends payable 17,427 13,358
Payment on redemption of preferred stock (65,000)
Net proceeds for issuance of preferred stock for cash 795,250 530,000
NET CASH PROVIDED BY FINANCING ACTIVITIES 732,886 418,642
NET (DECREASE) INCREASE IN CASH (193,314) (306,014)
CASH BEGINNING OF YEAR 490,614 609,144
CASH END OF YEAR 297,300 303,130
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION    
Interest paid 7,086 16,926
Taxes paid
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS    
Common stock issued at fair value for conversion of debt, plus accrued interest, and other fees $ 77,747 $ 891,255
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.20.2
Organization and Line of Business
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION AND LINE OF BUSINESS
1. The accompanying unaudited condensed consolidated financial statements of OriginClear, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.  For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2019.

 

Going Concern

The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. These factors, among others raise substantial doubt about the Company's ability to continue as a going concern.  Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2019 expressed substantial doubt about our ability to continue as a going concern.

 

The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, achieving a level of profitable operations and receiving additional cash. During the three months ended March 31, 2020, the Company obtained funds from sales of its preferred stock. Management believes this funding will continue from its current investors and from new investors. The Company also generated revenue of $1,092,438 and has standing purchase orders and open invoices with customers which will provide funds for operations. Management believes the existing shareholders, and prospective new investors and future sales will provide the additional cash needed to meet the Company's obligations as they become due and will allow the development of its core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity financing.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of OriginClear, Inc. and its wholly owned operating subsidiaries, Progressive Water Treatment, Inc., and OriginClear Technologies, Ltd. All material intercompany transactions have been eliminated upon consolidation of these entities.

 

Cash and Cash Equivalent

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

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company's impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, warranty reserves, inventory valuation, derivative liabilities and other conversion features, fair value investments, valuations of non-cash capital stock issuances and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Net Earnings (Loss) per Share Calculations

Basic loss per share calculations are computed by dividing income (loss) 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 securities or other contracts to issue common stock that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

 

   For the Three Months Ended
March 31,
 
   2020   2019 
Income (Loss) to common shareholders (Numerator)  $21,601,414   $(331,272)
           
Basic weighted average number of common shares outstanding (Denominator)   6,494,377    875,828 
           
Diluted weighted average number of common shares outstanding (Denominator)   100,433,377    875,828 

 

The Company excludes issuable shares from warrants, convertible notes and preferred stock, if their impact on the loss per share is anti-dilutive, and includes the issuable shares if their impact is dilutive.

 

    Anti-dilutive shares     Dilutive shares  
March 31, 2020            
             
Warrants shares     122,044       -  
Convertible debt shares     97,207,689       93,939,000  
Preferred shares     40,073,167       -  
                 
March 31, 2019                
                 
Warrants shares     125,456       -  
Convertible debt shares     4,051,573       -  
Preferred shares     40,639,649       -  

  

Revenue Recognition

We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

 

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

 

Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined.

 

Contract receivables are recorded on contracts for amounts currently due based upon progress billings, as well as retention, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs. 

 

Contract Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers on a monthly basis. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The allowance for doubtful accounts were $0 as of March 31, 2020 and December 31, 2019, respectively. The net contract receivable balance was $327,334 and $522,911 at March 31, 2020 and December 31, 2019, respectively.

 

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, "Business Combinations," where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

 

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at March 31, 2020, and determined there was no impairment of indefinite lived intangibles and goodwill.

 

Research and Development

Research and development costs are expensed as incurred. Total research and development costs were $28,982 and $23,950 for the three months ended March 31, 2020 and March 31, 2019, respectively.

 

Property and Equipment

Property and equipment are stated at cost. Gain or loss is recognized upon disposal of property and equipment, and the asset and related accumulated depreciation are removed from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred, while expenditures for addition and betterment are capitalized. Furniture and equipment are depreciated on the straight-line method and include the following categories:

 

Estimated Life        
Machinery and equipment     5-10 years  
Furniture, fixtures and computer equipment     5-7 years  
Vehicles     3-5 years  
Leasehold improvements     2-5 years  

 

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed following generally accepted accounting principles.

 

Depreciation expense during the three months ended March 31, 2020 and 2019, respectively was $11,361 and $10,729.

 

Stock-Based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

Accounting for Derivatives

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average series Binomial lattice option pricing models to value the derivative instruments at inception and on subsequent valuation dates.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2020, the balances reported for cash, contract receivables, cost in excess of billing, prepaid expenses, accounts payable, billing in excess of cost, and accrued expenses approximate the fair value because of their short maturities.

 

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

 

  Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. 

 

The following table presents certain investments and liabilities of the Company's financial assets measured and recorded at fair value on the Company's balance sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2020.

 

   Total   (Level 1)   (Level 2)   (Level 3) 
                 
Investment at fair value-securities  $4,400   $4,400   $      -   $      - 
Total Assets measured at fair value  $4,400   $4,400   $-   $- 
                     
   Total   (Level 1)   (Level 2)   (Level 3) 
                 
Derivative Liability  $9,109,600   $      -   $      -   $9,109,600 
Total liabilities measured at fair value  $9,109,600   $-   $-   $9,109,600 

 

The following is a reconciliation of the derivative liability for which level 3 inputs were used in determining the approximate fair value:

 

Balance as of January 1, 2020  $31,640,470 
Gain on conversion of debt and change in derivative liability   (22,530,870)
Balance as of March 31, 2020  $9,109,600 

 

For purpose of determining the fair market value of the derivative liability, the Company used Binomial lattice formula valuation model. The significant assumptions used in the Binomial lattice formula valuation of the derivative are as follows:

 

    3/31/2020
Risk free interest rate   0.05% - 2.43%
Stock volatility factor   0.54% - 207.0%
Weighted average expected option life   6 months -  5 years
Expected dividend yield   None

 

Segment Reporting

The Company's business currently operates in one segment based upon the Company's organizational structure and the way in which the operations are managed and evaluated.

 

Marketable Securities

The Company adopted ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities." ASU 2016-01 requires investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purpose, and separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. It eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The Company has evaluated the potential impact this standard may have on the condensed consolidated financial statements and determined that it had a significant impact on the condensed consolidated financial statements. The Company accounts for its investment in Water Technologies International, Inc. as available-for-sale securities, and the unrealized gain on the available-for-sale securities is recognized in net income.

 

Licensing agreement

The Company analysed the licensing agreement using ASU 606 to determine the timing of revenue recognition. The licensing of the intellectual property (IP) is distinct from the non-license goods or services and has significant standalone functionality that provides a benefit or value. The functionality will not change during the license period due to the licensor's activities. Because the significant standalone functionality is delivered immediately, the revenue is generally recognized when the license is delivered.

 

Reclassification of Certain Expenses

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operation.

 

Recently Issued Accounting Pronouncements 

Management reviewed currently issued pronouncements and does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.20.2
Capital Stock
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
CAPITAL STOCK
3. CAPITAL STOCK

 

Preferred Stock 

 

Series C

The Company has designated 1,000 shares of its preferred stock as Series C Preferred Stock. Such 1,000 shares are outstanding and are held by T. Riggs Eckelberry, our chief executive officer. Shares of Series C Preferred Stock are not convertible to common stock, are not entitled to receive dividends, and do not have a liquidation preference. The Series C Preferred Stock have no pre-emptive or subscription rights, and there is no sinking fund provision applicable to the Series C Preferred Stock. The Series C Preferred Stock entitles the holder to 51% of the total voting power of our stockholders. Share of Series C Preferred Stock will automatically be redeemed by the Company at par value on the first to occur of the following events: (i) the date that Mr. Eckelberry ceases to serve as officer, director or consultant of the Company, or (ii) on the date that the Company's shares of common stock first trade on any national securities exchange provided that (a) the listing rules of any such exchange prohibit preferential voting rights of a class of securities of the Company, or (b) listing on any such national securities exchange is conditioned upon the elimination of the preferential voting rights of the Series C Preferred Stock. As of March 31, 2020, there are 1,000 shares of Series C Preferred Stock issued and outstanding.

 

Series D-1

The Company has designated 50,000,000 shares of its preferred stock as Series D-1 Preferred Stock. Each share of Series D-1 Preferred Stock is convertible into 0.0005 shares of common stock. The Series D-1 Preferred Stock may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of our outstanding common stock. The holders of outstanding shares of Series D-1 Preferred Stock are not entitled to receive dividends, and do not have a liquidation preference. The Series D-1 Preferred Stock have no preemptive or subscription rights, and there is no redemption or sinking fund provisions applicable to the Series D-1 Preferred Stock. As of March 31, 2020, there were 38,500,000 shares of Series D-1 Preferred Stock issued and outstanding.

 

Series E

The Company has designated 4,000,000 shares of its preferred stock as Series E Preferred Stock. Each share of Series E Preferred Stock is convertible into the greater of (A) 0.05 shares of common stock and (B) the number of shares the holder would have received pursuant to the holder's subscription agreement if the preferred shares were priced based on the average closing sale price of three trading days prior to the date the holder requests a conversion, provided the lowest price for which an adjustment will be made is 50% of the purchase price paid by any purchaser of the Series E Preferred Stock. The Series E Preferred Stock may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of our outstanding common stock. The holders of outstanding shares of Series E Preferred Stock are not entitled to receive dividends, and do not have a liquidation preference. The Series E Preferred Stock have no pre-emptive or subscription rights, and there is no redemption or sinking fund provisions applicable to the Series E Preferred Stock. The Series E Preferred Stock does not have voting rights, except as required by law and with respect to certain protective provisions set forth in the Certificate of Designation of Series E Preferred Stock. As of December 31, 2019, there were 2,139,649 shares of Series E Preferred Stock issued and outstanding. During the period ended March 31, 2020, the Company issued 30,124 shares of common stock upon conversion of 602,436 Series E Preferred Stock. As of March 31, 2020, there were 1,537,213 shares of Series E Preferred Stock issued and outstanding. The Company did not recognize any gain or loss on conversion.

  

Series F

The Company has designated 6,000 shares of its preferred stock as Series F Preferred Stock. The Series F Preferred Stock has a stated value of $1,000 per share. The Series F Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series F Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series F Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to any other series of capital stock of the Company. The Series F Preferred Stock has no pre-emptive or subscription rights, and there is no sinking fund provision applicable to the Series F Preferred Stock. The Series F Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series F Preferred Stock on September 1, 2020, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series F Preferred Stock is outstanding, redeem all or any portion of the outstanding Series F Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series F Preferred Stock, subject to the Company's payment of any accrued but unpaid dividends upon such redemption. As of March 31, 2020, there were 1,678 shares of Series F Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $33,560.

 

Series G

The Company has designated 6,000 shares of its preferred stock as Series G Preferred Stock. The Series G Preferred Stock has a stated value of $1,000 per share. The Series G Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series G Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series G Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to any other series of capital stock of the Company (other than the Series F Preferred Stock). The Series G Preferred Stock has no pre-emptive or subscription rights, and there is no sinking fund provision applicable to the Series G Preferred Stock. The Series G Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series G Preferred Stock on April 30, 2021, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series G Preferred Stock is outstanding, redeem all or any portion of the outstanding Series G Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series G Preferred Stock, subject to the Company's payment of any accrued but unpaid dividends upon such redemption. On February 21, 2020, 100 shares of Series G Preferred Stock were exchanged for Series K Preferred Stock. As of March 31, 2020, there were 430 shares of Series G Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $9,740.

 

Series I

The Company has designated 4,000 shares of its preferred stock as Series I Preferred Stock. The Series I Preferred Stock has a stated value of $1,000 per share. The Series I Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series I Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series I Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to the common stock. The Series I Preferred Stock has no preemptive or subscription rights, and there is no sinking fund provision applicable to the Series I Preferred Stock. The Series I Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series I Preferred Stock two years following the date that is the later of the (i) final closing of the tranche (as designated in the subscription agreement under which such shares were sold) that such shares to be redeemed were part of (a "Series I Tranche"), or (ii) the expiration date of the Series I Tranche that such shares to be redeemed were part of, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series I Preferred Stock is outstanding, redeem all or any portion of the outstanding Series I Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series I Preferred Stock, subject to the Company's payment of any accrued but unpaid dividends upon such redemption. The issuance of the shares were accounted for under ASC 480-10-25-4, which requires liability treatment for certain mandatorily redeemable financial instruments, and the cumulative dividends are recorded as interest expense. As of March 31, 2020, there were 797 shares of Series I Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $15,948. 

 

Series J

The Company has designated 100,000 shares of its preferred stock as Series J Preferred Stock. The Series J Preferred Stock has a stated value of $1,000 per share. The Series J Preferred Stock is convertible into common stock in an amount determined by dividing the stated value by the conversion price, which is equal to lower of (a) the closing price of the common stock on the date the Company has banked funds and received and accepted executed subscription documents and the purchase price or (b) the average closing sale price of the common stock for the five trading days prior to the conversion date; certain prior investors are also entitled to certain make-good shares. The Series J Preferred Stock may not be converted to common stock to the extent such conversion would cause the holder to beneficially own more than 4.99% of the Company's outstanding common stock. The Series J Preferred Stock are entitled to dividends on an as-converted basis with the common stock. The Series J Preferred Stock will entitle the holders to a payment on an as-converted and pari passu basis with the common stock upon any liquidation. The Series J Preferred Stock has no pre-emptive or subscription rights, and there are no sinking fund or redemption provisions applicable to the Series J Preferred Stock. The Series J Preferred Stock votes on an as-converted basis with the common stock, subject to the beneficial ownership limitation. As of March 31, 2020, there were 349 shares of Series J Preferred Stock issued and outstanding.

 

Series K

The Company has designated 4,000 shares of its preferred stock as Series K Preferred Stock. The Series K Preferred Stock has a stated value of $1,000 per share. The Series K Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series K Preferred Stock are entitled to quarterly dividends at the annual rate of 8% of the stated value, in preference to any dividends on the common stock. The Series K Preferred Stock has a liquidation preference equal to the stated value plus any accrued but unpaid dividends, in preference to the common stock. The Series K Preferred Stock has no preemptive or subscription rights, and there is no sinking fund provision applicable to the Series K Preferred Stock. The Series K Preferred Stock does not have voting rights, except as required by law. The Company will be required to redeem all outstanding shares of Series K Preferred Stock two years following the date that is the later of the (i) final closing of the tranche (as designated in the subscription agreement under which such shares were sold) that such shares to be redeemed were part of (a "Series K Tranche"), or (ii) the expiration date of the Series K Tranche that such shares to be redeemed were part of, at a price equal to the stated value plus any accrued but unpaid dividends. The Company may, in its sole discretion, at any time while the Series K Preferred Stock is outstanding, redeem all or any portion of the outstanding Series K Preferred Stock at a price equal to the stated value plus any accrued but unpaid dividends. There are thus no restrictions on the Company redeeming shares of Series K Preferred Stock, subject to the Company's payment of any accrued but unpaid dividends upon such redemption. The issuance of the shares were accounted for under ASC 480-10-25-4, which requires liability treatment for certain mandatorily redeemable financial instruments, and the cumulative dividends are recorded as interest expense. During the period ended March 31, 2020, the Company issued an aggregate of 895 shares of Series K Preferred Stock for an aggregate purchase price of $795,250. On February 21, 2020, an investor was issued 100 shares of Series K Preferred Stock in exchange for 100 shares of Series G Preferred Stock. As of March 31, 2020, there were 2,896 shares of Series K Preferred Stock issued and outstanding and the Company accrued dividends in the amount of $50,620.

 

Series L

The Company has designated 100,000 shares of its preferred stock as Series L Preferred Stock. The Series L Preferred Stock has a stated value of $1,000 per share. The Series L Preferred Stock is convertible into common stock in an amount determined by dividing the stated value by the conversion price, which is equal to lower of(a) the closing price of the common stock on the date the Company has banked funds and received and accepted executed subscription documents and the purchase price or (b) the average closing sale price of the common stock for the five trading days prior to the conversion date; certain prior investors are also entitled to certain make-good shares. The Series L Preferred Stock may not be converted to common stock to the extent such conversion would cause the holder to beneficially own more than 4.99% of the Company's outstanding common stock. The Series L Preferred Stock are entitled to dividends on an as-converted basis with the common stock. The Series L Preferred Stock will entitle the holders to a payment on an as-converted and pari passu basis with the common stock upon any liquidation. The Series L Preferred Stock has no pre-emptive or subscription rights, and there is no sinking fund or redemption provisions applicable to the Series L Preferred Stock. The Series L Preferred Stock votes on an as-converted basis with the common stock, subject to the beneficial ownership limitation. During the period ended March 31, 2020, the Company issued an aggregate of 875,238 shares of common stock upon conversion of 43 shares of Series L Preferred Stock. The Company also issued 448 shares of Series L Preferred Stock with the Series K Preferred Stock. As of March 31, 2020, there were an aggregate of 1,405 shares of Series L Preferred Stock issued and outstanding. The Company recognized a loss on the conversions of $1,229.

  

Series M

Pursuant to the Amended and Restated Certificate of Designation of Series M Preferred Stock filed with the Secretary of State of Nevada on July 1, 2020, the Company has designated 800,000 shares of its preferred stock as Series M Preferred Stock. Each share of Series M Preferred Stock has a stated value of $25. The Series M Preferred Stock is not convertible into common stock. The holders of outstanding shares of Series M Preferred Stock are entitled to receive dividends, at the annual rate of 10%, payable monthly, payable in preference and priority to any payment of any dividend on the common stock. The Series M Preferred Stock will be entitled to a liquidation preference in an amount equal to $25 per share plus any declared but unpaid dividends, before any payments to holders of common stock. The Series M Preferred Stock have no pre-emptive or subscription rights, and there are no sinking fund provisions applicable to the Series M Preferred Stock. The Series M Preferred Stock does not have voting rights, except as required by law and with respect to certain protective provisions set forth in the Certificate of Designation of Series M Preferred Stock. To the extent it may lawfully do so, the Company may, in its sole discretion, at any time when there are outstanding shares of Series M Preferred Stock, redeem any or all of the then outstanding shares of Series M Preferred Stock at a redemption price of $37.50 per share (150% of the stated value) plus any accrued but unpaid dividends. During the period ended March 31, 2020, the Company reclassified noncash accrued interest of $46,260 associated with the exchange of a note, from preferred additional paid in capital, which affected the balance sheet only. As of March 31, 2020, there were 34,200 shares of Series M Preferred Stock issued and outstanding that do not qualify to receive dividends.

 

Common Stock 

On April 23, 2019, the Company filed a certificate of amendment to its articles of incorporation, with the Secretary of the State of Nevada effectuate an increase to the number of authorized shares of common stock of the Company from 8,000,000,000 shares from 16,000,000,000.

 

Reverse Stock Split

On October 25, 2019, the Company effected a one-for-two thousand (1 for 2,000) reverse stock split of its common stock (the "Reverse Split"). All shares, options, warrants and per share information throughout these consolidated financial statements have been retroactively restated to reflect the Reverse Split.

 

March 31, 2020

The Company issued 2,180,848 shares of common stock for the settlement of convertible promissory notes in an aggregate principal in the amount of $67,362, plus interest in the amount of $10,385, at conversion prices of $0.025 to $0.045.

 

The Company issued 622,181 shares of common stock for services at fair value of $61,865.

 

The Company issued 30,124 shares of common stock upon conversion of 602,436 shares of Series E preferred stock.

 

The Company issued 875,238 shares of common stock upon conversion of 43 shares of Series L preferred stock.

 

March 31, 2019

The Company issued 313,014 shares of common stock for the settlement of convertible promissory notes in an aggregate principal in the amount of $284,973, plus interest in the amount of $51,578, plus a default settlement of $40,500, with an aggregate fair value loss on conversion of debt in the amount of $514,404, based upon conversion prices of $1.8 to $3.60.

 

The Company issued 116,539 shares of common stock for services at fair value of $279,229.

 

The Company issued 82,799 shares of common stock through a private placement as additional consideration for purchase of Series G preferred stock.

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.20.2
Restricted Stocks and Warrants
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
RESTRICTED STOCKS AND WARRANTS
4. RESTRICTED STOCKS AND WARRANTS

  

Restricted Stock to CEO

Between May 12, 2016, and August 14, 2019, the Company entered into Restricted Stock Grant Agreements ("the RSGAs") with its Chief Executive Officer, Riggs Eckelberry, to create management incentives to improve the economic performance of the Company and to increase its value and stock price. All shares issuable under the RSGAs are performance based shares and none have yet vested nor have any been issued. The RSGAs provides for the issuance of up to an aggregate of 109,214 shares of the Company's common stock to Mr. Eckelberry provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company's quarterly or annual financial statements, the Company will issue up to an aggregate of 54,607 shares of its common stock; b) If the Company's consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC reports, the Company will issue up to an aggregate of 54,607 shares of its common stock. The Company has not recognized any costs associated with the milestones, because achievement is not probable. As the performance goals are achieved, the shares shall become eligible for vesting and issuance.

  

Restricted Stock to Employees and Consultants

Between May 12, 2016, and August 14, 2019, the Company entered into Restricted Stock Grant Agreements ("the E&C RSGAs") with its employees and consultants, to create management incentives to improve the economic performance of the Company and to increase its value and stock price. All shares issuable under the E&C RSGAs are performance based shares and none have yet vested nor have any been issued. The E&C RSGAs provide for the issuance of up to 378,750 shares of the Company's common stock to employees and consultants provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company's quarterly or annual financial statements, the Company will issue up to an aggregate of 189,375 shares of its common stock; b) If the Company's consolidated operating profit Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC reports, the Company will issue up to an aggregate of 189,375 shares of its common stock. As of December 31, 2019, an aggregate of 30,250 shares issuable under the E&C RSGAs have been cancelled. The Company has not recognized any costs associated with the milestones, because achievement is not probable. As the performance goals are achieved, the shares shall become eligible for vesting and issuance.

 

On August 14, 2019, the Board of Directors approved an amendment to the RSGAs and E&C RSGAs to include an alternative vesting schedule for the Grantees. The Grantees can elect to participate in the alternate vesting schedule for grants received at least two years prior to the date requested. On the first day of each calendar month, an aggregate dollar amount of restricted stock equal to an aggregate of 5% of the total dollar amount of the Company's common stock that traded during the prior calendar month, will vest, divided equally among all RSGAs and E&C RSGAs that have duly elected to participate in the alternate vesting schedule, with value based on the fair market value under the respective RSGAs and E&C RSGAs. The fair market value shall equal the average of the trailing ten (10) closing trade prices of the Company's common stock on the last ten (10) trading days of the month immediately prior to the date of determination as quoted on the public securities trading market on which the Company's common stock is then traded. If the fair market value of the Company's common stock on the date the shares are vested is less than the fair market value of the Company's common stock on the effective date of the RSGA or E&C RSGA, then the number of vested shares issuable (assuming all conditions are satisfied) shall be increased so that the aggregate fair market value of vested shares issuable on the vesting date equals the aggregate fair market value that such number of shares would have had on the effective date. Upon the occurrence of a Company performance goal, the right to participate in the alternate vesting schedule will terminate, and the vesting of the remaining unvested shares will be as set forth under the restricted stock award agreement. As of March 31 2020, there was no alternative vesting selected and no shares were issued.

  

Warrants

During the period ended March 31, 2020, no warrants were issued by the Company. A summary of the Company's warrant activity and related information follows for the three months ended March 31, 2020:

  

   March 31, 2020 
       Weighted 
   Number   average 
   of   exercise 
   Warrants   price 
Outstanding - beginning of period   122,044   $500 
Granted   -   $- 
Exercised   -   $- 
Forfeited   -   $- 
Outstanding - end of period   122,044   $500 

 

At March 31, 2020, the weighted average remaining contractual life of warrants outstanding:

 

    March 31, 2020 
            Weighted 
            Average 
            Remaining 
Exercisable   Warrants   Warrants   Contractual 
Prices   Outstanding   Exercisable   Life (years) 
$500.00    122,044    122,044    1.37 
      122,044    122,044      
XML 21 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Promissory Notes
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
CONVERTIBLE PROMISSORY NOTES
5. CONVERTIBLE PROMISSORY NOTES

 

As of March 31, 2020, the outstanding convertible promissory notes are summarized as follows:

 

Convertible Promissory Notes  $3,364,938 
Less current portion   1,891,613 
Total long-term liabilities  $1,473,325 

 

Maturities of long-term debt for the next five years are as follows:

 

Period Ending March 31,  Amount 
2021   1,891,613 
2022   1,411,050 
2023   - 
2024   62,275 
   $3,364,938 

 

At March 31, 2020, the Company had $3,364,938 in convertible promissory notes.

 

On various dates from 2014 through May 2015, the Company issued unsecured convertible promissory notes (the "2014-2015 Notes"), that matured on various dates and were extended sixty (60) months from the effective date of each Note. The 2014-2015 Notes bear interest at 10% per annum. The 2014-2015 Notes may be converted into shares of the Company's common stock at conversion prices ranging from the lesser of $4,200 to $9,800 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 50% of the lowest trade price on any trade day following issuance of the 2014-2015 Notes.  In addition, for as long as the 2014-2015 Notes or other convertible notes in effect between the purchaser and the Company are outstanding, if the Company issues any security with terms more favorable than the terms of the 2014-2015 Notes or such other convertible notes or a term was not similarly provided to the purchaser of the 2014-2015 Notes or such other convertible notes, then such more favorable or additional term shall, at the purchaser's option, become part of the 2014-2015 Notes and such other convertible notes. The conversion feature of the 2014-2015 Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the 2014-2015 Notes. During the period ended March 31, 2020, the Company issued 820,937 shares of common stock, upon conversion of $19,500 in principal, plus accrued interest of $10,385. As of March 31, 2020, the 2014-2015 Notes had an aggregate remaining balance of $1,081,050.

  

The unsecured convertible promissory notes (the "OID Notes") had an aggregate remaining balance of $184,124, plus accrued interest of $13,334. The OID Notes included an original issue discount and one-time interest, which has been fully amortized. The OID Notes matured on December 31, 2017, which were extended to June 30, 2018. The OID Notes were convertible into shares of the Company's common stock at a conversion price initially of $30,620. After the amendment, the conversion price changed to the lesser of $5,600 per share, or b) fifty percent (50%) of the lowest trade price of common stock recorded since the original effective date of this note, or c) the lowest effective price per share granted to any person or entity after the effective date.  The conversion feature of the notes was considered a derivative in accordance with current accounting guidelines, because of the reset conversion features of the notes. During the period ended March 31, 2020, the Company issued 130,711 shares of common stock upon conversion of principal in the amount of $5,150. The remaining balance of the OID Notes as of March 31, 2020 was $62,275.  

 

The Company issued various, unsecured convertible promissory notes (the "2015-2016 Notes"), on various dates ending on May 19, 2016. The 2015-2016 Notes matured and were extended from the date of each tranche through maturity dates ending on May 19, 2020. The 2015-2016 Notes bear interest at 10% per annum. The 2015-2016 Notes may be converted into shares of the Company's common stock at conversion prices ranging from the lesser of $1,400 to $5,600 (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 50% of the lowest trade price on any trade day following issuance of the 2015-2016 Notes.  The conversion feature of the 2015-2016 Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the 2015-2016 Notes. The remaining balance of the 2015-2016 Notes as of March 31, 2020 was $1,200,000.

 

The Company issued a convertible note (the "Dec 2015 Note") in exchange for accounts payable in the amount of $432,048, which could be converted into shares of the Company's common stock after December 31, 2015. The Dec 2015 Note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The Dec 2015 Note did not meet the criteria of a derivative, and was accounted for as a beneficial conversion feature, which was amortized over the life of the Dec 2015 Note and recognized as interest expense in the financial statements. On January 1, 2016, the Dec 2015 Note met the criteria of a derivative and was accounted for under ASC 815. The Dec 2015 Note has zero stated interest rate, and the conversion price shall be equal to 75% of the average three lowest last sale prices traded during the 25 trading days immediately prior to conversion. As of March 31, 2020, the remaining balance of the Dec 2015 Note was $167,048.

 

The Company issued a convertible note (the "Sep 2016 Note") in exchange for accounts payable in the amount of $430,896, which could be converted into shares of the Company's common stock after September 15, 2016. The Sep 2016 Note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The Sep 2016 Note met the criteria of a derivative and was accounted for under ASC 815. The Sep 2016 Note has zero stated interest rate, and the conversion price shall be equal to 75% of the average three lowest last sale prices traded during the 25 trading days immediately prior to conversion. The Sep 2016 Note did not meet the criteria of a derivative at the date of the issuance, and was accounted for as a beneficial conversion feature, which was amortized over the life of the Sep 2016 Note and recognized as interest expense in the financial statements. The conversion feature of the Sep 2016 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion feature of the Sep 2016 Note. As of March 31, 2020, the remaining balance of the Sep 2016 Note was $430,896.

  

The Company issued two (2) unsecured convertible promissory notes (the "Apr & May 2018 Notes"), in the aggregate amount of $300,000 on April 2, 2018 and May 31, 2018. The Apr & May 2018 Notes matured on April 2, 2019 and May 31, 2019, respectively. The Apr & May 2018 Notes bear interest at 10% per annum. The Apr & May 2018 Notes may be converted into shares of the Company's common stock at a variable conversion price of 50% of the lesser of the lowest trading price twenty five (25) trading days prior to conversion. The conversion feature of the Apr & May 2018 Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Notes. During the nine months ended September 30, 2019, the Company issued 12,500 shares of common stock upon conversion of principal in the amount of $6,523, plus accrued interest of $4,727, with a fair value loss on conversion of $16,250. On March 13, 2019, the Company entered into a settlement agreement with the investor in the amount of $570,000, based on the outstanding balance due and payable under the Apr & May 2018 Notes. The Company set up a reserve of 2,630,769 shares of common stock of the Company for issuance upon conversion by the investor of the amounts owed under the Notes, in accordance with the terms of the Notes, including, but no limited to the beneficial ownership limitations contained in the Notes. In addition to the foregoing, upon the sale by the investor of the settlement shares as delivered to the investor by the Company, resulting in total net proceeds less than the settlement value, the investor is entitled to additional settlement shares of the Company's common stock. If after the investor has sold all settlement shares, the investor delivers a written notice to the Company certifying that the investor is entitled to additional settlement shares of the Company's common stock (the "Make-Whole Shares"). The number of make-whole shares being equal to the greater of ((i) zero and (ii) the quotient of (1) the difference of (x) the settlement value with respect to each sale of shares by the Investor after the delivery of the Settlement Shares, minus (y) the aggregate net consideration received by the Investor from the resale of all shares of common stock issued by the Company, divided by (2) the average trailing closing price for ten (10) trading days for the shares immediately preceding the date of delivery of the make-whole shares. During the period ended March 31, 2020, the Company issued 1,229,200 shares of common stock upon conversion of principal in the amount of $42,712. As of March 31, 2020, the remaining balance of the Apr & May 2018 Notes was $423,669. 

 

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations.

 

The derivative liability recognized in the financial statements as of March 31, 2020 was $9,109,600.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.20.2
Revenue from Contracts with Customers
3 Months Ended
Mar. 31, 2020
Revenue from Contracts with Customers [Abstract]  
REVENUE FROM CONTRACTS WITH CUSTOMERS
6.REVENUE FROM CONTRACTS WITH CUSTOMERS

 

Equipment Contracts

Revenues and related costs on equipment contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

 

The following table represents a disaggregation of revenue by type of good or service from contracts with customers for the period ended March 31, 2020. 

 

   Three Months Ended 
   March 31, 
   2020   2019 
Equipment Contracts  $763,157   $446,233 
Component Sales   318,074    263,259 
Services Sales   11,207    32,551 
   $1,092,438   $742,043 

  

Revenue recognition for other sales arrangements, such as sales for components, service and licensing fees will remain materially consistent.

 

Contract assets represents revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represents billings in excess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of the contract completion. The contract asset for the three months ended March 31, 2020 was $222,056 and for the year ending December 31, 2019 was $26,287. The contract liability for the three months ended March 31, 2020 was $232,444 and for the year ending December 31, 2019 $428,009.

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.20.2
Financial Assets
3 Months Ended
Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
FINANCIAL ASSETS
7. FINANCIAL ASSETS

 

 

Convertible Note Receivable

The Company purchased a 10% convertible note in the amount of $80,000, through a private placement with Water Technologies International, Inc ("WTII"). The Note is convertible into common stock of WTII at a price of 65% of the lowest trading price for the ten (10) trading days immediately prior to the conversion date. The conversion price shall not be lower than a price of $0.0001 per share. As of March 31, 2020, the note included principal of $80,000 plus accrued interest of $41,880.

 

Fair value investment in Securities

  On May 15, 2018, the Company received 4,000 shares of WTII preferred stock for the use of OriginClear, Inc. technology associated with their proprietary electro water separation system. The stock was valued at fair market value of $0.0075 for a price of $30,000 on the date of issuance. The preferred shares are convertible into 4,000,000 shares of common stock. The Company analysed the licensing agreement using ASU 606 to determine the timing of revenue recognition. The licensing of the intellectual property (IP) is distinct from the non-license goods or services and has significant standalone functionality that provides a benefit or value. The functionality will not change during the license period due to the licensor's activities. Because the significant standalone functionality was delivered immediately, the revenue was recognized in the financial statements as of June 30, 2018. As of March 31, 2020, the fair value of the preferred shares was $4,400.
XML 24 R14.htm IDEA: XBRL DOCUMENT v3.20.2
Loans Payable
3 Months Ended
Mar. 31, 2020
Loans Payable [Abstract]  
LOANS PAYABLE
8. LOANS PAYABLE

 

Secured Loans Payable

The Company entered into short term loans with various lenders for capital expansion secured by the Company's assets in the amount of $1,749,970, which included finance cost of $624,810. The finance cost was fully amortized over the terms of the loans, which have various maturity dates ranging from October 2018 through February 2019. The term of the loans ranged from two months to six months. The net balance as of March 31, 2020 was $366,577.

 

Promissory Note Payable, Related Party

The Company received an unsecured promissory note on February 6, 2020 for the sum of $5,000. The note bears interest at 10% per annum, with a maturity date of February 6, 2021. Upon maturity the note and accrued interest is to be paid upon the maturity date. The funds were used for operating expenses.

 

Loan Payable-Related Party  

The Company's CEO loaned the Company $248,870 as of June 28, 2018. The loans bear interest at various rates to be repaid over a period of three (3) years at various maturity dates. The funds were used for operating expenses. Principal payments were made in the amount of $21,882, leaving a balance of $165,172 as of March 31, 2020.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.20.2
Capital Leases
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
CAPITAL LEASES

9. CAPITAL LEASES

 

The Company entered into a capital lease for the purchase of equipment during the period ended March 31, 2020. The lease is for a sixty (60) month term, with monthly payments of $757 per month, and a purchase option at the end of the lease for $1.00.

 

As of March 31, 2020, the maturities are summarized as follows:

 

Capital lease  $23,889 
Less current portion   9,088 
Total long-term liabilities  $14,801 

 

Long term maturities for the next three years are as follows:

 

Period Ending March 31,
2021   9,088 
2022   5,713 
   $14,801 
XML 26 R16.htm IDEA: XBRL DOCUMENT v3.20.2
Foreign Subsidiary
3 Months Ended
Mar. 31, 2020
Foreign Subsidiary [Abstract]  
FOREIGN SUBSIDIARY
10. FOREIGN SUBSIDIARY

 

On December 31, 2014, the Company formed a wholly owned subsidiary, OriginClear Technologies Limited (OCT), in Hong Kong, China. The Company granted OCT a master license for the People's Republic of China. In turn, OCT is expected to license regional joint ventures for water treatment.

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.20.2
Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
11. COMMITMENTS AND CONTINGENCIES

 

Operating Lease

The Company holds an agreement for office space located in Los Angeles, California. The initial agreement was from May 1, 2016 to July 31, 2016 and the term has automatically renewed for successive periods and will continue until terminated in accordance with the agreement.

 

Facility Rental – Related Party

The Company rents from its subsidiary on a month-to-month basis a 12,000 square foot facility in McKinney, Texas at a base rent of $4,850 per month.

 

Warranty Reserve

Generally, a PWT project is guaranteed against defects in material and workmanship for one year from the date of completion, while certain areas of construction and materials may have guarantees extending beyond one year. The Company has various insurance policies relating to the guarantee of completed work, which in the opinion of management will adequately cover any potential claims. A warranty reserve has been provided under PWT based on the opinion of management and based on Company history in the amount of $20,000 for the period ending March 31, 2020.

  

Litigation

In February 2019, a Complaint was filed in the Superior Court for the State of California, for breach of contract, common counts for sums due for services allegedly performed, and fraud. The Complaint was filed by RDI Financial, LLC ("RDI"), an assignee of Interdependence, Inc., and named the Company and our developmental subsidiary, WaterChain, Inc., as Defendants. RDI claimed that its assignor, Interdependence, Inc., entered into a contract with the Defendants for Interdependence to provide reputation and professional relationship management services. RDI claimed that Interdependence provided the services and that the Company was required to make certain payments of cash and our capital stock to Interdependence, but did not do so. RDI claims to be entitled to enforce the contract as the assignee, and is demanding monetary damages in the aggregate amount of $630,000.

 

While filed in February, 2019, the Company and WaterChain were unaware of the suit until September of 2019, when they received notice of a default judgment. Litigation counsel was engaged, the absence of prior notice, service of the suit and an improper default promptly challenged, and in October 2019 the Court vacated the default and judgment, and granted the Company and WaterChain leave to file an Answer and Cross-Complaint. Through these filings, the Company and WaterChain, Inc. contest the allegations and claims in the Complaint, and deny that Interdependence performed the required services and contends that we overpaid Interdependence $40,000 for whatever work was done. Specifically, in November, 2019, an Answer was filed denying the claims in the Complaint, along with a Cross-Complaint alleging fraudulent inducement to enter into the contract, negligent misrepresentations, breach of contract, and to rescind the underlying contract. Specifically, we have alleged that Interdependence misrepresented the nature and scope of the services which were to be provided and ability to provide them, misrepresented the results they would obtain from providing such services, and also failed to provide us with the services as required by the contract such that Interdependence was overpaid based on what it in fact did. For those reasons, and prior to any litigation, we terminated the contract for non-performance.

 

On February 6, 2020, the Superior Court set April 4, 2021 as the trial date for this matter. The Company and WaterChain are appropriately defending against the allegations and pursuing affirmative recovery on the cross-complaint. The Company disputes all claims and is appropriately litigating its defenses and pursuing recovery on its cross-suit. The parties are in the preliminary stages of settlement negotiations with the Plaintiff RDI and Interdependence, but we can provide no assurance that any settlement will be reached nor can we provide any assurances regarding any terms of such settlement. As of date of this report, legal fees and costs in this action have been substantial and it is impossible at this time to predict an exact amount, or even a meaningful estimate, of the aggregate sums that may be incurred in finally resolving or adjudicating this lawsuit.

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS
12. SUBSEQUENT EVENTS

 

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has determined that there are the following subsequent events:

 

Between April 28, 2020, and June 22, 2020 holders of convertible promissory notes converted an aggregate principal and interest amount of $45,138 into an aggregate of 1,781,080 shares of the Company's common stock.

 

Between April 9, 2020 and April 24, 2020, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold an aggregate of 265 shares of the Company's Series K preferred stock for an aggregate purchase price of $264,517. The Company also issued an aggregate of 132 shares of its Series L preferred stock to the investors.

 

Between April 2, 2020 and May 11, 2020, the Company sold an aggregate of 3,904 shares of the Company's Series M preferred stock for an aggregate purchase price of $97,600.

 

Between April 15, 2020 and April 30, 2020, holders of Series M Preferred Stock converted an aggregate of 320 Series M shares into an aggregate of 137,052 shares of the Company's common stock.

 

Between April 30, 2020 and June 30, 2020, the Company issued to consultants and two employees for performance an aggregate of 883,641 shares of the Company's common stock for services in lieu of cash considerations including 295,141 shares issued in exchange for 6,000,000 shares of Series D-1 preferred stock.

 

On April 27, 2020, the Company filed a certificate of designation (the "Series O COD") of Series O Preferred Stock (the "Series O") and a certificate of designation (the "Series P COD") of Series P Preferred Stock (the "Series P") with the Secretary of State of Nevada.

 

Between May 4, 2020 and May 5, 2020, the Company received loan proceeds in the aggregate amount of $345,000 (the "PPP Loan") under the Paycheck Protection Program (the "PPP") under the Coronavirus Aid, Relief and Economic Security Act. The principal and accrued interest under the Note is forgivable after eight weeks if the Company uses the PPP Loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and otherwise complies with PPP requirements. In order to obtain forgiveness of the PPP Loan, the Company must submit a request and provide satisfactory documentation regarding its compliance with applicable requirements.  The Company must repay any unforgiven principal amount of the Note, with interest, on a monthly basis following the Deferral Period.  The Company intends to use the proceeds of the PPP Loan specifically for eligible purposes and to pursue forgiveness, although no assurance is provided that forgiveness for all or any portion of the PPP Loan will be obtained.

 

On May 18, 2020, the Company entered into Restricted Stock Grant Agreements (the "May RSGAs") with its Chief Executive Officer, T. Riggs Eckelberry, members of the Board, employees and consultants to create management incentives to improve the economic performance of the Company and to increase its value and stock price. All shares issuable under the May RSGAs are performance based shares and none have yet vested nor have any been issued. The May RSGAs provide for the issuance of up to an aggregate of 10,500,000 shares of the Company's common stock as follows: 2,000,000 to Mr. Eckelberry, 500,000 to each of the other three members of the Board, and an aggregate of 7,000,000 to employees and consultants provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period, the Company will issue up to an aggregate of 5,250,000 shares of its common stock; b) If the Company's consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC Reports, the Company will issue up to an aggregate of 5,250,000 shares of its common stock. As the performance goals are achieved or if alternate vesting is qualified and selected, the shares shall become eligible for vesting and issuance.

 

On July 2, 2020, the Company issued to Mr. Eckelberry an aggregate of 115,344 shares of common stock per qualifying alternate vesting schedule relating to his May 2016 Restricted Stock Grant Agreement. 

 

On June 12, 2020, a holder of Series J Preferred Stock converted an aggregate of 2.5 Series J shares into an aggregate of 41,541 shares, including make-good shares, of the Company's common stock.

 

On June 22, 2020, a holder of Series L Preferred Stock converted an aggregate of 7.5 Series L shares into an aggregate of 126,738 shares, including make-good shares, of the Company's common stock.

 

Between June 4, 2020 and July 2, 2020, the Company entered into subscription agreements with certain accredited investors pursuant to which the Company sold an aggregate of 110 shares of the Company's Series O preferred stock for an aggregate purchase price of $110,000. The Company also issued an aggregate of 55 shares of its Series P preferred stock to the investors.

 

On July 1, 2020, the Company filed an Amended and Restated Certificate of Designation of Series M Preferred Stock (the "Amended Series M COD") with the Secretary of State of Nevada. The Amended Series M COD amended the terms of the Company's Series M Preferred Stock, such that, the Series M Preferred Stock will not be convertible into common stock, and the Company may redeem outstanding shares of Series M Preferred Stock at any time at a redemption price of $37.50 per share (150% of the stated value of $25.00), plus any accrued but unpaid dividends.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of OriginClear, Inc. and its wholly owned operating subsidiaries, Progressive Water Treatment, Inc., and OriginClear Technologies, Ltd. All material intercompany transactions have been eliminated upon consolidation of these entities.

Cash and Cash Equivalent

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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company's impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, warranty reserves, inventory valuation, derivative liabilities and other conversion features, fair value investments, valuations of non-cash capital stock issuances and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Net Earnings (Loss) per Share Calculations

Net Earnings (Loss) per Share Calculations

Basic loss per share calculations are computed by dividing income (loss) 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 securities or other contracts to issue common stock that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

 

   For the Three Months Ended
March 31,
 
   2020   2019 
Income (Loss) to common shareholders (Numerator)  $21,601,414   $(331,272)
           
Basic weighted average number of common shares outstanding (Denominator)   6,494,377    875,828 
           
Diluted weighted average number of common shares outstanding (Denominator)   100,433,377    875,828 

 

The Company excludes issuable shares from warrants, convertible notes and preferred stock, if their impact on the loss per share is anti-dilutive, and includes the issuable shares if their impact is dilutive.

 

    Anti-dilutive shares     Dilutive shares  
March 31, 2020            
             
Warrants shares     122,044       -  
Convertible debt shares     97,207,689       93,939,000  
Preferred shares     40,073,167       -  
                 
March 31, 2019                
                 
Warrants shares     125,456       -  
Convertible debt shares     4,051,573       -  
Preferred shares     40,639,649       -  
Revenue Recognition

Revenue Recognition

We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

 

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

 

Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined.

 

Contract receivables are recorded on contracts for amounts currently due based upon progress billings, as well as retention, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs.

Contract Receivable

Contract Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers on a monthly basis. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The allowance for doubtful accounts were $0 as of March 31, 2020 and December 31, 2019, respectively. The net contract receivable balance was $327,334 and $522,911 at March 31, 2020 and December 31, 2019, respectively.

Indefinite Lived Intangibles and Goodwill Assets

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, "Business Combinations," where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

 

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at March 31, 2020, and determined there was no impairment of indefinite lived intangibles and goodwill.

Research and Development

Research and Development

Research and development costs are expensed as incurred. Total research and development costs were $28,982 and $23,950 for the three months ended March 31, 2020 and March 31, 2019, respectively.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Gain or loss is recognized upon disposal of property and equipment, and the asset and related accumulated depreciation are removed from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred, while expenditures for addition and betterment are capitalized. Furniture and equipment are depreciated on the straight-line method and include the following categories:

 

Estimated Life        
Machinery and equipment     5-10 years  
Furniture, fixtures and computer equipment     5-7 years  
Vehicles     3-5 years  
Leasehold improvements     2-5 years  

 

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed following generally accepted accounting principles.

 

Depreciation expense during the three months ended March 31, 2020 and 2019, respectively was $11,361 and $10,729.

Stock-Based Compensation

Stock-Based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

Accounting for Derivatives

Accounting for Derivatives

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average series Binomial lattice option pricing models to value the derivative instruments at inception and on subsequent valuation dates.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2020, the balances reported for cash, contract receivables, cost in excess of billing, prepaid expenses, accounts payable, billing in excess of cost, and accrued expenses approximate the fair value because of their short maturities.

 

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

 

  Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. 

 

The following table presents certain investments and liabilities of the Company's financial assets measured and recorded at fair value on the Company's balance sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2020.

 

   Total   (Level 1)   (Level 2)   (Level 3) 
                 
Investment at fair value-securities  $4,400   $4,400   $      -   $      - 
Total Assets measured at fair value  $4,400   $4,400   $-   $- 
                     
   Total   (Level 1)   (Level 2)   (Level 3) 
                 
Derivative Liability  $9,109,600   $      -   $      -   $9,109,600 
Total liabilities measured at fair value  $9,109,600   $-   $-   $9,109,600 

 

The following is a reconciliation of the derivative liability for which level 3 inputs were used in determining the approximate fair value:

 

Balance as of January 1, 2020  $31,640,470 
Gain on conversion of debt and change in derivative liability   (22,530,870)
Balance as of March 31, 2020  $9,109,600 

 

For purpose of determining the fair market value of the derivative liability, the Company used Binomial lattice formula valuation model. The significant assumptions used in the Binomial lattice formula valuation of the derivative are as follows:

 

    3/31/2020
Risk free interest rate   0.05% - 2.43%
Stock volatility factor   0.54% - 207.0%
Weighted average expected option life   6 months -  5 years
Expected dividend yield   None
Segment Reporting

Segment Reporting

The Company's business currently operates in one segment based upon the Company's organizational structure and the way in which the operations are managed and evaluated.

Marketable Securities

Marketable Securities

The Company adopted ASU 2016-01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities." ASU 2016-01 requires investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purpose, and separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. It eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The Company has evaluated the potential impact this standard may have on the condensed consolidated financial statements and determined that it had a significant impact on the condensed consolidated financial statements. The Company accounts for its investment in Water Technologies International, Inc. as available-for-sale securities, and the unrealized gain on the available-for-sale securities is recognized in net income.

Licensing agreement

Licensing agreement

The Company analysed the licensing agreement using ASU 606 to determine the timing of revenue recognition. The licensing of the intellectual property (IP) is distinct from the non-license goods or services and has significant standalone functionality that provides a benefit or value. The functionality will not change during the license period due to the licensor's activities. Because the significant standalone functionality is delivered immediately, the revenue is generally recognized when the license is delivered.

Reclassification of Certain Expenses

Reclassification of Certain Expenses

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operation.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements 

Management reviewed currently issued pronouncements and does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Tables)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Schedule of loss per share anti-dilutive effect
   For the Three Months Ended
March 31,
 
   2020   2019 
Income (Loss) to common shareholders (Numerator)  $21,601,414   $(331,272)
           
Basic weighted average number of common shares outstanding (Denominator)   6,494,377    875,828 
           
Diluted weighted average number of common shares outstanding (Denominator)   100,433,377    875,828 
Schedule of loss per share is anti-dilutive and includes dilutive
    Anti-dilutive shares     Dilutive shares  
March 31, 2020            
             
Warrants shares     122,044       -  
Convertible debt shares     97,207,689       93,939,000  
Preferred shares     40,073,167       -  
                 
March 31, 2019                
                 
Warrants shares     125,456       -  
Convertible debt shares     4,051,573       -  
Preferred shares     40,639,649       -  
Schedule of estimated useful life

Estimated Life        
Machinery and equipment     5-10 years  
Furniture, fixtures and computer equipment     5-7 years  
Vehicles     3-5 years  
Leasehold improvements     2-5 years  
Schedule of fair value of financial instruments
  Total   (Level 1)   (Level 2)   (Level 3) 
                 
Investment at fair value-securities  $4,400   $4,400   $      -   $      - 
Total Assets measured at fair value  $4,400   $4,400   $-   $- 
Schedule of fair value of (liability) financial instruments
  Total   (Level 1)   (Level 2)   (Level 3) 
                 
Derivative Liability  $9,109,600   $      -   $      -   $9,109,600 
Total liabilities measured at fair value  $9,109,600   $-   $-   $9,109,600 
Schedule of reconciliation of the derivative liability for which level 3 inputs

Balance as of January 1, 2020  $31,640,470 
Gain on conversion of debt and change in derivative liability   (22,530,870)
Balance as of March 31, 2020  $9,109,600 

Schedule of fair market value of derivative liability assumptions
  3/31/2020
Risk free interest rate   0.05% - 2.43%
Stock volatility factor   0.54% - 207.0%
Weighted average expected option life   6 months -  5 years
Expected dividend yield   None
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.20.2
Restricted Stocks and Warrants (Tables)
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Schedule of warrant activity
  March 31, 2020 
       Weighted 
   Number   average 
   of   exercise 
   Warrants   price 
Outstanding - beginning of period   122,044   $500 
Granted   -   $- 
Exercised   -   $- 
Forfeited   -   $- 
Outstanding - end of period   122,044   $500 
Schedule of weighted average remaining contractual life of warrants outstanding
   March 31, 2020 
            Weighted 
            Average 
            Remaining 
Exercisable   Warrants   Warrants   Contractual 
Prices   Outstanding   Exercisable   Life (years) 
$500.00    122,044    122,044    1.37 
      122,044    122,044      
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Promissory Notes (Tables)
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Schedule of outstanding convertible promissory notes

Convertible Promissory Notes  $3,364,938 
Less current portion   1,891,613 
Total long-term liabilities  $1,473,325 
Schedule of maturities of long-term debt

Period Ending March 31,  Amount 
2021   1,891,613 
2022   1,411,050 
2023   - 
2024   62,275 
   $3,364,938 
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.20.2
Revenue from Contracts with Customers (Tables)
3 Months Ended
Mar. 31, 2020
Revenue from Contracts with Customers [Abstract]  
Schedule of disaggregation of revenue by type of good or service from contracts with customers
  Three Months Ended 
   March 31, 
   2020   2019 
Equipment Contracts  $763,157   $446,233 
Component Sales   318,074    263,259 
Services Sales   11,207    32,551 
   $1,092,438   $742,043 
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.20.2
Capital Leases (Tables)
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Schedule of maturities
Capital lease  $23,889 
Less current portion   9,088 
Total long-term liabilities  $14,801 

Schedule of long term maturities
Period Ending March 31,
2021   9,088 
2022   5,713 
   $14,801 
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.20.2
Organization and Line of Business (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
Organization and Line of Business (Textual)  
Revenue $ 1,092,438
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Accounting Policies [Abstract]    
Income (Loss) to common shareholders (Numerator) $ 21,601,414 $ (369,428)
Basic weighted average number of common shares outstanding (Denominator) 100,433,377 875,828
Diluted weighted average number of common shares outstanding (Denominator) 100,433,377 875,828
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details 1) - shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Preferred Stock    
Anti-dilutive shares 40,073,167 40,639,649
Dilutive shares
Convertible Debt [Member]    
Anti-dilutive shares 97,207,689 4,051,573
Dilutive shares 93,939,000
Warrant [Member]    
Anti-dilutive shares 122,044 125,456
Dilutive shares
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details 2)
3 Months Ended
Mar. 31, 2020
Machinery and equipment [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 5 years
Machinery and equipment [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 10 years
Furniture, fixtures and computer equipment [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 5 years
Furniture, fixtures and computer equipment [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 7 years
Vehicles [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 3 years
Vehicles [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 5 years
Leasehold improvements [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 2 years
Leasehold improvements [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated Life 5 years
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details 3)
Mar. 31, 2020
USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Investment at fair value-securities $ 4,400
Total Assets measured at fair value 4,400
Level 1 [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Investment at fair value-securities 4,400
Total Assets measured at fair value 4,400
Level 2 [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Investment at fair value-securities
Total Assets measured at fair value
Level 3 [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Investment at fair value-securities
Total Assets measured at fair value
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details 4) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Derivative Liability $ 9,109,600 $ 31,640,470
Total liabilities measured at fair value 9,109,600  
Level 1 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Derivative Liability  
Total liabilities measured at fair value  
Level 2 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Derivative Liability  
Total liabilities measured at fair value  
Level 3 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Derivative Liability 9,109,600  
Total liabilities measured at fair value $ 9,109,600  
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details 5)
3 Months Ended
Mar. 31, 2020
USD ($)
Accounting Policies [Abstract]  
Balance as of January 1, 2020 $ 31,640,470
Gain on conversion of debt and change in derivative liability (22,530,870)
Balance as of March 31, 2020 $ 9,109,600
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details 6) - Derivative [Member]
3 Months Ended
Mar. 31, 2020
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Expected dividend yield
Minimum [Member]  
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Risk free interest rate 0.05%
Stock volatility factor 0.54%
Weighted average expected option life 6 months
Maximum [Member]  
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Risk free interest rate 2.43%
Stock volatility factor 207.00%
Weighted average expected option life 5 years
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Polices (Details Textual) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Summary of Significant Accounting Polices (Textual)      
Issuance of common stock $ 64,042,000    
Allowance for doubtful accounts 0    
Contract receivable 327,334   $ 522,911
Total research and development costs 28,982 $ 23,950  
Depreciation expense $ 11,361 $ 10,729  
Derivative instrument 12 months    
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.20.2
Capital Stock (Details) - USD ($)
1 Months Ended 3 Months Ended
Oct. 25, 2019
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Apr. 23, 2019
Capital Stock (Textual)          
Common stock, shares authorized   16,000,000,000   16,000,000,000  
Common Stock [Member]          
Capital Stock (Textual)          
Common stock for settlement of convertible promissory notes   2,180,848 313,014    
Aggregate principal amount   $ 67,362 $ 284,973    
Interest amount   $ 10,385 $ 51,578    
Common stock issued   30,124      
Common stock issued for services, shares   622,181 116,539    
Common stock issued for services   $ 61,865 $ 279,229    
Fair value loss on settlement     40,500    
Description of convertible preferred stock terms   The Company issued 82,799 shares of common stock through a private placement as additional consideration for purchase of Series G preferred stock.      
Debt conversion amount     $ 514,404    
Description of reverse split One-for-two thousand (1 for 2,000) reverse stock split of its common stock (the "Reverse Split").        
Common Stock [Member] | Minimum [Member]          
Capital Stock (Textual)          
Conversion price   $ 0.025 $ 1.8    
Common stock, shares authorized         8,000,000,000
Common Stock [Member] | Maximum [Member]          
Capital Stock (Textual)          
Conversion price   $ 0.045 $ 3.60    
Common stock, shares authorized         16,000,000,000
Series C Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   1,000      
Preferred stockholder voting percentage, description   The Series C Preferred Stock entitles the holder to 51% of the total voting power of our stockholders.      
Preferred stock, shares outstanding   1,000      
Designated preferred stock   1,000      
Series C Preferred Stock [Member] | T. Riggs Eckelberry [Member]          
Capital Stock (Textual)          
Preferred stock, shares outstanding   1,000      
Series D One Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   38,500,000      
Preferred stock, shares issued   38,500,000   38,500,000  
Preferred stock, shares outstanding   38,500,000   38,500,000  
Designated preferred stock   50,000,000      
Description of convertible preferred stock terms   The Company has designated 50,000,000 shares of its preferred stock as Series D-1 Preferred Stock. Each share of Series D-1 Preferred Stock is convertible into 0.0005 shares of common stock. The Series D-1 Preferred Stock may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of our outstanding common stock. The holders of outstanding shares of Series D-1 Preferred Stock are not entitled to receive dividends, and do not have a liquidation preference. The Series D-1 Preferred Stock have no preemptive or subscription rights, and there is no redemption or sinking fund provisions applicable to the Series D-1 Preferred Stock. As of March 31, 2020, there were 38,500,000 shares of Series D-1 Preferred Stock issued and outstanding.      
Series E Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   1,537,213      
Preferred stock, shares issued   1,537,213   2,139,649  
Preferred stock, shares outstanding   1,537,213   2,139,649  
Designated preferred stock   4,000,000      
Conversion of shares   602,436      
Description of convertible preferred stock terms   (A) 0.05 shares of common stock and (B) the number of shares the holder would have received pursuant to the holder's subscription agreement if the preferred shares were priced based on the average closing sale price of three trading days prior to the date the holder requests a conversion, provided the lowest price for which an adjustment will be made is 50% of the purchase price paid by any purchaser of the Series E Preferred Stock. The Series E Preferred Stock may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of our outstanding common stock. The holders of outstanding shares of Series E Preferred Stock are not entitled to receive dividends, and do not have a liquidation preference. The Series E Preferred Stock have no preemptive or subscription rights, and there is no redemption or sinking fund provisions applicable to the Series E Preferred Stock. The Series E Preferred Stock does not have voting rights, except as required by law and with respect to certain protective provisions set forth in the Certificate of Designation of Series E Preferred Stock. As of December 31, 2019, there were 2,139,649 shares of Series E Preferred Stock issued and outstanding. During the period ended March 31, 2020, the Company issued 30,124 shares of common stock upon conversion of 602,436 Series E Preferred Stock.      
Series F Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   1,678      
Preferred stock, par value   $ 1,000      
Preferred stock, shares outstanding   1,678      
Designated preferred stock   6,000      
Dividend annual rate   8.00%      
Accrued dividends   $ 33,560      
Series G Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   430      
Preferred stock, par value   $ 1,000      
Preferred stock, shares outstanding   430      
Designated preferred stock   6,000      
Dividend annual rate   8.00%      
Accrued dividends   $ 9,740      
Description of convertible preferred stock terms   On February 21, 2020, 100 shares of Series G Preferred Stock were exchanged for Series K Preferred Stock.      
Series I Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   797      
Preferred stock, par value   $ 1,000      
Preferred stock, shares outstanding   797      
Designated preferred stock   4,000      
Dividend annual rate   8.00%      
Accrued dividends   $ 15,948      
Series J Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   349      
Preferred stock, par value   $ 1,000      
Preferred stock, shares issued   349   349  
Preferred stock, shares outstanding   349   349  
Designated preferred stock   100,000      
Description of convertible preferred stock terms   The Series J Preferred Stock may not be converted to common stock to the extent such conversion would cause the holder to beneficially own more than 4.99% of the Company's outstanding common stock.      
Series K Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   2,896      
Preferred stock, par value   $ 1,000      
Preferred stock, shares outstanding   2,896   2,001  
Designated preferred stock   4,000      
Dividend annual rate   8.00%      
Accrued dividends   $ 50,620      
Description of convertible preferred stock terms   The Company issued an aggregate of 895 shares of Series K Preferred Stock for an aggregate purchase price of $795,250. On February 21, 2020, an investor was issued 100 shares of Series K Preferred Stock in exchange for 100 shares of Series G Preferred Stock.      
Series L Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, shares issued   1,405      
Preferred stock, par value   $ 1,000      
Preferred stock, shares outstanding   1,405      
Designated preferred stock   100,000      
Benificially own outstanding common stock percentage   50.00%      
Common stock issued   875,238      
Conversion of shares   43      
Description of convertible preferred stock terms   The Company issued an aggregate of 875,238 shares of common stock upon conversion of 43 shares of Series L Preferred Stock. The Company also issued 448 shares of Series L Preferred Stock with the Series K Preferred Stock.      
Series M Preferred Stock [Member]          
Capital Stock (Textual)          
Preferred stock, par value   $ 25      
Preferred stock, shares issued   34,200   34,200  
Preferred stock, shares outstanding   34,200   34,200  
Designated preferred stock   800,000      
Dividend annual rate   10.00%      
Liquidation preference, per share   $ 25      
Description of convertible preferred stock terms   Series M Preferred Stock at a redemption price of $37.50 per share (150% of the stated value) plus any accrued but unpaid dividends.      
Accrued interest   $ 46,260      
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.20.2
Restricted Stocks and Warrants (Details) - Warrant [Member]
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Number of Warrants  
Outstanding - beginning of period | shares 122,044
Granted | shares
Exercised | shares
Forfeited | shares
Outstanding - end of period | shares 122,044
Weighted average exercise price  
Outstanding - beginning of period | $ / shares $ 500
Granted | $ / shares
Exercised | $ / shares
Forfeited | $ / shares
Outstanding - end of period | $ / shares $ 500
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.20.2
Restricted Stocks and Warrants (Details 1) - Warrant [Member]
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Warrants Outstanding 122,044
Warrants Exercisable 122,044
500.00 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercisable Prices | $ / shares $ 500.00
Warrants Outstanding 122,044
Warrants Exercisable 122,044
Weighted Average Remaining Contractual Life (years) 1 year 4 months 13 days
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.20.2
Restricted Stocks and Warrants (Details Textual) - USD ($)
12 Months Ended
Aug. 14, 2019
May 12, 2016
Dec. 31, 2019
Mar. 31, 2020
Restricted Stocks and Warrants (Textual)        
Issuance of shares     30,250  
Warrants outstanding       $ 0
Restricted Stock Grant Agreement [Member] | Chief Executive Officer [Member]        
Restricted Stocks and Warrants (Textual)        
Issuance of common stock, shares 109,214 109,214    
Restricted stock grant agreement, description The Company's common stock to Mr. Eckelberry provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company's quarterly or annual financial statements, the Company will issue up to an aggregate of 54,607 shares of its common stock; b) If the Company's consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC Reports, the Company will issue up to an aggregate of 54,607 shares of its common stock. The Company's common stock to Mr. Eckelberry provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company's quarterly or annual financial statements, the Company will issue up to an aggregate of 54,607 shares of its common stock; b) If the Company's consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC Reports, the Company will issue up to an aggregate of 54,607 shares of its common stock.    
Restricted Stock Grant Agreement [Member] | Employee Consultants and Restricted Stock Grant Agreements [Member]        
Restricted Stocks and Warrants (Textual)        
Issuance of common stock, shares 378,750 378,750    
Fair market value of stock grant, description The Grantees can elect to participate in the alternate vesting schedule for grants received at least two years prior to the date requested. On the first day of each calendar month, an aggregate dollar amount of restricted stock equal to an aggregate of 5% of the total dollar amount of the Company's common stock that traded during the prior calendar month, will vest, divided equally among all RSGAs and E&C RSGAs that have duly elected to participate in the alternate vesting schedule, with value based on the fair market value under the respective RSGAs and E&C RSGAs. The fair market value shall equal the average of the trailing ten (10) closing trade prices of the Company's common stock on the last ten (10) trading days of the month immediately prior to the date of determination as quoted on the public securities trading market on which the Company's common stock is then traded.      
Restricted stock grant agreement, description The Company's common stock to employees and consultants provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company's quarterly or annual financial statements, the Company will issue up to an aggregate of 189,375 shares of its common stock; b) If the Company's consolidated operating profit Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC Reports, the Company will issue up to an aggregate of 189,375 shares of its common stock. The Company's common stock to employees and consultants provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period as reported in the Company's quarterly or annual financial statements, the Company will issue up to an aggregate of 189,375 shares of its common stock; b) If the Company's consolidated operating profit Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC Reports, the Company will issue up to an aggregate of 189,375 shares of its common stock.    
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Promissory Notes (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Debt Disclosure [Abstract]    
Convertible Promissory Notes $ 3,364,938  
Less current portion 1,891,613 $ 2,879,325
Total long-term liabilities $ 1,473,325  
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Promissory Notes (Details 1)
Mar. 31, 2020
USD ($)
Maturities of long-term debt  
2021 $ 1,891,613
2022 1,411,050
2023
2024 62,275
Total $ 3,364,938
XML 50 R40.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Promissory Notes (Details Textual) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended
Mar. 13, 2019
Dec. 31, 2015
Mar. 31, 2020
Mar. 31, 2020
Sep. 30, 2019
Dec. 31, 2019
Jun. 28, 2018
Apr. 02, 2018
Convertible Promissory Notes (Textual)                
Convertible promissory notes     $ 1,473,325 $ 1,473,325   $ 552,975    
Net balance             $ 248,870  
Converted an aggregate principal amount         $ 6,523      
Derivative liability     9,109,600 9,109,600   $ 31,640,470    
Accrued interest         $ 4,727      
Investor amount $ 570,000              
Conversion into common stock         12,500      
Fair value loss on convertible debt         $ 16,250      
Convertible Promissory Notes [Member]                
Convertible Promissory Notes (Textual)                
Convertible promissory notes     $ 3,364,938 3,364,938        
Converted an aggregate principal amount       $ 19,500        
Notes bear interest     10.00%          
Number of shares converted into common stock       820,937        
Derivative liability     $ 430,896 $ 430,896        
Aggregate remaining amount     1,081,050 $ 1,081,050        
Conversion price per share of debt, description       50% of the lowest trade price on any trade day following issuance of the 2014-2015 Notes.        
Fair value loss on settlement       $ 10,385        
Convertible Promissory Notes [Member] | Minimum [Member]                
Convertible Promissory Notes (Textual)                
Conversion prices from lesser     4,200          
Convertible Promissory Notes [Member] | Maximum [Member]                
Convertible Promissory Notes (Textual)                
Conversion prices from lesser     $ 9,800          
Unsecured Convertible Notes Five [Member]                
Convertible Promissory Notes (Textual)                
Conversion price per share of debt, description     50% of the lesser of the lowest trading price twenty five (25) trading days prior to conversion.          
Unsecured Convertible Notes Four [Member]                
Convertible Promissory Notes (Textual)                
Reserved shares     2,630,769          
Aggregate remaining amount               $ 300,000
Description of debt instrument     The Company issued 1,229,200 shares of common stock upon conversion of principal in the amount of $42,712. As of March 31, 2020, the remaining balance of the Apr & May 2018 Notes was $423,669.          
Conversion price per share of debt, description     The Apr & May 2018 Notes bear interest at 10% per annum. The Apr & May 2018 Notes may be converted into shares of the Company's common stock at a variable conversion price of 50% of the lesser of the lowest trading price twenty five (25) trading days prior to conversion.          
Unsecured Convertible Notes One [Member]                
Convertible Promissory Notes (Textual)                
Debt instrument interest rate     10.00% 10.00%        
Aggregate remaining amount     $ 1,200,000 $ 1,200,000        
Conversion price per share of debt, description     50% of the lowest trade price on any trade day following issuance of the 2015-2016 Notes.          
OID Notes [Member]                
Convertible Promissory Notes (Textual)                
Debt instrument, maturity date     Dec. 31, 2017          
Aggregate remaining amount     $ 184,124 184,124        
Accrued interest     13,334 $ 13,334        
Conversion price     $ 30,620          
Conversion price per share of debt, description     After the amendment, the conversion price changed to the lesser of $5,600 per share, or b) fifty percent (50%) of the lowest trade price of common stock recorded since the original effective date of this note, or c) the lowest effective price per share granted to any person or entity after the effective date.          
OID Notes [Member] | Minimum [Member]                
Convertible Promissory Notes (Textual)                
Conversion price of debt     $ 1,400 $ 1,400        
OID Notes [Member] | Maximum [Member]                
Convertible Promissory Notes (Textual)                
Conversion price of debt     $ 5,600 $ 5,600        
Convertible Debt [Member]                
Convertible Promissory Notes (Textual)                
Aggregate remaining amount     $ 167,048 $ 167,048        
Description of debt instrument     Note has zero stated interest rate, and the conversion price shall be equal to 75% of the average three lowest last sale prices traded during the 25 trading days immediately prior to conversion. As of March 31, 2020, the remaining balance of the Dec 2015 Note was $167,048.          
Conversion price per share of debt, description     The Company issued 130,711 shares of common stock upon conversion of principal in the amount of $5,150. The remaining balance of the OID Notes as of March 31, 2020 was $62,275.          
Conversion of accounts payable into a convertible note   $ 432,048            
Percentage of average of lowest closing prices     75.00%          
Number of trading days previous to conversion     25 days          
Convertible Debt One [Member]                
Convertible Promissory Notes (Textual)                
Description of debt instrument     Note has zero stated interest rate, and the conversion price shall be equal to 75% of the average three lowest last sale prices traded during the 25 trading days immediately prior to conversion.          
Conversion of accounts payable into a convertible note     $ 430,896          
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.20.2
Revenue from Contracts with Customers (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenue from Contracts with Customers [Abstract]    
Equipment Contracts $ 763,157 $ 446,233
Component Sales 318,074 263,259
Services Sales 11,207 32,551
Total $ 1,092,438 $ 742,043
XML 52 R42.htm IDEA: XBRL DOCUMENT v3.20.2
Revenue from Contracts with Customers (Details Textual) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Revenue from Contracts with Customers (Textual)    
Contract assets $ 222,056 $ 26,287
Contract liability $ 232,444 $ 428,009
XML 53 R43.htm IDEA: XBRL DOCUMENT v3.20.2
Financial Assets (Details)
3 Months Ended
May 15, 2018
Mar. 31, 2020
USD ($)
TradingDays
$ / shares
Financial Assets (Textual)    
Fair value investment in Securities The Company received 4,000 shares of WTII preferred stock for the use of OriginClear, Inc. technology associated with their proprietary electro water separation system. The stock was valued at fair market value of $0.0075 for a price of $30,000 on the date of issuance. The preferred shares are convertible into 4,000,000 shares of common stock. The Company analysed the licensing agreement using ASU 606 to determine the timing of revenue recognition.  
Preferred shares fair value   $ 4,400
Convertible Note Receivable [Member]    
Financial Assets (Textual)    
Convertible note percentage   10.00%
Convertible note amount   $ 80,000
Convertible note price   65.00%
Conversion price per share | $ / shares   $ 0.0001
Number of trading days | TradingDays   10
Convertible note principal amount   $ 80,000
Convertible note accrued interest   $ 41,880
XML 54 R44.htm IDEA: XBRL DOCUMENT v3.20.2
Loans Payable (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Jun. 28, 2018
Loans Payable (Textual)      
Loan payable, net $ 366,577 $ 427,214  
Maturity date, description The loans bear interest at various rates to be repaid over a period of three (3) years at various maturity dates.    
Payments balance $ 165,172    
Principal amount $ 21,882    
Notes payable     $ 248,870
Secured Loans Payable [Member]      
Loans Payable (Textual)      
Description of debt instrument Short term loans with various lenders for capital expansion secured by the Company's assets in the amount of $1,749,970, which included finance cost of $624,810. The finance cost was fully amortized over the terms of the loans, which have various maturity dates ranging from October 2018 through February 2019. The term of the loans ranged from two months to six months.    
Promissory Note Payable [Member]      
Loans Payable (Textual)      
Description of debt instrument Promissory note on February 6, 2020 for the sum of $5,000. The note bears interest at 10% per annum, with a maturity date of February 6, 2021. Upon maturity the note and accrued interest is to be paid upon the maturity date. The funds were used for operating expenses.    
XML 55 R45.htm IDEA: XBRL DOCUMENT v3.20.2
Capital Leases (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Leases [Abstract]    
Capital lease $ 23,889  
Less current portion 9,088 $ 9,088
Total long-term liabilities $ 14,801 $ 17,073
XML 56 R46.htm IDEA: XBRL DOCUMENT v3.20.2
Capital Leases (Details 1)
Mar. 31, 2020
USD ($)
Period Ending March 31,  
2020 $ 9,088
2021 5,713
Total $ 14,801
XML 57 R47.htm IDEA: XBRL DOCUMENT v3.20.2
Capital Leases (Details Textual)
3 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
Capital Leases (Textual)  
Capital lease term 60 months
Lease price | $ / shares $ 1.00
Monthly payments for lease | $ $ 757
XML 58 R48.htm IDEA: XBRL DOCUMENT v3.20.2
Commitments and Contingencies (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
ft²
Feb. 28, 2019
USD ($)
Commitments and Contingencies (Textual)    
Warrant reserve $ 20,000  
Mckinney [Member]    
Commitments and Contingencies (Textual)    
Area of land | ft² 12,000  
Base rent $ 4,850  
Aggregate amount demanding monetary damages   $ 630,000
Services amount overpaid   $ 40,000
XML 59 R49.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events (Details) - USD ($)
1 Months Ended 2 Months Ended 9 Months Ended
Jul. 02, 2020
Jul. 02, 2020
Jul. 01, 2020
May 18, 2020
May 05, 2020
Jul. 22, 2020
Jul. 12, 2020
May 11, 2020
Apr. 30, 2020
Apr. 24, 2020
Jun. 30, 2020
Jun. 22, 2020
Sep. 30, 2019
Mar. 31, 2020
Subsequent Events (Textual)                            
Aggregate shares of common stock                         12,500  
Series M Preferred Stock [Member]                            
Subsequent Events (Textual)                            
Shares issued per share                           $ 25
Subsequent Event [Member] | PPP Loan [Member]                            
Subsequent Events (Textual)                            
Aggregate principal and interest amount         $ 345,000                  
Subsequent Event [Member] | Restricted Stock Grant Agreement [Member]                            
Subsequent Events (Textual)                            
Subsequent event, description The Company issued to Mr. Eckelberry an aggregate of 115,344 shares of common stock per qualifying alternate vesting schedule relating to his May 2016 Restricted Stock Grant Agreement.     The Company entered into Restricted Stock Grant Agreements (the "May RSGAs") with its Chief Executive Officer, T. Riggs Eckelberry, members of the Board, employees and consultants to create management incentives to improve the economic performance of the Company and to increase its value and stock price. All shares issuable under the May RSGAs are performance based shares and none have yet vested nor have any been issued. The May RSGAs provide for the issuance of up to an aggregate of 10,500,000 shares of the Company's common stock as follows: 2,000,000 to Mr. Eckelberry, 500,000 to each of the other three members of the Board, and an aggregate of 7,000,000 to employees and consultants provided certain milestones are met in certain stages; a) If the Company's consolidated gross revenue, calculated in accordance with generally accepted accounting principles, consistently applied, equals or exceeds $15,000,000 for the trailing twelve month period, the Company will issue up to an aggregate of 5,250,000 shares of its common stock; b) If the Company's consolidated operating profit (Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization), calculated in accordance with generally accepted accounting principles, equals or exceeds $1,500,000 for the trailing twelve month period as reported as reported in the Company's SEC Reports, the Company will issue up to an aggregate of 5,250,000 shares of its common stock. As the performance goals are achieved or if alternate vesting is qualified and selected, the shares shall become eligible for vesting and issuance.   A holder of Series L Preferred Stock converted an aggregate of 7.5 Series L shares into an aggregate of 126,738 shares, including make-good shares, of the Company's common stock. A holder of Series J Preferred Stock converted an aggregate of 2.5 Series J shares into an aggregate of 41,541 shares, including make-good shares, of the Company's common stock.              
Subsequent Event [Member] | Consultants and Two Employee [Member]                            
Subsequent Events (Textual)                            
Shares issued to consultants and one employee                     883,641      
Subsequent Event [Member] | Series L Preferred Stock [Member]                            
Subsequent Events (Textual)                            
Shares issued                   132        
Aggregate shares sold                   265        
Aggregate purchase price                   $ 264,517        
Subsequent Event [Member] | Series M Preferred Stock [Member]                            
Subsequent Events (Textual)                            
Aggregate shares sold               3,904            
Aggregate purchase price               $ 97,600            
Subsequent Event [Member] | Series O Preferred Stock [Member]                            
Subsequent Events (Textual)                            
Shares issued 55 55                        
Aggregate shares sold   110                        
Aggregate purchase price   $ 110,000                        
Forecast [Member]                            
Subsequent Events (Textual)                            
Shares issued                     295,141      
Forecast [Member] | Series M Preferred Stock [Member]                            
Subsequent Events (Textual)                            
Aggregate shares of common stock                 137,052          
Subsequent event, description     The Amended Series M COD amended the terms of the Company's Series M Preferred Stock, such that, the Series M Preferred Stock will not be convertible into common stock, and the Company may redeem outstanding shares of Series M Preferred Stock at any time at a redemption price of $37.50 per share (150% of the stated value of $25.00), plus any accrued but unpaid dividends.                      
Aggregate converted shares                 320          
Forecast [Member] | Series D One Preferred Stock [Member]                            
Subsequent Events (Textual)                            
Shares issued                     6,000,000      
Convertible Promissory Notes [Member] | Forecast [Member]                            
Subsequent Events (Textual)                            
Aggregate principal and interest amount                       $ 45,138    
Aggregate shares of common stock                       1,781,080    
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