10-Q

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, 2016

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

For the transition period from __________ to __________

Commission File Number: ________________

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.)

525 S. Hewitt St.

Los Angeles, CA 90013

 (Address of principal executive offices, Zip Code)

(323) 939-6645

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 13, 2016, there were 330,355,606 shares of common stock, par value $0.001, issued and outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 5.	Other Information	20
Item 6.	Exhibits	21
SIGNATURES		22

PART I - FINANCIAL INFORMATION

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

PART I - FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

ORIGINCLEAR, INC. AND SUBSIDIARIES

CONDENSED  CONSOLIDATED BALANCE SHEETS

	March 31, 2016			December 31, 2015
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	249,506		$	695,295
Contracts receivable, less allowance for doubtful accounts of $50,000 and $50,000 respectively		1,176,992			1,066,223
Cost in excess of billing		174,105			16,748
Other receivable		100,000			100,000
Work in progress		95,366			95,366
Prepaid expenses		30,049			30,477
TOTAL CURRENT ASSETS		1,826,018			2,004,109
NET PROPERTY AND EQUIPMENT		191,717			197,257
OTHER ASSETS
Other asset		19,538			19,538
Goodwill		487,413			487,447
Trademark		4,467			4,467
Security deposit		9,650			9,650
TOTAL OTHER ASSETS		521,068			521,102
TOTAL ASSETS	$	2,538,803		$	2,722,468
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable and other payable	$	472,555		$	604,393
Accrued expenses		556,158			487,734
Billing in excess of cost		552,818			503,718
Customer deposit		113,950			113,950
Warrant reserve		20,000			20,000
Deferred income		150,000			150,000
Derivative liabilities		7,122,416			9,317,475
Convertible promissory notes, net of discount of $532,308 and $161,863, respectively		4,049,759			4,278,315
Total Current Liabilities		13,037,656			15,475,585
SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value, 25,000,000 shares authorized
1,000 shares of Series A issued and outstanding, respectively		-			-
10,000 shares of Series B issued and outstanding, respectively		1			1
Common stock, $0.0001 par value, 2,500,000,000 shares authorized
288,905,273 and 232,588,828 shares issued and outstanding, respectively		28,890			23,258
Preferred treasury stock,1,000 and 0 shares outstanding, respectively		-			-
Additional paid in capital		47,214,087			46,307,448
Accumulated other comprehensive loss		(55	)		(47	)
Accumulated deficit		(57,741,776	)		(59,083,777	)
TOTAL SHAREHOLDERS' DEFICIT		(10,498,853	)		(12,753,117	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	2,538,803		$	2,722,468

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, 2016 AND 2015

(UNAUDITED)

	Three Months Ended
	March 31, 2016			March 31, 2015
Sales	$	1,467,750		$	47,570
Cost of Goods Sold		1,068,427			28,164
Gross Profit		399,323			19,406
Operating Expenses
Selling and marketing expenses		493,510			413,520
General and administrative expenses		686,846			557,618
Research and development		210,150			259,355
Depreciation and amortization expense		11,239			4,471
Total Operating Expenses		1,401,745			1,234,964
Loss from Operations		(1,002,422	)		(1,215,558	)
OTHER INCOME/(EXPENSES)
Fair value of discounted warrants		-			(149,807	)
Fair value of financing cost		(52,759	)		-
Gain on  net change in derivative liability		2,599,198			174,957
Commitment fee		-			(51,697	)
Interest expense		(202,016	)		(446,957	)
TOTAL OTHER INCOME/(EXPENSES)		2,344,423			(473,504	)
NET INCOME/(LOSS)	$	1,342,001		$	(1,689,062	)
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE	$	0.01		$	(0.02	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING,
BASIC AND DILUTED		257,202,339			106,642,676

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

2

ORIGINCLEAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

									Accumulated
	Preferred stock			Common stock				Additional Paid-in		Other Comprehensive			Accumulated
	Shares		Amount	Shares		Amount		Capital		loss			Deficit			Total
Balance at December 31, 2015	11,000	$	1	232,588,828	$	23,258	$	46,307,448	$	(47	)	$	(59,083,777	)	$	(12,753,117	)
Common stock issuance for conversion of debt	-		-	43,078,706		4,308		421,806		-			-			426,114
Common stock issued at fair value for services	-		-	13,237,739		1,324		292,656		-			-			293,980
Stock compensation cost	-		-	-		-		52,296		-			-			52,296
Beneficial conversion feature	-		-	-		-		16,771		-			-			16,771
Change in derivative liability - Preferred B shares	-		-	-		-		123,110		-			-			123,110
Accumulated comprehensive loss	-		-	-		-		-		(8	)		-			(8	)
Net income for the three months ended March 31, 2016	-		-	-		-		-		-			1,342,001			1,342,001
Balance at March 31, 2016 (unaudited)	11,000	$	1	288,905,273	$	28,890	$	47,214,087	$	(55	)	$	(57,741,776	)	$	(10,498,853	)

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

3

ORIGINCLEAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31, 2016			March 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)	$	1,342,001		$	(1,689,062	)
Adjustment to reconcile net income (loss) to net cash
used in operating activities
Depreciation & amortization		11,239			4,471
Common stock and warrants issued for services		293,980			337,395
Stock and warrant compensation expense		52,296			44,873
(Gain)Loss on  net  change in valuation of derivative liability		(2,599,198	)		(174,957	)
Debt discount and original issue discount  recognized as interest expense		120,816			371,073
Fair value of debt financing cost		52,759			-
Non cash commitment fee expense		-			51,696
Fair value of re-priced warrants		-			149,807
Changes in Assets and Liabilities
(Increase) Decrease in:
Contracts receivable		(110,769	)		(25,955	)
Cost in excess of billing		(157,357	)		-
Prepaid expenses		428			(138,067	)
Work in progress		-			(37,438	)
Other asset		42			-
Increase (Decrease) in:
Accounts payable		299,036			138,787
Accrued expenses		105,537			82,235
Billing in excess of cost		49,100			-
Deferred income		-			82,406
NET CASH USED IN OPERATING ACTIVITIES		(540,090	)		(802,736	)
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(5,699	)		(8,301	)
CASH USED IN INVESTING ACTIVITIES		(5,699	)		(8,301	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible promissory notes		100,000			945,000
Proceeds for issuance of common stock		-			146,181
NET CASH PROVIDED IN FINANCING ACTIVITIES		100,000			1,091,181
NET (DECREASE) INCREASE IN CASH		(445,789	)		280,144
CASH BEGINNING OF PERIOD		695,295			198,384
CASH END OF PERIOD	$	249,506		$	478,528
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	366		$	133
Taxes paid	$	-		$	-
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Conversion of accounts payable into a convertible note	$	430,896		$	-
Benefiical conversion feature on convertible note	$	16,771		$	-
Common stock issued for supplemental shares	$	-		$	51,697
Common stock issued for conversion of debt	$	426,114		$	400,607
Change in derivative liability on Series B preferred stock	$	123,110		$	400,607
Debt discount on issuance of convertible notes	$	474,490		$	-

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)

THREE MONTHS ENDED MARCH 31, 2016 

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of OriginClear, Inc. (the “Company”) (formerly OriginOil, Inc.) 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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.  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, 2015.

Going Concern

The accompanying 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, additional cash infusion. Management believes the existing shareholders, the prospective new investors and future sales will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue 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., (PWT) and OriginClear (HK) Company, Ltd. All material intercompany transactions have been eliminated upon consolidation of these entities.

Revenue Recognition

Equipment sales

We recognize revenue upon delivery of equipment, provided that evidence of an arrangement exists, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.  Title to the equipment is transferred to the customer once the last payment is received. We record revenue as goods are shipped, and the equipment has been fully accepted by the customer. Generally, we extend credit to our customers and do not require collateral.  We do not ship a product until we have a purchase agreement signed by the customer with a payment arrangement.  

Percentage of completion

Revenues and related costs on construction contracts are recognized using the “percentage of completion method” of accounting in accordance with ASC 605-35 – “Accounting for Performance of Construction-Type and Certain Production Type Contracts”. Under this method, contract revenues and related expenses are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs include direct material, direct labor, subcontract labor and any allocable indirect costs. 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 asset “Costs in excess of billings” represents revenues recognized in excess of amounts billed on contracts in progress. The liability “Billings in excess of costs” 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.

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.

5

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016   

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (Continued)

Contract Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers on a monthly basis. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The allowance for doubtful accounts was approximately $50,000 as of March 31, 2016 and December 31, 2015, respectively. The net contract receivable balance was $1,176,992 and $1,066,223 at March 31, 2016 and December 31, 2015, respectively, due to the acquisition of PWT.

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.

On September 29, 2015, the Company adopted and approved a new incentive stock option plan and reserved 8,000,000 shares of common stock at par value $0.0001 per share of the Corporation for issuance.

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, 2016, the balances reported for cash, prepaid expenses, accounts payable, and accrued expenses approximate the fair value because of their short maturities.

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

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

· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table presents certain 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, 2016:

	Total		(Level 1)		(Level 2)		(Level 3)
Derivative Liability	$	7,122,416	$	-	$	-	$	7,122,416
Total liabilities measured at fair value	$	7,122,416	$	-	$	-	$	7,122,416

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

Beginning balance as of January 1, 2016	$	9,317,475
Fair value of derivative liabilities issued		527,249
Gain on conversion of debt and change in derivative liability		(2,722,308	)
Ending balance as of March 31, 2016	$	7,122,416

6

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (Continued)

Loss per Share Calculations

Basic loss per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed 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. The Company’s diluted loss per share is the same as the basic loss per share for the three months ended March 31, 2016 and 2015, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

For the period ended March 31, 2016, the Company has excluded 74,373,123 stock options, 22,884,773 common stock purchase warrants outstanding, and $4,582,068 in convertible notes, which are convertible into shares of common stock, because their impact on the loss per share is anti-dilutive.

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. Significant estimates include estimates used to review the Company’s goodwill, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, derivative liabilities, debt beneficial conversion features, 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.

Principles of Consolidation

The Company adopted the guidance of ASC Topic 810 “Consolidation” of the FASB Accounting Standards Codification to determine whether and how to consolidate another entity.  Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.  Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.  The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

The consolidated financial statements include all accounts of the entities at March 31, 2016. 

		Date of incorporation or
Name of consolidated	State or other jurisdiction	formation (date of acquisition	Attributable interest
subsidiary or entity	of incorporation or organization	if applicable	at March 31, 2016
Origin Clear (HK) Ltd.	Hong Kong	December 31, 2014	94.80%
Progressive Water Treatment	Texas	October 1, 2015	100%

All inter-company balances and transactions have been eliminated.

Foreign Currency Matters

We adopted ASC Topic 830 – Foreign Currency Matters, which relates to translating the records of a foreign subsidiary from its functional currency into the reporting currency. The records are in conformity with generally accepted accounting principles (GAAP). The financial position and results of operations of the Company’s foreign subsidiary is measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiary has been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. During the period ended March 31, 2016, the foreign currency translation adjustments resulted in a loss of $8.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. 

7

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (Continued)

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

Recently Issued Accounting Pronouncements

In January 2016, FASB amended the guidance for recognition and measurement of financial assets and liabilities. These amendments address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The adoption of this guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption of certain provisions of this guidance is permitted as of the beginning of the fiscal year of adoption. Entities should apply these amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair value should be applied prospectively to equity investments that exist as of the date of adoption. The Company does not expect this guidance to have a significant impact on the results of operations, financial condition, or cash flows.

In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 816).” ASU 2016-09 simplifies several aspects of accounting for share-based compensation including the tax consequences, classification of awards as equity or liabilities, forfeitures and classification on the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the effects of adoption this ASU. The Company does not expect this guidance to have a significant impact on the results of operations, financial condition, or cash flows.

Management 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 unaudited condensed consolidated financial statements.

3. BUSINESS ACQUISITION

On October 1, 2015, the Company acquired PWT from Marc Stevens through the transfer of all issued and outstanding shares of PWT in exchange (the “Exchange”) for 10,000 shares of a new series of preferred stock, the Series B Preferred Stock, filed with the State of Nevada by the Company on October 1, 2015.

Each share of Series B Preferred Stock has a stated value of $150 per share and is convertible into shares of the Company’s common stock in three annual increments beginning 12 months from closing. The conversion price is subject to adjustment in the case of reverse splits, stock dividends, reclassifications and the like. In addition, the conversion price is subject to certain full ratchet anti-dilution protection. The Series B Preferred Stock is entitled to vote with the holders of the Company’s common stock on all corporate actions, including the election of the Company’s directors. The holders of the Series B Preferred Stock are entitled to cast one vote for each share of Series B Preferred Stock owed.

The acquisition was accounted for under ASC 805. PWT is engaged in providing water treatment systems and services for a wide variety of applications and component sales. The acquisition is designed to enhance our services in water treatment. PWT became a wholly-owned subsidiary of the Company.

Under the purchase method of accounting, the transactions were valued for accounting purposes at $1,500,000, which was the fair value of PWT at the time of acquisition. The assets and liabilities of PWT were recorded at their respective fair value as of the date of acquisition. Since, the Company determined there were no other separately identifiable intangible assets, any difference between the cost of the acquired entity and the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The acquisition date estimated fair value of the consideration transferred consisted of the following:

Convertible promissory note	$	1,500,000
Total purchase price	$	1,500,000
Tangible assets acquired	$	1,549,700
Liabilities assumed		(537,113	)
	$	1,012,587
Goodwill		487,413
Total purchase price	$	1,500,000

As of March 31, 2016, the Company has not identified any intangible assets other than goodwill. However, the above estimated fair value of the intangible assets of PWT is based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined.

8

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016

3. BUSINESS ACQUISITION (Continued)

Proforma results
The following tables set forth the unaudited pro forma results of the Company as if the acquisition of PWT had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented.

	Period Ended
	March 31, 2015
	(unaudited)
Total Revenues	$	868,227
Net Income (Loss)	$	(820,835	)
Basic and Diluted Net Earnings Per Common Share	$	(0.01	)

4. CAPITAL STOCK

Preferred Stock

As of March 31, 2016, the Company’s preferred stock consisted of Series A and Series B shares. There were 25,000,000 preferred shares authorized and 11,000 shares outstanding. The shares have a par value of $0.0001 per share. The Series A preferred stock provides for supermajority voting rights to the holder, and the Series B stock is convertible into shares of common stock to the holder.

Common Stock

During the three months ended March 31, 2016, the Company issued 38,505,536 shares of common stock for the settlement of convertible promissory notes in an aggregate principal in the amount of $314,000, plus interest in the amount of $37,114, based upon conversion prices per share ranging from $0.0085 to $0.0098.

During the three months ended March 31, 2016, the Company issued 13,237,739 shares of common stock for services at fair value of $293,980.

During the three months ended March 31, 2016, the Company issued 4,573,170 shares of common stock for the settlement of a convertible promissory note in an aggregate principal in the amount of $75,000, based upon a conversion price of $0.0164 per share.

9

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016

5. CONVERTIBLE PROMISSORY NOTES

On various dates the Company entered into unsecured convertible Notes (the “Convertible Promissory Notes” or “Notes”), that mature between six and nine months from the date of issuance and bear interest at 10% per annum. The Notes mature on various dates through December 31, 2016. The Notes may be converted into shares of the Company’s common stock at conversion prices ranging from the lesser of $0.06 to $0.14 (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 Notes.  The Notes include customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment.  In the event of default, the Notes shall become immediately due and payable at the mandatory default amount. The mandatory default amount is 150% of the Note amount and such mandatory default amount shall bear interest at 10% per annum.  In addition, for as long as the 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 Notes or such other convertible notes or a term was not similarly provided to the purchaser of the Notes or such other convertible notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the Notes and such other convertible notes. The conversion feature of the Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Notes. As of December 31, 2015, the outstanding principal balance was $2,535,000. During the three months ended March 31, 2016, the Company issued 28,034,948 shares of common stock upon conversion of $225,000 in aggregate principal, plus accrued interest of $37,114. As of March 31, 2016, the Notes had an aggregate remaining balance of $2,205,000. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $1,691 during the three months ended March 31, 2016. 

On February 24, 2015, the OID Notes with an aggregate remaining principle balance of $273,124, plus accrued interest of $13,334 were amended. The Notes are unsecured convertible promissory notes (the “OID Notes”), that included an original issue discount and one time interest, which has been fully amortized. The OID Notes were extended and matured on various dates through September 19, 2014. On each maturity date, each note was extended one year from its maturity date through September 19, 2015. On February 24, 2015, the Notes were amended and have a maturity date of December 31, 2015. The maturity date was subsequently extended to December 31, 2016. The Notes were analyzed under ASC 470 (Extinguishment & Modification of debt) to determine if there was a 10% change between the fair value of the embedded conversion option immediately before and after the modification or exchange. The change of the fair value of the conversion feature was greater than 10% of the carrying value of the debt. As a result, in accordance with ASC 470-50, the Company deemed the terms of the amendment to be substantially different and treated the convertible note as an extinguishment. The OID Notes were convertible into shares of the Company’s common stock at a conversion price initially of $0.4375. After the amendment the conversion price changed to the lesser of $0.08 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. On May 19, 2015, a holder of a note with a more favorable term converted a note at a price of $0.02, which became part of this note due to the reset provision mentioned above. 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. On March 31, 2016, the Company issued 10,470,588 shares of common stock upon partial conversion of principal in the amount of $89,000, leaving a remaining balance of $184,124. 

The Company entered into various unsecured convertible Notes (the “Convertible Promissory Notes” or “Notes”), for an aggregate amount of $1,900,000. As of March 31, 2016, the Company has received advances in the aggregate of $1,300,000. The notes matured between nine and twelve months from the date of issuance of each advance and bears interest at 10% per annum. The Notes were extended and mature on various dates ending on May 31, 2017. The Notes may be converted into shares of the Company’s common stock at conversion prices ranging from the lesser of $0.02 to $0.08 (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 Notes.  The Notes include customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment.  In the event of default, the Notes shall become immediately due and payable at the mandatory default amount. The mandatory default amount is 150% of the Note amount and such mandatory default amount shall bear interest at 10% per annum.  In addition, for as long as the 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 Notes or such other convertible notes or a term was not similarly provided to the purchaser of the Notes or such other convertible notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the Notes and such other convertible notes. 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. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $56,613 during the three months ended March 31, 2016. 

On June 30, 2015, the Company issued a convertible note in exchange for an 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 note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The 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 note and recognized as interest expense in the financial statements. On January 1, 2016, the note meet the criteria of a derivative and was accounted for under ASC 815. The note has a 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. On February 12, 2016, the Company issued 4,573,171 shares of commons stock upon conversion of $75,000 in principal, leaving a remaining balance of $357,048. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $53,266 during the three months ended March 31, 2016. 

On March 31, 2016, the Company issued a convertible note in exchange for an 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 note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The note has a 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 note did not meet the criteria of a derivative, and was accounted for as a beneficial conversion feature, which will be amortized over the life of the note and recognized as interest expense in the financial statements. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $9,245 during the three months ended March 31, 2016. 

10

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016 

6. DERIVATIVE LIABILITIES

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory note 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 derivative liability is adjusted periodically according to the stock price fluctuations. 

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows: 

Risk free interest rate	0.14% - 1.02%
Stock volatility factor	4.72% - 189.09%
Weighted average expected option life	6 months - 2 years
Expected dividend yield	None

The derivative liability recognized in the financial statements as of March 31, 2016 was $7,122,416.

7. OPTIONS AND WARRANTS

Options

The Board of Directors adopted the OriginClear, Inc. (formerly OriginOil, Inc.), 2009 Incentive Stock Option Plan (the “2009 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for Five Hundred Thousand (500,000) shares of Common Stock.   

On May 25, 2012, the Board of Directors adopted a new OriginOil, Inc., 2012 Incentive Stock Option Plan (the “2012 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for One Million (1,000,000) shares of Common Stock.  Options granted under these Plans may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (10th) anniversary from the effective date of grant. 

On June 14, 2013, the Board of Directors adopted a new OriginOil, Inc., 2013 Incentive Stock Option Plan (the “2013 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for Four Million (4,000,000) shares of Common Stock.  Options granted under the Plan may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall state the number of shares to which it pertains. The exercise price will be determined by the holders percentage owned as follows: If the holder owns more than 10% of the total combined voting power or value of all classes of stock of the Company, then the exercise price will be no less than 110% of the fair market value of the stock as of the date of grant; if the person is not a 10% holder, then the exercise price will be no less than 100% of the fair market value of the stock as of the date of grant. Notwithstanding any other provision of the 2013 Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (10th) anniversary from the date of grant. If the status of an employee terminates for any reason other than disability or death, then the Optionee or their representative shall have the right to exercise the portion of any Options which were exercisable as of the date of such termination, in whole or in part, not less than 30 days nor more than three (3) months after such termination. 

On October 2, 2015, the Board of Directors adopted a new OriginClear, Inc., 2015 Equity Incentive Stock Option Plan (the “2015 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for One Hundred Sixty Million (160,000,000) shares of Common Stock.  Options granted under these Plans may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the fifth (5th) anniversary from the effective date of grant. 

Options granted under these Plans may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (5th) anniversary from the effective date of grant. If the status of an employee terminates for any reason other than disability or death, then the Optionee or their representative shall have the right to exercise the portion of any Options which were exercisable as of the date of such termination, in whole or in part, not less than thirty (30) days nor more than three (3) months after such termination. 

With respect to Non-statutory Options granted to employees, directors or consultants, the Board or Committee may specify such period for exercise that the Option shall automatically terminate following the termination of employment or services as to shares covered by the Option as the Board or Committee deems reasonable and appropriate. 

11

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016 

7. OPTIONS AND WARRANTS (Continued)

During the three months ended March 31, 2016, the Company granted 1,000,000 incentive stock options, and recognized compensation costs of $52,296 based on the fair value of the options vested for the three months ended March 31, 2016.

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

	March 31, 2016
				Weighted
	Number			average
	of			exercise
	Options			price
Outstanding, beginning of period		119,404,644		$	0.43
Granted		1,000,000		$	0.02
Exercised		-			-
Forfeited/Expired		(1,200,000	)	$	0.04
Outstanding, end of period		119,204,644		$	0.05
Exercisable at the end of period		74,373,123		$	0.05
Weighted average fair value of options granted during the period				$	-

The weighted average remaining contractual life of options outstanding issued under the 2009 Plan, 2012 Plan, and 2013 Plan as of March 31, 2016, was as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	0.19 - 4.20		1,971,978		1,463,124		0.29 - 8.52
$	0.41 - 0.44		1,382,666		854,791		7.46
$	0.02 - 0.0375		115,850,000		72,059,375		4.52 - 5.00
			119,204,644		74,377,290

As of March 31, 2016, there was no intrinsic value with regards to the outstanding options. 

Warrants

During the three months ended March 31, 2016, the Company did not grant any warrants.

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

	March 31, 2016
				Weighted
				average
				exercise
	Options			price
Outstanding - January 1, 2015		23,297,108		$	0.21
Granted		-			-
Exercised		-			-
Forfeited		(412,335	)	$	0.43
Outstanding - September 30, 2015		22,884,773		$	0.20

At March 31, 2016, the weighted average remaining contractual life of warrants outstanding:

						Weighted
						Average
						Remaining
Exercisable		Warrants		Warrants		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	0.15 - 0.65		21,763,079		21,763,079	0.02- 2.20
$	0.25 - 1.75		841,692		841,692	1.07 - 2.47
$	0.90 - 6.90		280,002		280,002	0.08 - 6.63
			22,884,773		22,884,773

12

ORIGINCLEAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2016 

8. SUBSEQUENT EVENTS

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

Between April 18, 2016 and April 26, 2016 the Company sold, in a private placement, 17,500,000 shares of its common stock to accredited investors for an aggregate consideration of $175,000.

Between April 26, 2016, and May 12, 2016, the Company issued to consultants an aggregate of 15,572,573 shares of the Company’s common stock for services at a fair value of $316,873.

On April 28, 2016, holders of convertible promissory notes converted an aggregate principal and interest amount of $71,211 into an aggregate of 8,377,760 shares of the Company’s common stock.

On May 11, 2016, the Board of Directors of the Company voted to amend a prior agreement dated February 16, 2010 with T. Riggs Eckelberry, the Company’s chief executive officer. The original agreement entitled Mr. Eckelberry to a bonus of up a $40,000 per quarter (up to $160,000 annually) based on meeting certain objectives (the “Original Bonus Process”).  That agreement allowed Mr. Eckelberry to receive a bonus based on partial obtainment of those objectives as well.  On May 16, 2016, the Company and T. Riggs Eckelberry, entered into an agreement pursuant to which the Original Bonus Process was cancelled retroactively to January 1, 2016, cancelling any bonus award for the first Quarter 2016 and pursuant to which Mr. Eckelberry will receive a quarterly bonus of $40,000 (up to $160,000 annually) only if the Company achieved consolidated operating profit for the previous quarter.

On May 12, 2016, the Company entered into Restricted Stock Award Agreements with T. Riggs Eckelberry (“Eckelberry”), a consultant (“Consultant”) and employee of the Company (“Employee”), pursuant to which the Company granted 60,000,000 shares of common stock, par value $0.0001 per share to Eckelberry, 30,000,000 shares of common stock, par value $0.0001 per share to Consultant and 20,000,000 shares of common stock, par value $0.0001 per share to Employee.

On May 12, 2016, the Board approved the issuance of $60,000 in shares of the Company’s common stock to consultants for services in lieu of cash consideration. 

13

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

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

● business strategy;

● financial strategy;

● intellectual property;

● production;

● future operating results; and

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

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

Organizational History

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 recently moved into the commercialization phase of our business plan having been primarily involved in research, development and licensing activities. On May 1, 2016, we relocated our principal offices to 525 South Hewitt Street, Los Angeles, California 90013. 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)

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.

Overview of Business

OriginClear is a leading provider of water treatment solutions and the developer of a breakthrough water cleanup technology. Through its wholly owned subsidiaries, OriginClear provides systems and services to treat water in a wide range of industries, such as municipal, pharmaceutical, semiconductors, industrial, and oil & gas. To rapidly grow this segment of the business, we strategically acquire profitable and well-managed water treatment companies, which allow us to expand our global market presence and technical expertise. To enable a new era of clean and socially responsible water treatment solutions, we invented Electro Water Separation™, a breakthrough high-speed water cleanup technology using multi-stage electrochemistry, that we license worldwide to water treatment equipment manufacturers. Water is our most valuable resource, and the mission of The OriginClear Group™ is to improve the quality of water and help return it to its original and clear condition. 

14

The 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 could lead to enormous economies of scale through sharing of best practices, technologies, and customers. Again, Global Water Intelligence report, dated May 8, 2014 indicated, “…the market is incredibly fragmented…There needs to be some sort of aggregation of customers before it becomes a truly good business.” Therefore, OriginClear is assembling a group of such water treatment companies to create an opportunity for significant growth and increased company value for the stockholders.

Progressive Water Treatment

On October 1, 2015, Dallas-based Progressive Water Treatment, Inc. (“PWT”) became the first acquisition in The OriginClear Group. PWT is a fast-growing designer, builder and service provider for a wide range of industrial water treatment applications. PWT reported revenue of $4,831,788 in 2015, of which $773,699 was included in the consolidated financial statements for period ending December 31, 2015.

PWT’s Business

Since 1995, Progressive Water Treatment, Inc. of McKinney, Texas has been designing and manufacturing a complete line of water treatment systems for municipal, industrial and pure water applications. Known as an OEM (Original Equipment Manufacturer), PWT utilizes a wide range of technologies, including chemical injection, media filters, membrane, ion exchange and SCADA technology, in turnkey systems that it designs and builds. 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 Japan to Argentina to the Middle East. As OriginClear’s technology matures and enters commercial distribution channels, PWT intends to integrate it into applicable field situations, such as clarifying very oily, turbid water prior to processing with filters and membranes. OriginClear is currently in discussions for additional, accretive acquisitions of companies specializing in complementary markets and applications.

Technology Licensing

For its first eight years of existence, OriginClear focused uniquely on development and commercialization of its breakthrough Electro Water Separation™ technology. In 2015, the technology team became self-sufficient and the Company launched it as OriginClear Technologies, operating in parallel to the OriginClear Group. 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. A key element of this strategy is OriginClear (HK), OriginClear’s wholly-owned subsidiary in Hong Kong that manages Asia-Pacific market development, with a special focus on China sales and manufacturing. 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 OriginClear Group’s acquisition of profitable water treatment companies.

The Technology

OriginClear is the proprietary developer of Electro Water Separation™ (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. The EWS technology remains the most efficient 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, Electro Water Separation™, or 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. Even prior to this innovation, EWS, combined with an iSep ultrafiltration membrane, demonstrated up to a 99.9% removal of dispersed oil, 99.5% removal of suspended solids as well as successful treatment of chemical oxygen demand (COD), including specific contaminants such as ammonia, phosphorus and hydrogen sulfide. These results were presented at the International Water Conference in 2015. In 2016, OriginClear filed for a patent to protect the new AOx process and system configuration. Our technology integrates easily with other industry processes. We have begun to embed our technology into larger systems through licensing and joint ventures.

15

Strategic Partnership with Cleantech Incubator

On May 3, 2016, OriginClear announced that it had agreed to become a strategic partner of the Los Angeles Cleantech Incubator (LACI), a non-profit organization led by the City of Los Angeles and its Department of Water and Power (LADWP) that helps accelerate the commercialization of clean technologies. OriginClear has also relocated its headquarters to the incubator’s La Kretz Innovation Campus in downtown Los Angeles and intends to support the cleantech community by mentoring entrepreneurs in the newly-formed cluster of water technology startups. OriginClear is a longtime supporter of regional initiatives such as CleanTech Los Angeles, the California Business Alliance for a Clean Economy, and the Sustainable Business Council of Los Angeles. 

Critical Accounting Policies

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

Revenue Recognition

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

Use of Estimates

The preparation of financial statements in conformity with 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. Significant estimates include estimates used to review the Company’s goodwill, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, derivative liabilities, debt beneficial conversion features, 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, 2016, the amounts reported for cash, prepaid expenses, accounts payable and accrued expenses approximate the fair value because of their short maturities.

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the three months ended March 31, 2016, and no pronouncements were believed by management to have a material impact on our present or future financial statements.

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Results of Operation

Results of Operations for the three months ended March 31, 2016 compared to the three months ended March 31, 2015.

Three months of Progressive Water Treatment (PWT) operations were consolidated into the Company’s financial statements for the period ended March 31, 2016. Three months of PWT’s operations were not included in the Company’s financial statements for the period ended March 31, 2015. 

	Year Ended
	March 31, 2016			March 31, 2015
Revenue	$	1,467,750		$	47,570
Cost Of Goods Sold		1,068,427			28,164
Operating Expenses, Depreciation and Amortization		1,401,745			1,234,964
Loss from Operations before Other Income/(Expense)		(1,002,422	)		(1,215,558	)
Other Income/(Expense)		2,344,423			(473,504	)
Net Income/(Loss)	$	1,342,001		$	(1,689,062	)

Revenue and Cost of Sales

For the three months ended March 31, 2016, our revenue for the Company increased by 2,985% to $1,467,750 compared to $47,570 for the three months ended March 31, 2015. Cost of sales for the three months ended March 31, 2016, was $1,068,427 compared to $28,164 for the three months ended March 31, 2015. Revenue and cost of sales increased primarily due to PWT’s inclusion of three months operations.

Our gross profit increased by 1,958% to $399,323 compared to $19,406 for the three months ended March 31, 2016 and 2015, respectively. The gross profit increased primarily due to the inclusion of PWT’s revenue.

Selling and Marketing Expenses

For the three months ended March 31, 2016, we had selling and marketing expenses of $493,510, compared to $413,520 for the three months ended March 31, 2015. Selling and marketing expenses increased primarily due to the inclusion of PWT and the Company’s Hong Kong subsidiary three month activity.

General and Administrative Expenses

General and administrative expenses increased to $686,846, for the three months ended March 31, 2016, compared to $557,618 for the three months ended March 31, 2015. General and administrative expenses increased primarily due to the inclusion of PWT and the Company’s Hong Kong subsidiary three month activity, plus cost incurred for higher professional fees.

Research and Development Cost

Research and development cost for the three months ended March 31, 2016 and 2015, were $210,150 and $259,355, respectively. The decrease in research and development costs was primarily due to the decrease in salaries of $106,779, and a decrease in durable items of $60,399, with an overall increase in consultants and contractors expense of $55,130, and outside services of $71,461.

Other Income and (Expenses)

Other income and (expenses) for the three months ended March 31, 2016 and 2015, were $2,344,423 and $(473,504), respectively. The increase in income was the result of an increase in non-cash accounts associated with the fair value of the derivatives in the amount of $2,424,241 and interest expense of $244,941, which includes non-cash amortization of debt discount of $250,257, with an offset by a decrease in commitment fees of $51,697, and fair value of discounted warrants of $149,807.

Net Income/(Loss)

Our net income increased by $3,031,063 to $1,342,001 for the three months ended March 31, 2016, compared to a net loss of $1,689,062 for the three months ended March 31, 2015. The majority of the increase in net income was due primarily to an increase in other income in the amount of $2,817,927, which consisted of non-cash accounts associated with derivatives, an increase in gross profit in the amount of 379, 917, and an increase in total operating expenses of $166,781.  

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.

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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, additional cash infusion. We have obtained funds from our shareholders in April, 2016. Management believes the existing shareholders, the prospective new investors and future sales will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing.

At March 31, 2016 and December 31, 2015, we had cash of $249,506 and $695,295, respectively and working capital deficit of $11,211,638 and $13,471,476, respectively.  The decrease in working capital deficit was due primarily to a decrease in cash, prepaid expenses, accounts payable, derivative liabilities, and convertible promissory notes, with an increase in contracts receivable, cost in excess of billing, accrued expenses, and billing in excess of cost.

During the first three months of 2016, we raised an aggregate of $100,000 in an offering of unsecured convertible notes. 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 $540,090 for the three months ended March 31, 2016, compared to $802,736 for the prior period ended March 31, 2015. The decrease in cash used in operating activities was due to the net decrease in research and development, with an increase in general and administrative expenses.

Net cash flows used in investing activities was $5,699 for the three months ended March 31, 2016, as compared to $8,301 for the prior period ended March 31, 2015. The net decrease in cash used in investing activities was due to less equipment purchased in the current period.

Net cash flows provided by financing activities was $100,000 for the three months ended March 31, 2016, as compared to $1,091,181 for the prior period ended March 31, 2015. The decrease in cash provided by financing activities was due to a decrease in debt and equity financing. To date we have principally financed our operations through the sale of our common stock and the issuance of debt.

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

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

Additional Information

On May 11, 2016, the Board of Directors of the Company voted to amend a prior agreement dated February 16, 2010 with T. Riggs Eckelberry, the Company’s chief executive officer. The original agreement entitled Mr. Eckelberry to a bonus of up a $40,000 per quarter (up to $160,000 annually) based on meeting certain objectives (the “Original Bonus Process”).  That agreement allowed Mr. Eckelberry to receive a bonus based on partial obtainment of those objectives as well.  On May 16, 2016, the Company and T. Riggs Eckelberry, entered into an agreement pursuant to which the Original Bonus Process was cancelled retroactively to January 1, 2016, cancelling any bonus award for the first Quarter 2016 and pursuant to which Mr. Eckelberry will receive a quarterly bonus of $40,000 (up to $160,000 annually) only if the Company achieved consolidated operating profit for the previous quarter. In exchange for canceling the Original Bonus Process including the cancellation of any Q1, 2016 bonus, the agreement provides for an increase in Mr. Eckelberry’s salary by $100,000 per annum, effective May 16, 2016. The amendment to Mr. Eckelberry’s compensation has resulted in savings of up to $60,000 through May 15, 2016 and will continue to save the Company $5,000 per month beginning May 16, 2016 until consolidated operating profit is achieved.

On May 12, 2016, the Company entered into Restricted Stock Award Agreements with T. Riggs Eckelberry (“Eckelberry”), a consultant (“Consultant”) and an employee (“Employee”), pursuant to which the Company granted 60,000,000 shares of common stock, par value $0.0001 per share to Eckelberry, 30,000,000 shares of common stock, par value $0.0001 per share to Consultant and 20,000,000 shares of common stock, par value $0.0001 per share to Employee.

On May 12, 2016, the Company issued to consultants an aggregate of 14,000,000 shares of the Company’s common stock for services at a fair value of $284,200. 

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On May 12, 2016, the Board approved the issuance of $60,000 in shares of the Company’s common stock to consultants for services in lieu of cash consideration. 

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

Off-Balance Sheet Arrangements

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended ("Exchange Act"), the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer ("CEO/CFO") of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. The term "disclosure controls and procedures", as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As disclosed in our annual report filing for the year ended December 31, 2015, there was a material weakness in the Company's internal control over financial reporting due to the fact that the Company had a lack of segregation of duties and failure to implement accounting controls of acquired businesses. Based upon the evaluation of the disclosure controls and procedures at the end of the period covered by this report, the Company's CEO/CFO concluded that the Company's disclosure controls and procedures were not effective due to a material weakness in the Company's internal control over financial reporting.  

To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles.  Accordingly, management believes that the financial statements included in this quarterly report on Form 10-Q 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 first three months of 2016 that has materially affected, or are reasonably likely to materially affect, the Company’s 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 – OTHER INFORMATION

Item 1.  Legal Proceedings.

None.

Item 1A. Risk Factors.  

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

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

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

None.

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Item 6.  Exhibits.

Exhibit Number	Description of Exhibit
10.1	Letter Agreement between OriginClear, Inc. and T. Riggs Eckelberry
10.2	Form of Restricted Stock Award between OriginClear, Inc. and T. Riggs Eckelberry
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 by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema.*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase.*
101.LAB	XBRL Taxonomy Extension Label Linkbase.*
101.PRE	XBRL Extension Presentation Linkbase.*

* Attached as Exhibit 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statement of Operations, (iii) the Statement of Shareholders’ Equity, (iv) the Statement of Cash Flow, and (v) Notes to Financial Statements.

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SIGNATURES

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

	ORIGINCLEAR, INC.
Date: May 16, 2016	By:	/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-10.1

Exhibit 10.1

 

May 16, 2016

Riggs Eckelberry

2713 Willowhaven Dr.

La Crescenta CA 91214

Dear Riggs,

This letter serves to formalize discussions during the Board meeting held on May 11, 2016 and to outline your new approved compensation and to amend the Management by Objectives (“MBO”) process outlined in the original agreement of February 16, 2010 appended hereto as Exhibit 1.

The original agreement between OriginClear, Inc. (the “Company”) and you dated February 16, 2010 implemented a formal MBO process providing you up to $160,000 in additional annual compensation. This letter amendment hereby cancels that original agreement and imposes the sole condition for earning the $40,000 bonus per quarter shall now be that the Company achieves consolidated operating profit for the previous quarter with the first qualifying quarter being Q2 2016. There shall be no partial accomplishment. The bonus shall be paid in future periods in its entirety after each quarterly financial review process if consolidated operating profit, defined as Consolidated Operating Profit = Operating Revenue - Cost of Goods Sold - Operating Expenses - Depreciation & Amortization, is achieved, and not at all if it has not.

For canceling the up to $160,000 in additional annual compensation until consolidated operating profit is achieved and in consideration for your services to the Company, the Board has approved a $100,000 per annum increase in your salary, effective May 16, 2016. Additionally, the Q1, 2016 proposed MBO goal approved at the January 15, 2016 meeting of the Board is hereby canceled.

Upon your acceptance, this amendment will be appended to the agreement of February 16, 2010.

Sincerely,	Offer Accepted:
/s/ Anthony T. Fidaleo	/s/ T. Riggs Eckelberry
Anthony T. Fidaleo	T. Riggs Eckelberry
/s/ Jean-Louis Kindler
Jean-Louis Kindler
/s/ Byron Elton
Byron Elton

A leading provider of water treatment solutions.

525 S. Hewitt St., Los Angeles, CA 90013 | Phone: +1 (323) 939-6645 | Fax: +1 (323) 315-2300 | www.originclear.com

EXHIBIT 1

A leading provider of water treatment solutions.

525 S. Hewitt St., Los Angeles, CA 90013 | Phone: +1 (323) 939-6645 | Fax: +1 (323) 315-2300 | www.originclear.com

February16, 2010

RiggsEckelberry

Re: OfferofEmployment

DearRiggs,

Thisofferwillimplement aformalMBOprocesstoformalizethesimilararrangement begunin2009.

Theintentionofthisprocessistosetonekeycompany objective whichshallbemetin eachquarter. lf accomplished 100%, a bonus of $40,000 will be awarded. Lesser achievement will result in aproportionately smaller performance bonus.

Ateachquarterly Boardmeeting,youwillpresentyourobjective forthequarterandwill reportontheobjective setfor theprevious quarter. The Board will voteto on a percentage of attainment of the objective, and willapprove the objective forthe new quarter.The Board's decision is final.

Uponapproval,theCompany willpaythebonusbymultiplyingthebonussumbythe approvedpercentage ofattainment andpaytheresulting sum at thenext payperiod after approval.

Uponyouracceptance, thisofferwillbeappended toyourofferofJune4,2007.

Sincerely,	OfferAccepted:
	/s/ T. Riggs Eckelberry
Ivan Ivankovich	TRiggsEckelberry
Director

EX-10.2

Exhibit 10.2

ORIGINCLEAR, INC.

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (the “Agreement”) is made and entered into as of _________________, (the “Effective Date”) by and between OriginClear, Inc., a Nevada corporation (the “Company”), and the person named below (the “Grantee”).

Grantee:	T. Riggs Eckelberry
Address:
Total Number of Shares to Be Granted:	60,000,000
Fair Market Value of Shares on Effective Date:

1. Grant of Restricted Stock. The Board of Directors of the Company, hereby awards to the Grantee, effective as of the Effective Date, the number of shares (the “Shares”) of common stock, par value $0.0001 per share, set forth above as restricted stock (the “Restricted Stock”) on the following terms and conditions. As used in this Agreement, the term “Shares” shall mean shares of Restricted Stock granted under this Agreement, and all securities received (i) in replacement of the Shares, (ii) as a result of stock dividends or stock splits with respect to the Shares, (iii) in replacement of the Shares in a merger, recapitalization, reorganization or similar corporate transaction; and (iv) pursuant to an adjustment to the number of Shares issuable on any vesting date by virtue of Section 2.6 of this Agreement.

2. Eligibility for Vesting and Issuance. The Shares of Restricted Stock shall become eligible for vesting, and shall vest and be issued to the Grantee, upon the satisfaction of the conditions set forth in Section 2.1 and 2.2 of this Agreement. The Restricted Shares are forfeitable as set forth in Section 2.3 and Section 2.4 of this Agreement.

2.1 Schedule of Company Performance Goals. Shares of Restricted Stock shall become eligible for vesting (the “Eligible Restricted Shares”) for each Company Performance Goal attained as follows:

Restricted Shares	Company Performance Goals
50 %	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 filed with the U.S. Securities and Exchange Commission (“SEC Reports”)
50 %	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, consistently applied, equals or exceeds $1,500,000 for the trailing twelve-month period as reported in the Company’s SEC Reports.

2.2 Vesting and Issuance of Eligible Restricted Shares. After a Company Performance Goal is achieved, as described in Section 2.1, Eligible Restricted Shares may become vested (“Vested Shares”) and issued as follows:

(a) If the Company is acquired in a transaction in which the Company’s common stockholders, on a fully diluted basis, receive consideration in the form of cash and/or marketable securities traded on a national securities exchange or market in excess of $20,000,000 (a “Transaction”), then the Eligible Restricted Shares shall be vested and issued at the closing of the Transaction; provided, however, that if reasonably necessary to close the Transaction, the Grantee shall tender the Shares in exchange for the consideration offered to the Company’s common stockholders in such Transaction; or

(b) If the Company’s shares are uplisted to a national securities exchange (as defined below), then one year after the uplisting, the number of Eligible Restricted Shares that may be vested and issued shall equal, but not exceed the following amounts each three-month period:

(i) If the Company’s shares are subsequently delisted and quoted on the over-the-counter market, including the OTCQB, 1% of the shares of common stock outstanding as shown by the most recent SEC Report published by the Company, or

(ii) If the Company’s shares are traded on a national securities exchange, the greater of (b)(i) and the average weekly reported volume of trading in the common stock on a national securities exchange during the previous four calendar weeks,.

For the purpose of this Agreement, a “national securities exchange” shall mean the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the NYSE MKT or the NYSE and any successor to the foregoing.

Upon written agreement between the Company and the Grantee, the terms and conditions of vesting and issuance in this Section 2.2 may be modified in whole or in part. The Company and Grantee acknowledge that modifying the terms and conditions of vesting may result in adverse tax consequences and agree to seek counsel from their respective tax advisors before agreeing to any modifications.

2.3 Forfeiture. The Grantee shall forfeit all vesting rights for any Eligible Restricted Shares that have not vested within ten (10) years of the Effective Date.

2.4 Termination. The Grant of Shares of Restricted Stock hereunder will not confer upon the Grantee any right to continue in service with the Company or any of its subsidiaries or affiliates. If the Grantee ceases to provide any services to the Company or its affiliates as officer, director, employee or consultant, for any reason before the date that the Company Performance Goals have been met (the “Termination Date”), then the Shares of Restricted Stock associated with the unmet Company Performance Goals as of the date of such Termination Date shall immediately be forfeited as of the Termination Date. The Eligible Restricted Shares associated with any Company Performance Goals met prior to the Termination Date shall continue to vest in accordance with Sections 2.2 of this Agreement.

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2.5 Title to Shares. The exact spelling of the name(s) under which Grantee shall take title to the Shares is:

Grantee desires to take title to the Shares as follows:

[ ] Individual, as separate property

[ ] Husband and wife, as community property

[ ] Joint Tenants

2.6 Anti-Dilutive Adjustment to Number of Vested Shares. The Company agrees that if the Fair Market Value of the Company’s common stock on the date the Shares are vested (the “Vesting Date”) is less than the Fair Market Value of the Company’s common stock on the Effective Date, 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. 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; provided, that if the Company’s common stock is not then publicly trading or quoted, Fair Market Value shall be determined by the Company’s Board of Directors in good faith.

2.7 Restrictions on Resale of Shares. For the purpose of any transfer or sale of any Shares issuable under this Agreement whether under Rule 144 promulgated under the Securities Act, a registration statement under Form S-8 or any other basis, notwithstanding anything contained herein, the number of Shares that may be transferred or sold shall not exceed the following amounts within any three month period: (i) if the Company’s shares are quoted on the over-the-counter market, including the OTCQB, 1% of the shares of common stock outstanding as shown by the most recent SEC Report published by the Company, , or (ii) if the Company’s shares are traded on a national securities exchange, the greater of clause (i) and the average weekly reported volume of trading in the common stock on a national securities exchange during the four calendar weeks immediately preceding the transfer or sale,.

3. Representations and Warranties of Grantee. Grantee represents and warrants to the Company that:

3.1 Agrees to Terms of this Agreement. Grantee has received a copy of this Agreement, has read and understands the terms of this Agreement, and agrees to be bound by its terms and conditions.

3.2 Access to Information. Grantee has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Grantee reasonably considers important in making the decision to acquire the Shares, and Grantee has had ample opportunity to ask questions of the Company's representatives concerning such matters and this investment.
 

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3.3 Understanding of Risks. Grantee is fully aware of: (i) the highly speculative nature of the investment in the Shares; (ii) the financial hazards involved; (iii) the qualifications and backgrounds of the management of the Company; and (iv) the tax consequences of investment in the Shares. Grantee is capable of evaluating the merits and risks of this investment, has the ability to protect Grantee's own interests in this transaction and is financially capable of bearing a total loss of this investment. Grantee acknowledges that Grantee will consult with a tax advisor regarding the income tax consequences of the grant of the Shares, the vesting of the Shares and any other matters related to this Agreement. In order to comply with all applicable federal, state or local income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state or local payroll, withholding, income or other taxes, which are Grantee’s sole and absolute responsibility, are withheld or collected from Grantee.

4. Restrictions on Transfer. Until the Shares of Restricted Stock vest in accordance with the terms herein, the Grantee shall not transfer the Grantee’s rights to such Shares of Restricted Stock or any rights related thereto.  Any attempt to transfer unvested Shares of Restricted Stock or any rights related thereto, whether by transfer, pledge, hypothecation or otherwise and whether voluntary or involuntary, by operation of law or otherwise, shall not vest the transferee with any interest or right in or with respect to such Shares of Restricted Stock or such related rights.

5. Market Standoff Agreement. Grantee agrees in connection with any registration of the Company's securities that, upon the request of the Company or the underwriters managing any public offering of the Company's securities, Grantee shall not sell or otherwise dispose of any Eligible Restricted Shares without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) after the effective date of such registration requested by such underwriters and subject to all restrictions as the Company or the underwriters may specify. Grantee further agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing.

6. Rights as a Stockholder. Subject to the terms and conditions of this Agreement, Grantee shall have all of the rights of a stockholder of the Company with respect to the Shares after the Shares of Restricted Stock vest and until such time as Grantee disposes of the Shares.

7. Tax Consequences. GRANTEE UNDERSTANDS THAT GRANTEE MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF GRANTEE'S ACQUISITION OR DISPOSITION OF THE SHARES. GRANTEE REPRESENTS (i) THAT GRANTEE HAS CONSULTED WITH A TAX ADVISER THAT GRANTEE DEEMS ADVISABLE IN CONNECTION WITH THE ACQUISITION OR DISPOSITION OF THE SHARES AND (ii) THAT GRANTEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

8. Compliance with Laws and Regulations. The issuance and transfer of the Shares of Restricted Stock shall be subject to and conditioned upon compliance by the Company and Grantee with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company's common stock may be listed or quoted at the time of such issuance or transfer. Any certificate of Restricted Stock issued to the Grantee shall contain a legend stating that it is subject to transfer restrictions and other restrictions as the Company may deem reasonably advisable pursuant to the rules, regulations, and other requirements of the U.S. Securities and Exchange Commission, any stock exchange upon which such Restricted Stock is listed, or any applicable federal or state laws, and the Company may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

9. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Grantee and Grantee's heirs, executors, administrators, legal representatives, successors and assigns.

10. Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada as such laws are applied to agreements between Nevada residents entered into and to be performed entirely within Nevada, excluding that body of laws pertaining to conflict of laws. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision shall be enforced to the maximum extent possible and the other provisions shall remain fully effective and enforceable.

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11. Notices. Any notice required to be given or delivered to the Company shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Grantee shall be in writing and addressed to Grantee at the address indicated above or to such other address as Grantee may designate in writing from time to time to the Company. All notices shall be deemed effectively given upon personal delivery, (i) three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested), (ii) one (1) business day after its deposit with any return receipt express courier (prepaid), or (iii) one (1) business day after transmission by facsimile or email.

12. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

13. Headings; Counterparts. The captions and headings of this Agreement are included for ease of reference only and shall be disregarded in interpreting or construing this Agreement. All references herein to Sections shall refer to Sections of this Agreement. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement.

14. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersedes all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter of this Agreement. The terms of this Award Agreement cannot be modified except in writing and signed by each of the parties hereto.

15. Equitable Adjustments. If any Shares vest subsequent to any change in the number or character of the Company’s Common Stock (through any stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or otherwise) occurring after the Effective Date, you shall then receive upon such vesting the number and type of securities or other consideration which you would have received if such Shares had vested prior to the event changing the number or character of the Company’s Common Stock..

[Intentionally blank]

5 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized representative and Grantee has executed this Agreement as of the Effective Date.

OriginClear, Inc.	Grantee
By:
	(Signature)
(Please print name)	(Please print name)
Chief Executive Officer
(Please print title)

6 

Spouse Consent

The undersigned spouse of _______________________ (the “Grantee”) has read, understands, and hereby approves the Restricted Stock Grant Agreement between Carbon Sciences, Inc., a Nevada corporation (the “Company”) and Grantee (the “Agreement”). In consideration of the Company's granting my spouse the right to purchase the Shares as set forth in the Agreement, the undersigned hereby agrees to be irrevocably bound by the Agreement and further agrees that any community property interest shall similarly be bound by the Agreement. The undersigned hereby appoints Grantee as my attorney-in-fact with respect to any amendment or exercise of any rights under the Agreement.

Date:
	Signature of Grantee's Spouse
Print Name of Grantee's Spouse	(Please print name)
	Address:
(Please print title)

☐  Check this box if you do not have a spouse.

7

EX-31

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, 2016;

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

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

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

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

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

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

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

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

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

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

May 16, 2016	/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

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, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, T Riggs Eckelberry, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

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

May 16, 2016	/s/ T Riggs Eckelberry
	T Riggs Eckelberry
	Chief Executive Officer (Principal Executive Officer)
	and Acting Chief Financial Officer (Principal Accounting and Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 13, 2016
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, 2016
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		330,355,606

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2016	Dec. 31, 2015
CURRENT ASSETS
Cash	$ 249,506	$ 695,295
Contracts receivable, less allowance for doubtful accounts of $50,000 and $50,000 respectively	1,176,992	1,066,223
Cost in excess of billing	174,105	16,748
Other receivable	100,000	100,000
Work in progress	95,366	95,366
Prepaid expenses	30,049	30,477
TOTAL CURRENT ASSETS	1,826,018	2,004,109
NET PROPERTY AND EQUIPMENT	191,717	197,257
OTHER ASSETS
Other asset	19,538	19,538
Goodwill	487,413	487,447
Trademark	4,467	4,467
Security deposit	9,650	9,650
TOTAL OTHER ASSETS	521,068	521,102
TOTAL ASSETS	2,538,803	2,722,468
Current Liabilities
Accounts payable and other payable	472,555	604,393
Accrued expenses	556,158	487,734
Billing in excess of cost	552,818	503,718
Customer deposit	113,950	113,950
Warrant reserve	20,000	20,000
Deferred income	150,000	150,000
Derivative liabilities	7,122,416	9,317,475
Convertible promissory notes, net of discount of $532,308 and $161,863, respectively	4,049,759	4,278,315
Total Current Liabilities	13,037,656	15,475,585
SHAREHOLDERS' DEFICIT
Common stock, $0.0001 par value, 2,500,000,000 shares authorized 288,905,273 and 232,588,828 shares issued and outstanding, respectively	$ 28,890	$ 23,258
Preferred treasury stock,1000 and 0 shares outstanding, respectively
Additional paid in capital	$ 47,214,087	$ 46,307,448
Accumulated other comprehensive loss	(55)	(47)
Accumulated deficit	(57,741,776)	(59,083,777)
TOTAL SHAREHOLDERS' DEFICIT	(10,498,853)	(12,753,117)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$ 2,538,803	$ 2,722,468
Series A Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value, 25,000,000 shares authorized 1,000 shares of Series A issued and outstanding, respectively 10,000 shares of Series B issued and outstanding, respectively
Series B Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value, 25,000,000 shares authorized 1,000 shares of Series A issued and outstanding, respectively 10,000 shares of Series B issued and outstanding, respectively	$ 1	$ 1

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Allowance for doubtful accounts	$ 50,000	$ 50,000
Discount on debt	$ 532,308	$ 161,863
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	25,000,000	25,000,000
Common Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Common stock, shares authorized	2,500,000,000	2,500,000,000
Common stock, shares issued	288,905,273	232,588,828
Common stock, shares outstanding	288,905,273	232,588,828
Preferred treasury stock shares outstanding	1,000	0
Series A Preferred Stock
Preferred stock, shares issued	1,000	1,000
Preferred stock, shares outstanding	1,000	1,000
Series B Preferred Stock
Preferred stock, shares issued	10,000	10,000
Preferred stock, shares outstanding	10,000	10,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Sales	$ 1,467,750	$ 47,570
Cost of Goods Sold	1,068,427	28,164
Gross Profit	399,323	19,406
Operating Expenses
Selling and marketing expenses	493,510	413,520
General and administrative expenses	686,846	557,618
Research and development	210,150	259,355
Depreciation and amortization expense	11,239	4,471
Total Operating Expenses	1,401,745	1,234,964
Loss from Operations	$ (1,002,422)	(1,215,558)
OTHER INCOME/(EXPENSES)
Fair value of discounted warrants		$ (149,807)
Fair value of financing cost	$ (52,759)
Gain on net change in derivative liability	$ 2,599,198	$ 174,957
Commitment fee		(51,697)
Interest expense	$ (202,016)	(446,957)
TOTAL OTHER INCOME/(EXPENSES)	2,344,423	(473,504)
NET INCOME/(LOSS)	$ 1,342,001	$ (1,689,062)
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE	$ 0.01	$ (0.02)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED	257,202,339	106,642,676

XML

Condensed Consolidated Statement of Shareholders' Equity Deficit - 3 months ended Mar. 31, 2016 - USD ($)	Total	Common stock	Preferred stock [Member]	Additional Paid-in Capital	Accumulated Other Comprehensive loss	Accumulated deficit
Beginning balance at Dec. 31, 2015	$ (12,753,117)	$ 23,258	$ 1	$ 46,307,448	$ (47)	$ (59,083,777)
Beginning balance (shares) at Dec. 31, 2015		232,588,828	11,000
Common stock issuance for conversion of debt	426,114	$ 4,308		421,806
Common stock issuance for conversion of debt (shares)		43,078,706
Common stock issued at fair value for services	293,980	$ 1,324		292,656
Common stock issued at fair value for services (shares)		13,237,739
Stock compensation cost	52,296			52,296
Beneficial conversion feature	16,771			16,771
Change in derivative liability on Series B preferred stock	123,110			$ 123,110
Accumulated comprehensive loss	8				$ (8)
Net income for the three months ended March 31, 2016	1,342,001					$ 1,342,001
Ending balance at Mar. 31, 2016	$ (10,498,853)	$ 28,890	$ 1	$ 47,214,087	$ (55)	$ (57,741,776)
Ending balance (shares) at Mar. 31, 2016		288,905,273	11,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)	$ 1,342,001	$ (1,689,062)
Adjustment to reconcile net income (loss) to net cash
Depreciation & amortization	11,239	4,471
Common stock and warrants issued for services	293,980	337,395
Stock and warrant compensation expense	52,296	44,873
(Gain)Loss on net change in valuation of derivative liability	(2,599,198)	(174,957)
Debt discount and original issue discount recognized as interest expense	120,816	$ 371,073
Fair value of debt financing cost	$ 52,759
Non cash commitment fee expense		$ 51,696
Fair value of re-priced warrants		$ 149,807
Accumulated comprehensive loss	$ 8
(Increase) Decrease in:
Contracts receivable	(110,769)	$ (25,955)
Cost in excess of billing	(157,357)
Prepaid expenses	$ 428	$ (138,067)
Work in progress		$ (37,438)
Other asset	$ 34
Increase (Decrease) in:
Accounts payable	299,036	$ 138,787
Accrued expenses	105,537	$ 82,235
Billing in excess of cost	$ 49,100
Deferred income		$ 82,406
NET CASH USED IN OPERATING ACTIVITIES	$ (540,090)	(802,736)
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Purchase of fixed assets	(5,699)	(8,301)
CASH USED BY INVESTING ACTIVITIES	(5,699)	(8,301)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible promissory notes	$ 100,000	945,000
Proceeds for issuance of common stock		146,181
NET CASH PROVIDED BY FINANCING ACTIVITIES	$ 100,000	1,091,181
NET (DECREASE) INCREASE IN CASH	(445,789)	280,144
CASH BEGINNING OF PERIOD	695,295	198,384
CASH END OF PERIOD	249,506	478,528
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$ 366	$ 133
Taxes paid
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Conversion of accounts payable into a convertible note	$ 430,896
Benefiical conversion feature on convertible note	$ 16,771
Common stock issued for supplemental shares		$ 51,697
Common stock issuance for conversion of debt	$ 426,114	400,607
Change in derivative liability on Series B preferred stock	123,110	$ 400,607
Debt discount on issuance of convertible notes	$ 474,490

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2016

Basis of Presentation [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of OriginClear, Inc. (the “Company”) (formerly OriginOil, Inc.) 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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.  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, 2015.

Going Concern

The accompanying 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, additional cash infusion. Management believes the existing shareholders, the prospective new investors and future sales will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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., (PWT) and OriginClear (HK) Company, Ltd. All material intercompany transactions have been eliminated upon consolidation of these entities.

Revenue Recognition

Equipment sales

We recognize revenue upon delivery of equipment, provided that evidence of an arrangement exists, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.  Title to the equipment is transferred to the customer once the last payment is received. We record revenue as goods are shipped, and the equipment has been fully accepted by the customer. Generally, we extend credit to our customers and do not require collateral.  We do not ship a product until we have a purchase agreement signed by the customer with a payment arrangement.  

Percentage of completion

Revenues and related costs on construction contracts are recognized using the “percentage of completion method” of accounting in accordance with ASC 605-35 – “Accounting for Performance of Construction-Type and Certain Production Type Contracts”. Under this method, contract revenues and related expenses are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs include direct material, direct labor, subcontract labor and any allocable indirect costs. 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 asset “Costs in excess of billings” represents revenues recognized in excess of amounts billed on contracts in progress. The liability “Billings in excess of costs” 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.

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 Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers on a monthly basis. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The allowance for doubtful accounts was approximately $50,000 as of March 31, 2016 and December 31, 2015, respectively. The net contract receivable balance was $1,176,992 and $1,066,223 at March 31, 2016 and December 31, 2015, respectively, due to the acquisition of PWT.

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.

On September 29, 2015, the Company adopted and approved a new incentive stock option plan and reserved 8,000,000 shares of common stock at par value $0.0001 per share of the Corporation for issuance.

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, 2016, the balances reported for cash, prepaid expenses, accounts payable, and accrued expenses approximate the fair value because of their short maturities.

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

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

· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table presents certain 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, 2016:

	Total		(Level 1)		(Level 2)		(Level 3)
Derivative Liability	$	7,122,416	$	-	$	-	$	7,122,416
Total liabilities measured at fair value	$	7,122,416	$	-	$	-	$	7,122,416

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

Beginning balance as of January 1, 2016	$	9,317,475
Fair value of derivative liabilities issued		527,249
Gain on conversion of debt and change in derivative liability		(2,722,308	)
Ending balance as of March 31, 2016	$	7,122,416

Loss per Share Calculations

Basic loss per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed 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. The Company’s diluted loss per share is the same as the basic loss per share for the three months ended March 31, 2016 and 2015, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

For the period ended March 31, 2016, the Company has excluded 74,373,123 stock options, 22,884,773 common stock purchase warrants outstanding, and $4,582,068 in convertible notes, which are convertible into shares of common stock, because their impact on the loss per share is anti-dilutive.

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. Significant estimates include estimates used to review the Company’s goodwill, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, derivative liabilities, debt beneficial conversion features, 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.

Principles of Consolidation

The Company adopted the guidance of ASC Topic 810 “Consolidation” of the FASB Accounting Standards Codification to determine whether and how to consolidate another entity.  Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.  Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.  The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

The consolidated financial statements include all accounts of the entities at March 31, 2016. 

		Date of incorporation or
Name of consolidated	State or other jurisdiction	formation (date of acquisition	Attributable interest
subsidiary or entity	of incorporation or organization	if applicable	at March 31, 2016
Origin Clear (HK) Ltd.	Hong Kong	December 31, 2014	94.80%
Progressive Water Treatment	Texas	October 1, 2015	100%

All inter-company balances and transactions have been eliminated.

Foreign Currency Matters

We adopted ASC Topic 830 – Foreign Currency Matters, which relates to translating the records of a foreign subsidiary from its functional currency into the reporting currency. The records are in conformity with generally accepted accounting principles (GAAP). The financial position and results of operations of the Company’s foreign subsidiary is measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiary has been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. During the period ended March 31, 2016, the foreign currency translation adjustments resulted in a loss of $8.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Recently Issued Accounting Pronouncements

Management has reviewed recently issued accounting pronouncements and has adopted the following;

On August 27, 2014, the Company adopted the amendment to ASU 2014-15 on Presentation of Financial Statements Going Concern (Subtopic 205-40). The amendment provides for guidance to reduce diversity in the timing and content of footnote disclosures. The amendment requires management to assess the Company’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The Company has to define the term of substantial doubt, which has to be evaluated every reporting period including interim periods. Management has to provide principles for considering the mitigating effect of its plan, and disclose when substantial doubt is alleviated as well as when it is not alleviated. The Company is required to assess managements plan for a period of one year after the financial statements are issued (or available to be issued). The amendment is effective for annual periods ending after December 15, 2016. Early adoption is permitted. The Company does not believe the accounting standards currently adopted will have a material effect on the accompanying condensed financial statements.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

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Business Acquisition

3 Months Ended

Mar. 31, 2016

Business Acquisition [Abstract]

BUSINESS ACQUISTION

3. BUSINESS ACQUISITION

On October 1, 2015, the Company acquired PWT from Marc Stevens through the transfer of all issued and outstanding shares of PWT in exchange (the “Exchange”) for 10,000 shares of a new series of preferred stock, the Series B Preferred Stock, filed with the State of Nevada by the Company on October 1, 2015.

Each share of Series B Preferred Stock has a stated value of $150 per share and is convertible into shares of the Company’s common stock in three annual increments beginning 12 months from closing. The conversion price is subject to adjustment in the case of reverse splits, stock dividends, reclassifications and the like. In addition, the conversion price is subject to certain full ratchet anti-dilution protection. The Series B Preferred Stock is entitled to vote with the holders of the Company’s common stock on all corporate actions, including the election of the Company’s directors. The holders of the Series B Preferred Stock are entitled to cast one vote for each share of Series B Preferred Stock owed. This brief description of the Certificate of Designation is only a summary of the material terms and is qualified in its entirety by reference to the full text of the form of the Certificate of Designation as attached to this Current Report on as Exhibit 3.8.

The acquisition was accounted for under ASC 805. PWT is engaged in providing water treatment systems and services for a wide variety of applications and component sales. The acquisition is designed to enhance our services in water treatment. PWT became a wholly-owned subsidiary of the Company.

Under the purchase method of accounting, the transactions were valued for accounting purposes at $1,500,000, which was the fair value of PWT at the time of acquisition. The assets and liabilities of PWT were recorded at their respective fair value as of the date of acquisition. Since, the Company determined there were no other separately identifiable intangible assets, any difference between the cost of the acquired entity and the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The acquisition date estimated fair value of the consideration transferred consisted of the following:

Convertible promissory note	$	1,500,000
Total purchase price	$	1,500,000
Tangible assets acquired	$	1,549,700
Liabilities assumed		(537,113	)
	$	1,012,587
Goodwill		487,413
Total purchase price	$	1,500,000

As of March 31, 2016, the Company has not identified any intangible assets other than goodwill. However, the above estimated fair value of the intangible assets of PWT is based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined.

Proforma results
The following tables set forth the unaudited pro forma results of the Company as if the acquisition of PWT had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented.

	Period Ended		Period Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Total Revenues	$	1,467,750	$	868,227
Net Income (Loss)	$	1,342,001	$	(820,835	)
Basic and Diluted Net Earnings Per Common Share	$	0.01	$	0.01

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Capital Stock

3 Months Ended

Mar. 31, 2016

Capital Stock [Abstract]

CAPITAL STOCK

4. CAPITAL STOCK

Preferred Stock

As of March 31, 2016, the Company’s preferred stock consisted of Series A and Series B shares. There were 25,000,000 preferred shares authorized and 11,000 shares outstanding. The shares have a par value of $0.0001 per share. The Series A preferred stock provides for supermajority voting rights to the holder, and the Series B stock is convertible into shares of common stock to the holder.

Common Stock

During the three months ended March 31, 2016, the Company issued 38,505,536 shares of common stock for the settlement of convertible promissory notes in an aggregate principal in the amount of $314,000, plus interest in the amount of $37,114, based upon conversion prices per share ranging from $0.0085 to $0.0098.

During the three months ended March 31, 2016, the Company issued 13,237,739 shares of common stock for services at fair value of $293,980.

During the three months ended March 31, 2016, the Company issued 4,573,170 shares of common stock for the settlement of a convertible promissory note in an aggregate principal in the amount of $75,000, based upon a conversion price of $0.0164 per share.

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Convertible Promissory Notes

3 Months Ended

Mar. 31, 2016

Convertible Promissory Notes [Abstract]

CONVERTIBLE PROMISSORY NOTES

5. CONVERTIBLE PROMISSORY NOTES

On various dates the Company entered into unsecured convertible Notes (the “Convertible Promissory Notes” or “Notes”), that mature between six and nine months from the date of issuance and bear interest at 10% per annum. The Notes mature on various dates through December 31, 2016. The Notes may be converted into shares of the Company’s common stock at conversion prices ranging from the lesser of $0.06 to $0.14 (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 Notes.  The Notes include customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment.  In the event of default, the Notes shall become immediately due and payable at the mandatory default amount. The mandatory default amount is 150% of the Note amount and such mandatory default amount shall bear interest at 10% per annum.  In addition, for as long as the 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 Notes or such other convertible notes or a term was not similarly provided to the purchaser of the Notes or such other convertible notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the Notes and such other convertible notes. The conversion feature of the Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Notes. As of December 31, 2015, the outstanding principal balance was $2,535,000. During the three months ended March 31, 2016, the Company issued 28,034,948 shares of common stock upon conversion of $225,000 in aggregate principal, plus accrued interest of $37,114. As of March 31, 2016, the Notes had an aggregate remaining balance of $2,205,000. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $1,691 during the three months ended March 31, 2016. 

On February 24, 2015, the OID Notes with an aggregate remaining principle balance of $273,124, plus accrued interest of $13,334 were amended. The Notes are unsecured convertible promissory notes (the “OID Notes”), that included an original issue discount and one time interest, which has been fully amortized. The OID Notes were extended and matured on various dates through September 19, 2014. On each maturity date, each note was extended one year from its maturity date through September 19, 2015. On February 24, 2015, the Notes were amended and have a maturity date of December 31, 2015. The maturity date was subsequently extended to December 31, 2016. The Notes were analyzed under ASC 470 (Extinguishment & Modification of debt) to determine if there was a 10% change between the fair value of the embedded conversion option immediately before and after the modification or exchange. The change of the fair value of the conversion feature was greater than 10% of the carrying value of the debt. As a result, in accordance with ASC 470-50, the Company deemed the terms of the amendment to be substantially different and treated the convertible note as an extinguishment. The OID Notes were convertible into shares of the Company’s common stock at a conversion price initially of $0.4375. After the amendment the conversion price changed to the lesser of $0.08 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. On May 19, 2015, a holder of a note with a more favorable term converted a note at a price of $0.02, which became part of this note due to the reset provision mentioned above. 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. On March 31, 2016, the Company issued 10,470,588 shares of common stock upon partial conversion of principal in the amount of $89,000, leaving a remaining balance of $184,124. 

The Company entered into various unsecured convertible Notes (the “Convertible Promissory Notes” or “Notes”), for an aggregate amount of $1,900,000. As of March 31, 2016, the Company has received advances in the aggregate of $1,300,000. The notes matured between nine and twelve months from the date of issuance of each advance and bears interest at 10% per annum. The Notes were extended and mature on various dates ending on May 31, 2017. The Notes may be converted into shares of the Company’s common stock at conversion prices ranging from the lesser of $0.02 to $0.08 (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 Notes.  The Notes include customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment.  In the event of default, the Notes shall become immediately due and payable at the mandatory default amount. The mandatory default amount is 150% of the Note amount and such mandatory default amount shall bear interest at 10% per annum.  In addition, for as long as the 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 Notes or such other convertible notes or a term was not similarly provided to the purchaser of the Notes or such other convertible notes, then such more favorable or additional term shall, at the purchaser’s option, become part of the Notes and such other convertible notes. 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. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $56,613 during the three months ended March 31, 2016. 

On June 30, 2015, the Company issued a convertible note in exchange for an 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 note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The 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 note and recognized as interest expense in the financial statements. On January 1, 2016, the note meet the criteria of a derivative and was accounted for under ASC 815. The note has a 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. On February 12, 2016, the Company issued 4,573,171 shares of commons stock upon conversion of $75,000 in principal, leaving a remaining balance of $357,048. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $53,266 during the three months ended March 31, 2016. 

On March 31, 2016, the Company issued a convertible note in exchange for an 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 note was accounted for under ASC 470, whereby, a beneficial conversion feature was recorded at time of issuance. The note has a 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 note did not meet the criteria of a derivative, and was accounted for as a beneficial conversion feature, which will be amortized over the life of the note and recognized as interest expense in the financial statements. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $9,245 during the three months ended March 31, 2016.

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Derivative Liabilities

3 Months Ended

Mar. 31, 2016

Derivative Liabilities [Abstract]

DERIVATIVE LIABILITIES

6. DERIVATIVE LIABILITIES

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory note 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 derivative liability is adjusted periodically according to the stock price fluctuations. 

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows: 

Risk free interest rate	0.14% -  1.02%
Stock volatility factor	4.72% - 189.09%
Weighted average expected option life	6 months - 2 years
Expected dividend yield	None

The derivative liability recognized in the financial statements as of March 31, 2016 was $7,122,416.

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Options and Warrants

3 Months Ended

Mar. 31, 2016

Options and Warrants [Abstract]

OPTIONS AND WARRANTS

7. OPTIONS AND WARRANTS

Options

The Board of Directors adopted the OriginClear, Inc. (formerly OriginOil, Inc.), 2009 Incentive Stock Option Plan (the “2009 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for Five Hundred Thousand (500,000) shares of Common Stock.   

On May 25, 2012, the Board of Directors adopted a new OriginOil, Inc., 2012 Incentive Stock Option Plan (the “2012 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for One Million (1,000,000) shares of Common Stock.  Options granted under these Plans may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (10th) anniversary from the effective date of grant. 

On June 14, 2013, the Board of Directors adopted a new OriginOil, Inc., 2013 Incentive Stock Option Plan (the “2013 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for Four Million (4,000,000) shares of Common Stock.  Options granted under the Plan may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall state the number of shares to which it pertains. The exercise price will be determined by the holders percentage owned as follows: If the holder owns more than 10% of the total combined voting power or value of all classes of stock of the Company, then the exercise price will be no less than 110% of the fair market value of the stock as of the date of grant; if the person is not a 10% holder, then the exercise price will be no less than 100% of the fair market value of the stock as of the date of grant. Notwithstanding any other provision of the 2013 Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (10th) anniversary from the date of grant. If the status of an employee terminates for any reason other than disability or death, then the Optionee or their representative shall have the right to exercise the portion of any Options which were exercisable as of the date of such termination, in whole or in part, not less than 30 days nor more than three (3) months after such termination. 

On October 2, 2015, the Board of Directors adopted a new OriginClear, Inc., 2015 Equity Incentive Stock Option Plan (the “2015 Plan”) for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of options for One Hundred Sixty Million (160,000,000) shares of Common Stock.  Options granted under these Plans may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the fifth (5th) anniversary from the effective date of grant. 

Options granted under these Plans may be either incentive options or nonqualified options and shall be administered by the Company's Board.  Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. Notwithstanding any other provision of the Plan or of any option agreement, each Option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (5th) anniversary from the effective date of grant. If the status of an employee terminates for any reason other than disability or death, then the Optionee or their representative shall have the right to exercise the portion of any Options which were exercisable as of the date of such termination, in whole or in part, not less than thirty (30) days nor more than three (3) months after such termination. 

With respect to Non-statutory Options granted to employees, directors or consultants, the Board or Committee may specify such period for exercise that the Option shall automatically terminate following the termination of employment or services as to shares covered by the Option as the Board or Committee deems reasonable and appropriate.

During the three months ended March 31, 2016, the Company granted 1,000,000 incentive stock options, and recognized compensation costs of $52,296 based on the fair value of the options vested for the three months ended March 31, 2016.

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

	March 31, 2016
				Weighted
	Number			average
	of			exercise
	Options			price
Outstanding, beginning of period		119,404,644		$	0.43
Granted		1,000,000		$	0.02
Exercised		-			-
Forfeited/Expired		(1,200,000	)	$	0.04
Outstanding, end of period		119,204,644		$	0.05
Exercisable at the end of period		74,373,123		$	0.05
Weighted average fair value of options granted during the period				$	-

The weighted average remaining contractual life of options outstanding issued under the 2009 Plan, 2012 Plan, and 2013 Plan as of March 31, 2016, was as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	0.19 - 4.20		1,971,978		1,458,957		0.29 - 8.52
$	0.41 - 0.44		1,382,666		854,791		7.46
$	0.02 - 0.0375		115,850,000		72,059,375		4.52 - 5.00
			119,204,644		74,373,123

As of March 31, 2016, there was no intrinsic value with regards to the outstanding options. 

Warrants

During the three months ended March 31, 2016, the Company did not grant any warrants.

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

	March 31, 2016
				Weighted
				average
				exercise
	Options			price
Outstanding - January 1, 2015		23,297,108		$	0.21
Granted		-			-
Exercised		-			-
Forfeited		(412,335	)	$	0.43
Outstanding - September 30, 2015		22,884,773		$	0.20

At March 31, 2016, the weighted average remaining contractual life of warrants outstanding:

						Weighted
						Average
						Remaining
Exercisable		Warrants		Warrants		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	0.15 - 0.65		21,763,079		21,763,079	0.02- 2.20
$	0.25 - 1.75		841,692		841,692	1.07 - 2.47
$	0.90 - 6.90		280,002		280,002	0.08 - 6.63
			22,884,773		22,884,773

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

8. SUBSEQUENT EVENTS

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

Between April 18, 2016 and April 26, 2016 the Company sold, in a private placement, 17,500,000 shares of its common stock to accredited investors for an aggregate consideration of $175,000.

Between April 26, 2016, and May 12, 2016, the Company issued to consultants an aggregate of 15,572,573 shares of the Company’s common stock for services at a fair value of $316,873.

On April 28, 2016, holders of convertible promissory notes converted an aggregate principal and interest amount of $71,211 into an aggregate of 8,377,760 shares of the Company’s common stock.

On May 11, 2016, the Board of Directors of the Company voted to amend a prior agreement dated February 16, 2010 with T. Riggs Eckelberry, the Company’s chief executive officer. The original agreement entitled Mr. Eckelberry to a bonus of up a $40,000 per quarter (up to $160,000 annually) based on meeting certain objectives (the “Original Bonus Process”).  That agreement allowed Mr. Eckelberry to receive a bonus based on partial obtainment of those objectives as well.  On May 16, 2016, the Company and T. Riggs Eckelberry, entered into an agreement pursuant to which the Original Bonus Process was cancelled retroactively to January 1, 2016, cancelling any bonus award for the first Quarter 2016 and pursuant to which Mr. Eckelberry will receive a quarterly bonus of $40,000 (up to $160,000 annually) only if the Company achieved consolidated operating profit for the previous quarter.

On May 12, 2016, the Company entered into Restricted Stock Award Agreements with T. Riggs Eckelberry (“Eckelberry”), a consultant (“Consultant”) and employee of the Company (“Employee”), pursuant to which the Company granted 60,000,000 shares of common stock, par value $0.0001 per share to Eckelberry, 30,000,000 shares of common stock, par value $0.0001 per share to Consultant and 20,000,000 shares of common stock, par value $0.0001 per share to Employee.

On May 12, 2016, the Board approved the issuance of $60,000 in shares of the Company’s common stock to consultants for services in lieu of cash consideration.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Summary of Significant 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., (PWT) and OriginClear (HK) Company, Ltd. All material intercompany transactions have been eliminated upon consolidation of these entities.

Revenue Recognition

Revenue Recognition

Equipment sales

We recognize revenue upon delivery of equipment, provided that evidence of an arrangement exists, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.  Title to the equipment is transferred to the customer once the last payment is received. We record revenue as goods are shipped, and the equipment has been fully accepted by the customer. Generally, we extend credit to our customers and do not require collateral.  We do not ship a product until we have a purchase agreement signed by the customer with a payment arrangement.  

Percentage of completion

Revenues and related costs on construction contracts are recognized using the “percentage of completion method” of accounting in accordance with ASC 605-35 – “Accounting for Performance of Construction-Type and Certain Production Type Contracts”. Under this method, contract revenues and related expenses are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs include direct material, direct labor, subcontract labor and any allocable indirect costs. 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 asset “Costs in excess of billings” represents revenues recognized in excess of amounts billed on contracts in progress. The liability “Billings in excess of costs” 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.

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 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 was approximately $50,000 as of March 31, 2016 and December 31, 2015, respectively. The net contract receivable balance was $1,176,992 and $1,066,223 at March 31, 2016 and December 31, 2015, respectively, due to the acquisition of PWT.

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.

On September 29, 2015, the Company adopted and approved a new incentive stock option plan and reserved 8,000,000 shares of common stock at par value $0.0001 per share of the Corporation for issuance.

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, 2016, the balances reported for cash, prepaid expenses, accounts payable, and accrued expenses approximate the fair value because of their short maturities.

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

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

· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table presents certain 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, 2016:

	Total		(Level 1)		(Level 2)		(Level 3)
Derivative Liability	$	7,122,416	$	-	$	-	$	7,122,416
Total liabilities measured at fair value	$	7,122,416	$	-	$	-	$	7,122,416

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

Beginning balance as of January 1, 2016	$	9,317,475
Fair value of derivative liabilities issued		527,249
Gain on conversion of debt and change in derivative liability		(2,722,308	)
Ending balance as of March 31, 2016	$	7,122,416

Loss per Share Calculations

Loss per Share Calculations

Basic loss per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed 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. The Company’s diluted loss per share is the same as the basic loss per share for the three months ended March 31, 2016 and 2015, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

For the period ended March 31, 2016, the Company has excluded 74,373,123 stock options, 22,884,773 common stock purchase warrants outstanding, and $4,582,068 in convertible notes, which are convertible into shares of common stock, because their impact on the loss per share is anti-dilutive.

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. Significant estimates include estimates used to review the Company’s goodwill, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, derivative liabilities, debt beneficial conversion features, 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.

Principles of Consolidation

Principles of Consolidation

The Company adopted the guidance of ASC Topic 810 “Consolidation” of the FASB Accounting Standards Codification to determine whether and how to consolidate another entity.  Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.  Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.  The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

The consolidated financial statements include all accounts of the entities at March 31, 2016. 

		Date of incorporation or
Name of consolidated	State or other jurisdiction	formation (date of acquisition	Attributable interest
subsidiary or entity	of incorporation or organization	if applicable	at March 31, 2016
Origin Clear (HK) Ltd.	Hong Kong	December 31, 2014	94.80%
Progressive Water Treatment	Texas	October 1, 2015	100%

All inter-company balances and transactions have been eliminated.

Foreign Currency Matters

Foreign Currency Matters

We adopted ASC Topic 830 – Foreign Currency Matters, which relates to translating the records of a foreign subsidiary from its functional currency into the reporting currency. The records are in conformity with generally accepted accounting principles (GAAP). The financial position and results of operations of the Company’s foreign subsidiary is measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiary has been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. During the period ended March 31, 2016, the foreign currency translation adjustments resulted in a loss of $8.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

Management has reviewed recently issued accounting pronouncements and has adopted the following;

On August 27, 2014, the Company adopted the amendment to ASU 2014-15 on Presentation of Financial Statements Going Concern (Subtopic 205-40). The amendment provides for guidance to reduce diversity in the timing and content of footnote disclosures. The amendment requires management to assess the Company’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The Company has to define the term of substantial doubt, which has to be evaluated every reporting period including interim periods. Management has to provide principles for considering the mitigating effect of its plan, and disclose when substantial doubt is alleviated as well as when it is not alleviated. The Company is required to assess managements plan for a period of one year after the financial statements are issued (or available to be issued). The amendment is effective for annual periods ending after December 15, 2016. Early adoption is permitted. The Company does not believe the accounting standards currently adopted will have a material effect on the accompanying condensed financial statements.

Segment Reporting

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Summary of Significant Accounting Policies [Abstract]

Schedule of fair value of financial instruments

	Total		(Level 1)		(Level 2)		(Level 3)
Derivative Liability	$	7,122,416	$	-	$	-	$	7,122,416
Total liabilities measured at fair value	$	7,122,416	$	-	$	-	$	7,122,416

Schedule of reconciliation of the derivative liability for which Level 3 inputs

Beginning balance as of January 1, 2016	$	9,317,475
Fair value of derivative liabilities issued		527,249
Gain on conversion of debt and change in derivative liability		(2,722,308	)
Ending balance as of March 31, 2016	$	7,122,416

Schedule of consolidated financial statements entity

		Date of incorporation or
Name of consolidated	State or other jurisdiction	formation (date of acquisition	Attributable interest
subsidiary or entity	of incorporation or organization	if applicable	at March 31, 2016
Origin Clear (HK) Ltd.	Hong Kong	December 31, 2014	94.80%
Progressive Water Treatment	Texas	October 1, 2015	100%

XML

Business Acquisition (Tables)

3 Months Ended

Mar. 31, 2016

Business Acquisition [Abstract]

Schedule of business acquisitions

Convertible promissory note	$	1,500,000
Total purchase price	$	1,500,000
Tangible assets acquired	$	1,549,700
Liabilities assumed		(537,113	)
	$	1,012,587
Goodwill		487,413
Total purchase price	$	1,500,000

Schedule of pro forma results

	Period Ended		Period Ended
	March 31, 2016		March 31, 2015
	(unaudited)		(unaudited)
Total Revenues	$	1,467,750	$	868,227
Net Income (Loss)	$	1,342,001	$	(820,835	)
Basic and Diluted Net Earnings Per Common Share	$	0.01	$	0.01

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Derivative Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Liabilities [Abstract]

Schedule of derivative liabilities at fair value

Risk free interest rate	0.14% -  1.02%
Stock volatility factor	4.72% - 189.09%
Weighted average expected option life	6 months - 2 years
Expected dividend yield	None

XML

Options and Warrants (Tables)

3 Months Ended

Mar. 31, 2016

Options and Warrants [Abstract]

Schedule of company's stock option activity and related information

	March 31, 2016
				Weighted
	Number			average
	of			exercise
	Options			price
Outstanding, beginning of period		119,404,644		$	0.43
Granted		1,000,000		$	0.02
Exercised		-			-
Forfeited/Expired		(1,200,000	)	$	0.04
Outstanding, end of period		119,204,644		$	0.05
Exercisable at the end of period		74,373,123		$	0.05
Weighted average fair value of options granted during the period				$	-

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

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	0.19 - 4.20		1,971,978		1,458,957		0.29 - 8.52
$	0.41 - 0.44		1,382,666		854,791		7.46
$	0.02 - 0.0375		115,850,000		72,059,375		4.52 - 5.00
			119,204,644		74,373,123

Schedule of company's warrant activity and related information

	March 31, 2016
				Weighted
				average
				exercise
	Options			price
Outstanding - January 1, 2015		23,297,108		$	0.21
Granted		-			-
Exercised		-			-
Forfeited		(412,335	)	$	0.43
Outstanding - September 30, 2015		22,884,773		$	0.20

Schedule of weighted average remaining contractual life of warrants outstanding

						Weighted
						Average
						Remaining
Exercisable		Warrants		Warrants		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	0.15 - 0.65		21,763,079		21,763,079	0.02- 2.20
$	0.25 - 1.75		841,692		841,692	1.07 - 2.47
$	0.90 - 6.90		280,002		280,002	0.08 - 6.63
			22,884,773		22,884,773

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Summary of Significant Accounting Policies (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability	$ 7,122,416
Total liabilities measured at fair value	$ 7,122,416
(Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability
Total liabilities measured at fair value
(Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability
Total liabilities measured at fair value
(Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability	$ 7,122,416	$ 9,317,475
Total liabilities measured at fair value	$ 7,122,416

XML

Summary of Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Gain on conversion of debt and change in derivative liability	$ (2,599,198)	$ (174,957)
Ending balance as of March 31, 2016	7,122,416
Level 3 [Member]
Fair Value, Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Beginning balance as of January 1, 2016	9,317,475
Fair value of derivative liabilities issued	527,249
Gain on conversion of debt and change in derivative liability	(2,722,308)
Ending balance as of March 31, 2016	$ 7,122,416

XML

Summary of Significant Accounting Policies (Details 2)	3 Months Ended
	Mar. 31, 2016
Origin Clear (HK) Ltd. [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Entity Incorporation, State Country Name	Hong Kong
Entity Incorporation, Date of Incorporation	Dec. 31, 2014
Attributable interest at March 31, 2016	94.80%
Progressive Water Treatment [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Entity Incorporation, State Country Name	Texas
Entity Incorporation, Date of Incorporation	Oct. 01, 2015
Attributable interest at March 31, 2016	100.00%

XML

Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Sep. 29, 2015
Summary Of Significant Accounting Policies (Textual)
Antidilutive securities excluded from computation of earnings per share	4,582,068
Foreign currency translation adjustments loss	$ 8
Entity voting percent	50.00%
Common Stock, capital shares reserved for future issuance			8,000,000
Common stock par value	$ 0.0001	$ 0.0001	$ 0.0001
Net contracts receivable	$ 1,176,992	$ 1,066,223
Allowance for doubtful accounts	$ 50,000	$ 50,000
Warrant [Member]
Summary Of Significant Accounting Policies (Textual)
Antidilutive securities excluded from computation of earnings per share	22,884,773
Stock Option [Member]
Summary Of Significant Accounting Policies (Textual)
Antidilutive securities excluded from computation of earnings per share	74,373,123

XML

Business Acquisition (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Business Acquisition [Abstract]
Convertible promissory note	$ (1,500,000)
Total purchase price	1,500,000
Tangible assets acquired	1,549,700
Liabilities assumed	(537,113)
Total	1,012,587
Goodwill	487,413	$ 487,447
Total purchase price	$ 1,500,000

XML

Business Acquisition (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Business Acquisition [Abstract]
Total Revenues	$ 1,467,750	$ 868,227
Net Income (Loss)	$ 1,342,001	$ (820,835)
Basic and Diluted Net Earnings Per Common Share	$ 0.01	$ 0.01

XML

Business Acquisition (Details Textual) - USD ($)	Oct. 01, 2015	Mar. 31, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Preferred stock, par value		$ 0.0001	$ 0.0001
Purchase price		$ 1,500,000
Series B Preferred Stock [Member]
Business Acquisition [Line Items]
Preferred stock issued during period of acquisition, shares	10,000
Preferred stock, par value	$ 150

XML

Capital Stock (Details) - USD ($)	1 Months Ended	3 Months Ended
	Nov. 03, 2015	Mar. 31, 2016	Dec. 31, 2015	Oct. 01, 2015	Jul. 31, 2015
us-gaap_ClassOfStockLineItems
Preferred stock, shares authorized		25,000,000	25,000,000
Preferred stock, par value		$ 0.0001	$ 0.0001
Aggregate principal amount		$ 314,000
Interest amount		37,114
Common stock issued at fair value for services	$ 184,391	$ 293,980
Common stock issued at fair value for services (shares)	5,957,988
Maximum [Member]
us-gaap_ClassOfStockLineItems
Conversion price		$ 0.052
Minimum [Member]
us-gaap_ClassOfStockLineItems
Conversion price		$ 0.02
Series A Preferred Stock [Member]
us-gaap_ClassOfStockLineItems
Preferred stock, shares outstanding		1,000	1,000
Preferred stock, shares issued		1,000	1,000
Series B Preferred Stock [Member]
us-gaap_ClassOfStockLineItems
Preferred stock, shares outstanding		10,000	10,000
Preferred stock, shares issued		10,000	10,000
Conversion price					$ 0.03
Preferred stock, par value				$ 150
Common Stock [Member]
us-gaap_ClassOfStockLineItems
Common stock issuance for conversion of debt (shares)		43,078,706
Aggregate principal amount		$ 75,000
Common stock issued at fair value for services		$ 1,324
Common stock issued at fair value for services (shares)		13,237,739
Common Stock [Member] | Maximum [Member]
us-gaap_ClassOfStockLineItems
Conversion price		$ 0.0098
Common Stock [Member] | Minimum [Member]
us-gaap_ClassOfStockLineItems
Conversion price		$ 0.0085
Preferred stock [Member]
us-gaap_ClassOfStockLineItems
Common stock issuance for conversion of debt (shares)
Common stock issued at fair value for services
Common stock issued at fair value for services (shares)
Preferred stock [Member] | Series A Preferred Stock [Member]
us-gaap_ClassOfStockLineItems
Preferred stock, shares authorized		25,000,000
Preferred stock, shares outstanding		11,000
Preferred stock, par value		$ 0.0001
Preferred stock [Member] | Series B Preferred Stock [Member]
us-gaap_ClassOfStockLineItems
Preferred stock, shares authorized		25,000,000
Preferred stock, shares outstanding		11,000
Preferred stock, par value		$ 0.0001
Common Stock One [Member]
us-gaap_ClassOfStockLineItems
Common stock issuance for conversion of debt (shares)		38,505,536
Common stock issued at fair value for services		$ 293,980
Common stock issued at fair value for services (shares)		13,237,739
Common Stock Two [Member]
us-gaap_ClassOfStockLineItems
Conversion price		$ 0.0164
Common stock issuance for conversion of debt (shares)		4,573,170

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Convertible Promissory Notes (Details) - USD ($)		1 Months Ended		3 Months Ended
	Feb. 12, 2016	Feb. 24, 2015	Apr. 30, 2014	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	May. 19, 2015
Short-term Debt [Line Items]
Debt instrument outstanding amount						$ 2,535,000
Converted an aggregate principal amount				$ 426,114	$ 400,607
Derivative reclassified from equity				$ (93,380)
Amended Balance Description				On February 24, 2015, the OID Notes with an aggregate remaining principle balance of $273,124, plus accrued interest of $13,334 were amended.
Maximum [Member]
Short-term Debt [Line Items]
Conversion price of debt				$ 0.052
Minimum [Member]
Short-term Debt [Line Items]
Conversion price of debt				$ 0.02
Convertible Promissory Notes [Member]
Short-term Debt [Line Items]
Debt instrument interest rate				10.00%
Debt instrument, Maturity date				Dec. 31, 2016
Conversion price per share of debt, Description				50% of the lowest trade price on any trade day following issuance of the Notes.
Debt instrument debt default				The mandatory default amount is 150% of the Note amount and such mandatory default amount shall bear interest at 10% per annum.
Converted an aggregate principal amount				$ 225,000
Interest and extension fee amount				$ 37,114
Number of shrares converted into common stock				28,034,948
Aggregate remaining amount				$ 2,205,000
Recognized interest expense				$ 1,691
Convertible Promissory Notes [Member] | Maximum [Member]
Short-term Debt [Line Items]
Conversion price of debt				$ 0.14
Convertible Promissory Notes [Member] | Minimum [Member]
Short-term Debt [Line Items]
Conversion price of debt				$ 0.06
OID Notes [Member]
Short-term Debt [Line Items]
Debt instrument, Maturity date		Sep. 19, 2014		Dec. 31, 2015
Conversion price of debt		$ 0.4375					$ 0.02
Conversion price per share of debt, Description				After the amendment the conversion price changed to the lesser of $0.08 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.
Converted an aggregate principal amount				$ 89,000
Interest and extension fee amount		$ 13,334
Number of shrares converted into common stock				10,470,588
Aggregate remaining amount		184,124
Original issue discount on promissory notes		$ 273,124
Description of maturity note				On each maturity date, each note was extended one year from its maturity date through September 19, 2015.
Beneficial conversion feature [member]
Short-term Debt [Line Items]
Converted an aggregate principal amount	$ 75,000		$ 230,000
Derivative reclassified from equity			$ 93,380
Number of shrares converted into common stock	4,573,171		4,455,422
Aggregate remaining amount	$ 357,048
Recognized interest expense				$ 53,266
Conversion of accounts payable into a convertible note				$ 430,896
Percentage of average of lowest closing prices				75.00%
Number of trading days previous to conversion				25 days
Unsecured convertible notes 2 [Member]
Short-term Debt [Line Items]
Debt instrument interest rate				10.00%
Debt instrument, Maturity date				Feb. 25, 2016
Conversion price per share of debt, Description				50% of the lowest trade price on any trade day following issuance of the Notes.
Debt instrument debt default				The mandatory default amount is 150% of the Note amount and such mandatory default amount shall bear interest at 10% per annum.
Converted an aggregate principal amount				$ 1,900,000
Recognized interest expense				56,613
Received advances of debt				$ 130,000
Unsecured convertible notes 2 [Member] | Maximum [Member]
Short-term Debt [Line Items]
Conversion price of debt				$ 0.08
Unsecured convertible notes 2 [Member] | Minimum [Member]
Short-term Debt [Line Items]
Conversion price of debt				$ 0.02
Convertable promissory notes 3 [Member]
Short-term Debt [Line Items]
Recognized interest expense				$ 9,245
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

XML

Derivative Liabilities (Details)	3 Months Ended
	Mar. 31, 2016
Significant assumptions used for black scholes valuation of the derivative
Expected dividend yield
Minimum [Member]
Significant assumptions used for black scholes valuation of the derivative
Risk free interest rate	0.14%
Stock volatility factor	4.72%
Weighted average expected option life	6 months
Maximum [Member]
Significant assumptions used for black scholes valuation of the derivative
Risk free interest rate	1.02%
Stock volatility factor	189.09%
Weighted average expected option life	2 years

XML

Derivative Liabilities (Details Textual) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Derivative Liabilities (Textual)
Fair value of derivative liabilities	$ 7,122,416	$ 9,317,475

XML

Options and Warrants (Details) - Stock Options	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Options, outstanding, beginning of period | shares	119,404,644
Number of Options, granted | shares	1,000,000
Number of Options, exercised | shares
Number of Options, forfeited/expired | shares	(1,200,000)
Number of Options, outstanding, end of period | shares	119,204,644
Number of Options, exercisable at the end of period | shares	74,373,123
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Weighted average exercise price, outstanding, beginning of period	$ 0.43
Weighted average exercise price, granted	$ 0.02
Weighted average exercise price, exercised
Weighted average exercise price, forfeited/expired	$ 0.04
Weighted average exercise price, outstanding, end of period	0.05
Weighted average exercise price, exercisable at the end of period	$ 0.05
Weighted average fair value of options granted during the period

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Options and Warrants (Details 1) - Stock Options - 2009 Plan, 2012 Plan, and 2013 Plan	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding	119,204,644
Stock Options Exercisable	74,373,123
0.19 - 4.20 [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices Lower limit | $ / shares	$ 0.19
Exercisable Prices Upper limit | $ / shares	$ 4.20
Stock Options Outstanding	1,971,978
Stock Options Exercisable	1,458,957
0.19 - 4.20 [Member] | Minimum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	3 months 15 days
0.19 - 4.20 [Member] | Maximum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	8 years 6 months 7 days
0.41 - 0.44 [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices Lower limit | $ / shares	$ 0.41
Exercisable Prices Upper limit | $ / shares	$ 0.44
Stock Options Outstanding	1,382,666
Stock Options Exercisable	854,791
Weighted Average Remaining Contractual Life (years)	7 years 5 months 16 days
0.02 - 0.0375 [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices Lower limit | $ / shares	$ 0.02
Exercisable Prices Upper limit | $ / shares	$ 0.0375
Stock Options Outstanding	115,850,000
Stock Options Exercisable	72,059,375
0.02 - 0.0375 [Member] | Minimum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	4 years 6 months 7 days
0.02 - 0.0375 [Member] | Maximum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	5 years

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Options and Warrants (Details 2) - Warrant [Member]	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Class Of Warrant Or Right [Roll Forward]
Warrants, outstanding - January 1, 2015 | shares	23,297,108
Warrants, granted | shares
Warrants, exercised | shares
Warrants, forfeited | shares	(412,335)
Warrants, outstanding - September 30, 2015 | shares	22,884,773
Class Of Warrant Or Right, Weighted Average Exercise Price [Roll Forward]
Weighted average exercise price, outstanding - January 1, 2015 | $ / shares	$ 0.21
Weighted average exercise price, granted | $ / shares
Weighted average exercise price, exercised | $ / shares
Weighted average exercise price, forfeited | $ / shares	$ 0.43
Weighted average exercise price, outstanding - September 30, 2015 | $ / shares	$ 0.20

XML

Options and Warrants (Details 3) - Warrant [Member]	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Warrants Outstanding	22,884,773
Warrants Exercisable	22,884,773
0.15 - 0.65 [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices Lower limit | $ / shares	$ 0.15
Exercisable Prices Upper limit | $ / shares	$ 0.65
Warrants Outstanding	21,763,079
Warrants Exercisable	21,763,079
0.15 - 0.65 [Member] | Minimum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	7 days
0.15 - 0.65 [Member] | Maximum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	2 years 2 months 12 days
0.25 - 1.75 [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices Lower limit | $ / shares	$ 0.25
Exercisable Prices Upper limit | $ / shares	$ 1.75
Warrants Outstanding	841,692
Warrants Exercisable	841,692
0.25 - 1.75 [Member] | Minimum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	1 year 26 days
0.25 - 1.75 [Member] | Maximum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	2 years 5 months 19 days
0.90 - 6.90 [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable Prices Lower limit | $ / shares	$ 0.90
Exercisable Prices Upper limit | $ / shares	$ 6.90
Warrants Outstanding	280,002
Warrants Exercisable	280,002
0.90 - 6.90 [Member] | Minimum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	29 days
0.90 - 6.90 [Member] | Maximum [Member]
Share-Based Compensation, Shares Authorized Under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (years)	6 years 7 months 17 days

XML

Options and Warrants (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Oct. 02, 2015	Jun. 14, 2013	May. 25, 2012
Options And Warrants Textual [Abstract]
Employee Termination	Not less than thirty (30) days nor more than three (3) months after such termination.
Stock Compensation Expense	$ 52,296	$ 44,873
Restricted stock award grant	1,000,000
Exercise price description	The exercise price will be determined by the holders percentage owned as follows: If the holder owns more than 10% of the total combined voting power or value of all classes of stock of the Company, then the exercise price will be no less than 110% of the fair market value of the stock as of the date of grant; if the person is not a 10% holder, then the exercise price will be no less than 100% of the fair market value of the stock as of the date of grant.
2009 Incentive Stock Option Plan [Member]
Options And Warrants Textual [Abstract]
Common stock shares reserves and sets aside for the granting of options (in shares)	500,000
2012 Incentive Stock Option Plan [Member]
Options And Warrants Textual [Abstract]
Common stock shares reserves and sets aside for the granting of options (in shares)					1,000,000
2013 Incentive Stock Option Plan [Member]
Options And Warrants Textual [Abstract]
Common stock shares reserves and sets aside for the granting of options (in shares)				4,000,000
2015 Incentive Stock Option Plan [Member]
Options And Warrants Textual [Abstract]
Common stock shares reserves and sets aside for the granting of options (in shares)			160,000,000

XML

Subsequent Events (Details) - USD ($)					1 Months Ended		3 Months Ended
	May. 16, 2016	May. 11, 2016	Apr. 28, 2016	Apr. 26, 2016	May. 12, 2016	Nov. 03, 2015	Mar. 31, 2016	Dec. 31, 2015	Sep. 29, 2015
Subsequent Events (Textual)
Common stock issued at fair value for services						$ 184,391	$ 293,980
Common stock par value							$ 0.0001	$ 0.0001	$ 0.0001
Subsequent Event [Member]
Subsequent Events (Textual)
Common stock shares issued					15,572,573
Common stock issued at fair value for services					$ 316,873
Principal and interest amount			$ 71,211
Aggregate common stock			8,377,760
Cash consideration					$ 60,000
Subsequent Event [Member] | Private Placement [Member]
Subsequent Events (Textual)
Common stock shares issued				17,500,000
Common stock shares for aggregate consideration				$ 175,000
Subsequent Event [Member] | Riggs Eckelberry [Member]
Subsequent Events (Textual)
Common stock shares issued					60,000,000
Common stock par value					$ 0.0001
Subsequent Event [Member] | Consultant [Member]
Subsequent Events (Textual)
Common stock shares issued					30,000,000
Common stock par value					$ 0.0001
Subsequent Event [Member] | Employee [Member]
Subsequent Events (Textual)
Common stock shares issued					20,000,000
Common stock par value					$ 0.0001
Subsequent Event [Member] | Mr. Eckelberry [Member]
Subsequent Events (Textual)
Quarter bonus		$ 40,000
Annually bonus		$ 160,000
Original bonus process description	On May 16, 2016, the Company and T. Riggs Eckelberry, entered into an agreement pursuant to which the Original Bonus Process was cancelled retroactively to January 1, 2016, cancelling any bonus award for the first Quarter 2016 and pursuant to which Mr. Eckelberry will receive a quarterly bonus of $40,000 (up to $160,000 annually) only if the Company achieved consolidated operating profit for the previous quarter.