CEO

Insider Briefing of 19 March 2020

Helping You Thrive in the World's ONLY Vital, Scarce and Recession-Proof Market

In this Insider Briefing CEO Eckelberry shows how industrial and commercial business properties, multi-tenant residential properties as well as agricultural properties and their operational values are directly affected by innovative water management. He also covers emerging trends in the water space and comparative markets and how these factors strategically relate to OriginClear's market position and expansion initiatives.

Transcript from recording:

Introduction

Riggs: Hello, everyone. It is Thursday, again, the 19th of March 2020, and we're in our insider briefing. This is the more intimate version of the big webinar that we do on the first Thursday of every month. The next first Thursday, of course, will be on the second week after next, so we have one more insider briefing, and then the big video webinar, which should be a lot of fun.

Lots going on right now. You don't want to hear more about the virus. It's like the topic of discussion. I won't get into it. Rather, this is about economic planning around the disruption caused by it, and so what we are all about here is we are in a pandemic that has caused supply chains to be disrupted, and we see now that the just-in-time philosophy of supply chains is a real problem because all of a sudden, people are rushing to get toilet paper. But then, just in time means you only have so much in your various warehouses along the way, and then if there's a disruption, you're in trouble.

So I think people are going to be rethinking their just-in-time philosophy and maybe doing more amassing of inventory. Also, I think China has continued to lose a lot of prestige. We are going to see a diversification internationally of places like Vietnam, Malaysia, even Europe, and of course, the good old US of A. Now, in order for the US to really get into the business of supplying its own market, which it used to do, it's going to have to invest heavily in automation. So that is actually going to create a boom for the technology sector. Also, it is going to put some pressure on making the properties work with the water part. Of course, we are all about water, and Water Is The New Gold, of course, but what is it about specifically?

Three Major Sectors

There are three major sectors we are talking about when we talk about water. One, of course is, industrial, and that's where, for example, we were just talking about these robots - automation. Well, the water required for chip fabrication has to be beyond pure, no minerals, nothing, and so that is a major water concern. The second area is commercial with both business properties and multi-tenant residential properties, and the final is agricultural. We are seeing interesting things going on in this economic situation in all three sectors.

Surge Of Foreign Money

Now, as I have been saying, I've been quoting that CNBC article, which I will be happy to share, but it is an article that states that foreign money is flowing into US real estate. Why? Because as bad as it is here, it's worse elsewhere, and it has always been that way. I think it will be that way for a long time to come. For example, Italy has a wonderful healthcare system, but it turns out that they had not allocated enough beds. They were trying to run just-in-time health, and so they got completely overwhelmed. Hopefully, we will do better in this situation if we get in the same place, but we have other benefits to our system, which basically is expensive. Not very fair to a lot of people, but it is a very good investing environment, and this is why foreign investors are coming into this environment in droves. What are they looking for?

Investor Security

Let's start with somehow you are in the market, you get out of the market, and you're in cash. Well, you don't want to stay in cash. That is a problem. Why? Because, you are going to put it in the bank. You will get 0% return on your savings account. Furthermore, inflation is coming because the good old days of using a cheap China source are gone. China itself will become more expensive. Other sources are not quite as cheap. So, you have a problem with inflation and cash is not a great place to be. Where do you want to be? You want to be a creditor, but more importantly, you want to be a creditor backed up by real estate. That is where it's at, and the good thing is, is that most industrial, commercial, and agricultural water involves real estate.

Twin Pump & Lift Stations delivered to a landfill for leachate (Blackwater) processing. Highly durable envelopes for water treatment that are prefabricated in the factory and trucked out

Modular Pump & Lift Stations

Until now, we have sold a lot of systems. I will give you an example. We've had a lot of excitement around the Modular Water Systems™ that we sell, these highly durable envelopes for water treatment that are prefabricated in the factory and trucked out. We actually sold a half million dollars worth of these pump stations, Modular Pump Stations™ despite their being more expensive than the competition of the precast concrete.

Standardized Product Line & Sales

Great. We got that done, but it taught us also how to standardize these and eliminate the engineering charges each time, so there were no longer custom. Now, I just saw a price list come in from our COO, Tom Marchesello. We have completely standardized the prices on these things, and we managed to become extremely competitive. That means that we are able to conquer a lot of business. In fact, just this morning, some great news came across my desk from our Texas operation, who closed a major account and got a PO from a city that is in the half-million-dollar range. Very proud of you guys. Mike Jenkins brought it home. Of course, that does not make a quarter. I am not trying to make projections or anything like that, but clearly, the team in Texas is able to sell. They are selling well and that is going to continue.

In addition, Tom Marchesello, COO, and Mike Mann, VP Sales, are busy developing standardized product sales. In the case of the pump stations, because we standardized the product line, we were able to become less expensive than the precast concrete systems. Well, when you have four times the life cycle of a concrete package and you are less expensive, then it's like duh. Already, cities are specifying us even though they thought we were more expensive because they were not going to have to replace the pump stations every 20 years, 25 years.

Product sales. We’re doing well in that respect. We are doing a good job, but let's face it, when you are trying to sell a large piece of equipment, let's say it's a manure effluent treatment system, $300,000, $400,000, maybe $500,000. Those things do not get sold overnight, especially if the client was not already planning to do it.

Pump Station System for a Major Mid-Atlantic Insurance Company Headquarters

Already Planning To

For example, we did the headquarters for a major insurance company. They were building a 75-year location. This building, this headquarters, had to last for 75 years and insurance companies think in those long-term timelines. So therefore, whatever equipment they put in, including the water systems, had to last 85 years, and so they ended up giving us the business of putting in the pump stations. Remember, pump stations lift clean water. Lift stations lift dirty water. So in this case, it was a pump station, and we get that quality business, but what I'm saying is this insurance company was already planning to do it.

Imagine if we went to this insurance company and said, "Hey, why don't you build a 75-year location?" Now, we are in front of this whole planning cycle, and that is very long indeed. If you get them when they are already planning to do it, that's great, except that there is still a lengthy process of approvals, and permitting, and engineering. Then, of course, there's always people coming and trying to rip off your business, take it away from you by underpricing you, so that is a very challenging environment. Selling large capital systems is a challenge.

Changing The World

We are trying to change the world. You are here because you believe we can change the world. If you're an investor in OriginClear or interested in investing in OriginClear, it is because you think that we have something that ordinary water companies do not have, which is the ability to get some things done on the ground, not with the big central systems that billions of dollars later, maybe something happens, but right away, solutions that occur right at the basic level like that trailer park story I've been telling.

So with that, you want to see us ramp up our deals. That is what it is all about. We have been looking at how to do this, and it has been intimately tied in with investment in our company. Imagine if you had a less expensive solution, perhaps an interim solution, and furthermore, you said to the customer, "You know what? Don't pay upfront. We'll just install it. Pay us in the backend." If you could do that, then you would pretty much write your own ticket.

Depuporc's Pilot Swine Manure Treatment in Huesca, Spain (Click Image to View Presentation Video)

The Animal Farming Problem

I'll take a tangible example. We have these animal farms in Spain, in the US, everywhere, and the problem is much bigger than the problem of humans. The problem is all about that this 2,500-cow dairy farm puts out as much poop as the entire city of Metro Miami, 400,000 people. What is up with that? I guarantee you there's not just 2,500 head of cattle in this country. We are talking more like 25 million head of cattle, pigs, lamb, and chicken - poultry. There's many, many millions of these, and they are all pooping away. It is out of sight and out of mind, except when you drive by one of these. When we drive to San Francisco, we drive past the Harris Ranch, and whoa, that stinks.

What’s That Smell?

There is a reason why these locations are away from most human habitation, but that smell you smell is a bunch of things, but it's above all ammonia, NH₃. The problem with ammonia is that it is toxic to the forestry and also to the water table, and so you do not want ammonia as a gas escaping from these manure lagoons because the first thing that most producers do is they just pour the manure into a lagoon and sit there, and they basically let it take care of itself. That is the easy way to do it. There's a problem with that because then you are putting out ammonia in a place like Europe, you are going to get seriously penalized.

Expanding Spain’s Swine Production

The entire country of Spain is one of only two countries in Europe that, for the last 10 years, has consistently been in violation on the ammonia regulations. Don't think that Brussels, which is the European bureaucracy, isn't coming down hard on Spain. It's going down. Now, on top of it, Spain is trying to dramatically expand its pork production business. Why? Because China, once again, China has the swine flu. The swine flu is killing swine, pigs by the millions. So, they have to import pig and are importing pig. The Chinese diet is very heavy on pork, so all of a sudden, there is this huge demand, and Spain wants to fulfill it. They are trying to cover Northern Spain with pig farms, but they have got this problem with the ammonia.

OriginClear | Depuporc Partnership

This drives the solution, and sure enough, our partner, Depuporc, and you guys and gals probably saw the videos, we went to Spain and toured the facilities. It was really wonderful. They believe in us. They think we are definitely a home run. You should see the videos. They just think that we are amazing with that technology, and so we have proven that technology can be implemented to do what is called zero waste manure, which is take the poop, separate it into beautiful fertilizer that you can run through your hands, and it's ready to use. If you feed the pigs organic food, it's actually organic fertilizer, but nonetheless, it is very good natural fertilizer. On the other side, you have got water that you can use to irrigate the land and so forth.

Verified By Independent Testing

That is a wonderful solution. It totally solves it. We have now proven that the reduction of the nitrogen, which is what we are talking about when we say ammonia, takes the emissions of nitrogen down to one-tenth of what the law requires. So instead of being above the level required by Europe and by the Spanish law, it's actually one-tenth, and that is huge. Here's the thing, these things are not free. They are expensive. Again, call it half a million dollars. So once again, you get into this long sales cycle.

Water Distressed Property: Stranded Assets

But we had this breakthrough in the human world with a lagoon for a little trailer park in Alabama. A small project. It came to us through one of my relationships actually, and this is an investor who is trying to complete divesting all of his trailer park portfolio that he and his wife have had since 2005 when they invested. This last property has been stuck because the Alabama Department of Environmental Protection, I'll just call them the state EPA said, "You got to fix this or you can't sell your property."

So, they wanted to hook up to sewage and it would have cost them $500 to hook up to the sewage system. The city said, "No, we will not take your sewage. You cannot connect."  I've been telling you, there is a problem in America with municipal water treatment, and people don't think so, but this is happening all over America with crumbling central infrastructure, and people like my friends are stuck with this problem.

Dan Early’s Elegant Solution

We got involved, and we said, "Hey, we can help." So, we did. Dan Early came up with a beautiful, elegant system. Imagine a kind of a diving platform, but obviously nobody is going to be diving from this thing because it goes in a poop lagoon, but underneath it, you have a whole structure. It looks like an iceberg of what is called biofilm. This biofilm is a very special surface. It is not a flat surface. It's like coral. It's very nubbly, and it has this beneficial bacteria. The beneficial bacteria eats its way through all the poop, and guess what? Two or three months later, there's three things that have been addressed.

One is the ammonia. The ammonia has been neutralized, phosphorus has been neutralized, and what's called biological oxygen demand has been neutralized. Biological oxygen demand is oxygen deprivation, like when you can't breathe because there is not enough oxygen for you. That is what BOD, Biological Oxygen Demand, is. It is when the water in there has enough pollution that it can't possibly supply the oxygen for that pollution to get eaten up, and so the water can't breathe. That's the best way of saying it. Those three things, BOD, phosphorus, and ammonia get handled by this one thing that we call the bobber because it bobs up and down, I guess. There are no waves in these lagoons, but kind of cute.

Approved By The State

Anyway, this solution was cheap, $50,000, and that's as a custom system. Imagine what it could be as a standardized production system. I'm not going to speculate what it would be, but it would be a good deal less. Here's the punchline. Dan Early got the state to approve it, so he got permitted to do it. So now, our friends are taken care of. Here's what is great. All you have got to do is take that bobber, roll it in, drop it in the water, and walk away. It takes 20-amps of electricity to run a single pump to keep the circulation going, and you just let it be. That solves the problem of this human lagoon, and there's thousands of trailer parks that have manure lagoons, so that is a business all of its own.

About That Smell

But guess what? We can go to animal farms and go, "You really want to do a zero-waste solution. You want to create the fertilizer. But meantime, why don't you take care of that smell? Why don't you take care of the ammonia that's going to give you fines for a fraction of $500,000?” Call it 50. That's not a price that I'm going to commit to, but it is a substantially lower price. “We'll put you into it."

Easy Financing

Now, here's the good news. That $50,000 is easy for us to finance. $500,000, harder. $50,000, easier. Who is going to do the financing? Sure, we can cashflow it, but cash is expensive, and how do you make thousands of installations? You have got to come up with a lot of cash.

Partnering With Our Investors

Well, here is where our incredibly loyal investor base is right now becoming super excited about getting involved because what we will do is we'll make them partners. We'll say, "Okay. That, call it, $50,000 solution, you will have title to it. It's going to go out, and the customer, all he has to do is sign for it and basically rent it. Once he's done, gets rid of it, no problem. We put it back in the rental pool. It's all good." Investors love this. Why? Because they have a secured property. They own something tangible, either the equipment, or the land, or whatever. That is easy to secure because remember, the customer is delighted not to have to pay me cash.

We don't worry too much about the credit because these are portable systems inside a truck with a hitch. Pull the thing out again, and it's gone. So now, we are basically in the business of supplying these elegant solutions that are not necessarily long-term, funded by our investors. Like I say, it is cheap enough that we could fund it ourselves, but we will run out of money long before we run out of market. So, what we're doing is we're ramping up the investment opportunities for our investors.

Current Private Placement

How is this happening? Well, you talk to Ken Berringer because Ken Berringer is the guy putting these deals together with Mike Mann. Ken is the investor liaison, and Mike Mann is the VP Sales who is putting these deals together. So, Mike is finding all these deals, and so is Bill Charneski, our Senior VP. Ken Berringer is lining up the investors. What Ken is willing to do, with my blessing, is that if you invest in our current private placement, then at a later date, when you decide to invest in one of these water systems, we will actually, separately from the private placement just because we are appreciative of your involvement, we will rebate you a cash check for a portion of the investment.

Now, this is subject to legal approval. I believe that we can do that without requiring approval from on high because I think it is pretty evident that we can do deals all day long that involve investors that are not stock grants. Nonetheless, we are going to make sure that this is okay with our SEC attorney, but I can tell you that this is something that we can do.

In other words, here is what I'm saying: You invest in the current offering as an accredited investor  (I'll tell you about unaccredited in one second), even though I'm getting short on time, I'm going to tell you about it. Invest in the current offering. A full unit is $100,000. You put the $100,000 in. Our commitment secured by our own business is to repay you that amount in two years. We give you an 8% dividend, and we give you a stock grant for half the investment. Its an amazing deal. If you do that, you will become a preferred partner that we will be happy to help with the investment that you make.

Menu of Real Estate Secured Deals

Basically, you'll get a menu of real estate secured deals, and you pick the one that you like. So again, I'm going to disclaim this that this is the very early stage, but we are serious as a heart attack that we want you as an investor to win with these, what we call water-distressed situations, water-distressed properties that have a specific problem that we can solve.

We bring in an investor for not a lot of money. We're talking $50,000, $100,000. This is not a big deal. If you do that, as part of the deal, we will actually come back and rebate you a cash check, which will be the first payment in the whole thing. It's exciting. It's cool. It works. You'll see how it papers out. It's really amazing. So talk to Ken Berringer. I could give you the number, and I'm going to circle back to the last thing with the unaccredited, and then we'll be out of time. So to talk to Ken Berringer. Dial 323-939-6645 extension 201, and you can also send an email to invest@originclear.com.

Contact Us

Don't delay because from what we can tell with our discussions with investors who understand real estate, there's high demand for that, and we want you to be involved. By the way, this process is also an end to our old investors getting repriced. We have now paid nine quarters of on-time dividends on this new private placement, 27 months. So we are pretty gosh darn good. We are reliable. We manage things very well, and we want our existing investors to come in and participate because part of this swing to real estate is that we are going to no longer offer the repricing for existing investors.

Regulation A Offering

Okay, so I'm going to finalize here by talking about the unaccredited round. Again, I can't tell you when it is going to be effective, but we are getting towards the end of the normal period that the Securities Exchange Commission takes to review these things. It takes about 50, 60 days. I'm not going to tell you anything except that it seems like things are moving along just fine. With that in mind, one would think that the unaccredited investor, people who are not accredited will be able to invest soon. That would be the assumption.

Again, I'm not guaranteeing it or when it happens, but things are fine, and there is no reason to believe that we are not within the typical turnaround for these accredited offerings. I'm not promoting this. I'm not trying to get you to invest yet because you can't, but I am just going to briefly discuss this offering that has been filed publicly. You could look up in the EDGAR database. You go to EDGAR, that's the database, enter OriginClear, and boom, it will come up. Take a look. You'll see. But basically, the deal is very, very simple. Invest at least $500, and we will give you 10% per year paid every single month. That's it. Very simple.

Now, the second part of it is, is that this goes on for as long as we like. We don't think we want to have you out there forever being paid 10%, but that is entirely based on the market. This is called a preferred share, and it's priced at $25. Think of it as a bond. What we believe we can do is to get it listed on the OTC markets as a preferred share. There are many of those. There's hundreds of those already listed on the OTC, and we believe that we can get that bond. It's a preferred share, but think of it as a bond.

Here's why: when you know that this thing has a face value of $25 and 10% is being paid out. Now, let's say all of a sudden on the over-the-counter market, OTC market, it was offered at $12. Well, gosh, you'd buy it, wouldn't you because that $12 share earns you 10% on $25? So literally, $12.5 just to be even is going to get you 20% a year. So that is going to tend to suck up that share. So, it is going to create a market. We believe in this share, and this is potentially how investors can sell. But again, there is really no reason to because they will be getting that nice 10% check, and our track record shows that we pay very reliably.

That is the simplicity of it. It's not as good as the deal for accredited investors, but nonetheless, it's a very reliable deal. When you compare it to what you can get for a certificate of deposit in the banks, you'll get literally nothing for your money anywhere else, and so it makes sense to invest in water and water transformation with OriginClear. Again, I'm hoping that this gets approved soon. I'll be keeping you advised of how that goes forward, and in the meantime, everything that I've been saying is again disclaimed that it is not final, both the real estate investment benefits as well as some of the comments that I've made about potentially the Regulation A, unaccredited offering being effective. But again, we believe that things are on track, and we're going to have a wonderful ability for everyone to become a favored investor in OriginClear and become part of the Next Generation Water Company™.

With that, I'm going to wrap it up. I wanted to thank you for being with us this week. Like I say, it's going to be another phone briefing next week, and then we will go to the new, new thing. Before I wrap up, I'm just going to check the Q&As and the chats. Tamika Towner would like me to repeat that number again. Certainly. It's 323-939-6645. 323-939-6645 extension 201. The real estate opportunities are open to accredited investors, and the other question I was going to answer. Tamika also says, "Sounds like a plan, especially based off the demand, and as I see how the economy is altering, it will be a necessity." Well, thank you, Tamika. As I say, from your lips to God's ears.

We have John Debevoise says, "Greetings from North San Diego, California," and he says, "It smells like money to me." Well, I thank you for your positive input, both of you. Again, in the future, I'll be happy to respond to the Q&As and the chats. Either one is fine. I'll respond to it in real time, and I promise not to forget.

Again, thank you very much. It has been a real pleasure having you guys on board. Let's do it again next week. I promise you that I'll have even more information, and I hope to have some really solid, undisclaimed information that you can act on. Thank you so much, and if you are a previous investor with the company, do not hesitate to contact Ken. Again, 323-939-6645 extension 201, and he will take care of you. Thank you very much. Good health to you all, and we will talk next week.

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SAFE HARBOR STATEMENT 

Matters discussed in this presentation contain forward-looking statements. When used in this update, the words "anticipate," "believe," "estimate," "may," "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of the Company and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with our history of losses and our need to raise additional financing, the acceptance of our products and technology in the marketplace, our ability to demonstrate the commercial viability of our products and technology and our need to increase the size of our organization. Further information on the Company's risk factors is contained in the Company's quarterly and annual reports as filed with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason except as may be required under applicable law.

Important Disclaimer

The securities referred to in this advertisement may be sold only to accredited investors, which for natural persons, are investors who meet certain minimum annual income or net worth thresholds. These securities are being offered in reliance on an exemption from the registration requirements of the Securities Act and are not required to comply with specific disclosure requirements that apply to registration under the Securities Act. The Securities and Exchange Commission has not passed on the merits of or given its approval to the securities, the terms of the offering, or the accuracy or completeness of any offering materials. The securities are subject to legal restrictions on transfer and resale and investors should not assume that they will be able to resell their securities. Investing in securities involves risk, and investors should be able to bear the loss of their investment.