CEO

Insider Briefing of 29 April 2021

The American Jobs Plan has the largest allocation for water ever, but what's missing? What if water got the same treatment as oil? Check out The Blue Renewal Plan! Dan Early joined me to report on the status of three immediate prospects for our Water On Demand™ program.

FEATURED OR COVERED IN THIS BRIEFING — QUICK LINKS

• Testimonial commentary from RJ and CS St. Germain partnership manager Teresa Solorio.
• CEO Update on the 2020 company annual 10-K report.
• What is great about Biden's American Jobs Plan.
• What is missing from Biden's plan that could make it work. Why is water treated less favorably than oil?
• What are non-renewable resources and how does the principle apply to water?
• Is there an way to empower businesses with water related tax advantages?
• What is the Blue Renewal Plan and what could it accomplish?
• OriginClear's immediate prospects for our DBOO model and operating on an outsourced, managed services basis.
• An overview of the Water on Demand program and where an O&M subsidiary or division fits in.
• The 4 different investment options to support and fund OriginClear's projects.
• Contact Ken Berenger and get your own personal briefing on our plans, programs and offerings.

Transcript from recording

Introduction

Riggs Eckelberry:

Dan Early, co-host, chief engineer of OriginClear, there he is! Dan is going to be laying out some of these cool Water on Demand™  projects later in the show but we have so much to cover. Once again,  this is Water Is the New Gold, and it's turning out to be an amazingly recession-proof market given how much it's tracking with the real inflation out there. It is the 29th, briefing number 108.

Forward Looking Statements

A quick look at our safe harbor statement, basically that we do our best to make correct statements, but of course they are subject to risks and uncertainties like everything. I have a quick video to play. 

Start of video presentation

Transcript from recording

Investor Commentary

Riggs: Well, hello everyone and I'm privileged to be speaking with Teresa Solorio, who is managing the St. Germain partnership. Am I right?

Teresa: Right. It's the RJ and CS St. Germain partnership. I really liked the direction that OriginClear has gone and what it is doing now. Because of that, we've been continuing to invest and I feel like we've been some pretty loyal partners in this and I think that it's going to pay off.

I feel the management of OriginClear now is all connected and in tune with each other and because of that, the strides that you're making in the direction you're going are only going to be positive. So I'm really pleased to be a part of it.

Riggs: We think we're starting to move the needle. So it's great to hear that from you.

Teresa: Well, I just like how the management are moving with the future. Like you say, not staying in the back, not putting yourself into this one little sphere of this is what you're going to look like, but have said, "This is working, no, that's not working." You know, "We see a different need." I like that. I feel it. It makes my investment more powerful and down the road and more profitable.

Riggs: So invigorating to hear these words and please convey my heartfelt thanks for you guys support.

Teresa: Well, I appreciate that and I want to say that I thank you guys for being so accessible because when there's concerns and or questions, I have always gotten immediate answers. So thank you for that.

Riggs: Well, that is music to my ears because it's the most important thing. Teresa, I want to thank you for your time on this, it's been very pleasurable, have a great rest of week and let's stay in touch, okay?

Teresa: All right. I appreciate it. Thank you Riggs.

End of video presentation

About Commentary

Riggs: This is a very cool group. The St. Germain partnership, they actually invested as early as our algae days. So they've been around for more than 10 years, and they're happy with how it's been going. So that was a very heartwarming interview.

And we're going to be having more of these. We're asking people who, for example, the Roetens, to make a commentary, and it's cool to actually hear how we're doing well. Okay. And we're also going to be hearing good news shortly about how well things are going with operations, but first I'm going to cover some more of this presentation.

Annual Report

All right, now what's the latest annual report. What the heck is going on? Well, we are, I cannot say exactly when we're going at this point. I literally cannot tell you exactly when we're filing, but it is very soon. As to the fixing of the problem. Why the heck did this thing get so late?

CFO

It's primarily about getting a good CFO. The update on that is this week we interviewed a vet, fantastic candidate who has headed public companies, very large, who's done the whole thing and really knows, amazingly qualified person. We are vetting two more, including one that was referred to us by the ever helpful Arte Maren. And we've reached out to 10 additional prospects. We are on track for having a CFO on the job this summer. And that is a super high priority because I don't intend to have this happen ever again.

American Jobs Plan

Now there was a tease this afternoon about President Biden's address. What's good and what's missing. So let's talk about what was great, this American jobs plan, which is the infrastructure plan, largest job plan since World War II.

It has within it, the largest allocation for clean water, more than a hundred billion dollars. One of the goals is to remove 100% of the lead in every American water pipe. And believe me, Flint, Michigan is not the only place that's got a problem.

Buy American

Mandates "buy American", which is fantastic because our own Progressive Water Treatment has been around for 20 years, highest quality, and they want the parts and assemblies to be American because then they can really guarantee end-to-end onsite products [service} for the life of the product. So this is really, really good.

Now what's wrong. What's missing. Well, let's take a look at the oil and gas industry.

Depreciation Method

As an example, oil and gas industry has something called Intangible Drilling Costs, IDCs. They've been allowed since 1913. You can take an immediate deduction in the same taxable year of your expenses. What are they? Everything except the equipment itself. And it's all labelled as intangible because it has no value after the well stops working. So, and I'll tell you why this is good, better than existing depreciation methods.

Non-Renewable Resources

The other thing that the oil industry had is the depletion allowance, they get to, it is the one of the most tax advantage investments available in United States. And 15% of gross income is tax-free for these investors. And that's on the theory that the extraction is a depletion of what you might call non-renewable resources.

Water's Predicament

Well, how does this relate to water? You might ask. Well, we have $111 billion dollars in the American jobs plan, the biggest yet, but we know that's only one year of gap. The investment gap is $105 billion per year. This thing, this is a report in 2016 and by 2040, the gap will be 150. So it's getting worse.

Empower Local Business

And as you know, we know that this is driving local businesses to do their own treatment, which is a win-win definitely because it means that these water districts, which are not catching up, even with this huge water bill are going to have less of a load.

And so there's hope there, if we can make these local businesses pull up the slack, this is of course why we have what we call Water on Demand, which enables these private businesses to pay on a pay per gallon basis, which is what Dan will be reviewing with us very shortly. All right. And then of course, Because we want to expand this out to a marketplace and we'll get to that. For now, we want to get this thing right ourselves.

Expensing Intangibles

So what if these local businesses could expense their intangible water system costs? That's better than the section 179 accelerated depreciation which is being at, where you're able to depreciate everything in the first year. But it's only on assets and you have to have active business income. In the oil and gas business, the intangible depreciation, you can make $1 and you can depreciate $100,000. So it's far better.

Water Depletion Allowance

And the second thing is, what about a water depletion allowance? Water is becoming scarcer and it is a very bad, I call it a good example, it's a bad example, but the Ogallala and the Midwest, which you'd think would have lots of water. It's a vast aquifer in eight states, one fifth of all produce in the United States. It has been drawn down as much as 234 feet and would take 6,000 years to refill once drained. So water is being depleted and I think that's a very powerful argument to make.

The Blue Renewal Plan

So let's call it something like The Blue Renewal Plan and this, by applying essentially what oil and gas gets, we could support the renewal of water and help local businesses. Now, I can't tell you that this thing, this is not something I'm saying, we're going to go to Washington and get a pass. We got a lot to do here.

But it's a very powerful argument to make in the, I'm getting PR opportunities with Forbes and a bunch of other publications. I want to be able to tell these stories and make these points. And it really makes the point about, hey, oil is getting better treated than water in this country. And yet water is pure survival. So that's where this is going. All right.

Operating on an Outsourced Basis

So Dan I'm going to now jump into this thing called DBOO, DESIGN-BUILD-OWN-OPERATE. And I have a currently Progressive Water Treatment and Modular Water Systems™. You guys do design and build and you ship it. You say, we'll give you warranty support, it's all good.

Well own and operate means that you finance the machine upfront, either the bank finances it for you or the, in some cases, the government helps you, SBA, whatever. But we, the strong thing to do, is to have your own capital to invest, which is what we are accumulating now. And then you operate it on a pure outsourced basis.

Overview

And it looks kind of like this. This is a diagram that I did, which shows OriginClear, and it has its own wholly-owned subsidiary Progressive Water and a division called Modular Water Systems and Modular Water Systems contributes to the designing and building of these systems.

What's new now is we've got these other wholly owned subs. We've now created a Water on Demand™ number one. And more will follow, number two, number three, number X, whatever. And they send finance systems, they pay for systems built by Progressive Water with of course the Modular Water designs as well.

O&M Subsidiary

And what we need to do, well, Progressive Water delivers the systems, but there has to be managed services. And that's where we need to build the operation and maintenance subsidiary that we're either going to buy it, acquire the subsidiary, which is a challenge because that know-how is actually pretty precious. Or we go ahead and build the  capability.

Either way, we also have an overflow capability where we can finance the work of qualifying water companies, where you Dan would come in and say, okay, our friends at Ad Edge up in Atlanta, they're a good company and they have a great machine and we're willing to certify, and now Water on Demand can finance those. So it expands beyond us and that's the beautiful vision of it. So that's kind of how it looks and we're obviously fleshing it out. All right.

Dan Early — Chief Engineer OriginClear

Funding Projects

And which brings us to you my friend, and we're going to be reviewing what you've got going because I gave you a mandate, gosh, about a week ago. To start, I said, "Money is burning a hole in my pocket." And because we've been doing extremely well with our investors, we've had huge support.

And so now we have a treasury and we're able to get going, even without these Water on Demand subsidiaries being fully liquid, because as you know, real estate is coming in and it takes forever to, to leverage et cetera,. Well we're just going ahead and out of our normal treasury, paying for these things.

Mobile Home Park

So what I'm going to do is I'm going to switch over to a redacted version of your report and enable you to go through it. There are some terms that you're probably going to want to tell us what the heck it means, but let's go to the top here. All right, so this, let me just, there we go. DBOO status update, this is brand, brand new today. So we have a mobile home park, wastewater treatment plant, with an EveraSKID™, and that is a containerized system?

Dan: Yeah, that is correct. EveraSKID is our containerized wastewater treatment system, that's our plug and play above ground installation.

Riggs: And MBR means membrane bio-reactor, which basically what does that do?

Dan: A membrane bio-reactor is an advanced filtration device. It actually stays submerged in the wastewater treatment system. And it does the liquid solid separation. It's a filter system. It's one of the more advanced forms of wastewater treatment.

Riggs: So, this mobile home park is under a court order and it has to do it, they love the idea of a fully outsource model. And Progressive Water Treatment believes that this could be at least a 10 year contractual life cycle. And as we've been discussing the O and M built in and so forth, about a $300,000 capital cost. And obviously we're still working out the service cost.

Status

So what's the status? Well; we're working directly with the rep and the end-user's engineer of record who recommended EveraSKID actually, and this is well done to you for...payback for all the webinars you do.

Dan: Correct, correct.

Riggs: You get, you've got your action. Anyways, so it's actually, is the only one that would work for DBOO actually. And the Pennsylvania Department of Environmental Protection, it would meet the requirements for that discharge permit.

So where are we going with this? We're going to enter into an agreement for the package. It was submitted and initial comments we intend to have blah, blah, blah. All this is to be done. But looks like this thing could execute as early as July 1st. So that's excellent.

Brewing Company

Let's take a look at our brewing company, 5,000 gallons per day, MBR also EveraSKID, and they are an existing craft beer producer. And here is this thing that keeps happening to breweries is that they have too much organic waste and too much of it. And so they ended up having to truck the stuff away to another county, and they're spending money on that, and it's becoming more. It's growing, obviously. These expenses are growing.

What is a local sewer's SIU? What is SIU?

Dan: SIU. Significant Industrial User. It's the EPA mandate where all local public utilities have to impose treatment limits for industrial dischargers.

Riggs: And of course, those limits are becoming more drastic as the capability of the cities is becoming degraded. Now, this customer is sophisticated. The MBR treatment system is viable, et cetera, et cetera. April, okay. And so we have a follow-up meeting, we have a preliminary dialogue going on here, and expectations are the craft brewery could be 20 years plus or minus. Very interesting.

Just Pay a Monthly Bill

Dan: Let me comment on this one right here. What I like about this particular customer, when it comes to the DBOO model. They are in the business of brewing beer, making craft beverages, they are not in the business of owning and operating the utility. What they would prefer to do, they would prefer to see an entity like ours come in and provide them with a soup to nut, A to Z, turnkey solution.

We can provide the equipment, we can bring in the engineering and design team, we can operate the system, and basically all they have to do is pay a monthly bill. And you can set these things up on five-year terms, ten-year terms. My expectation on this one is that it is a commercial enterprise, the life cycle, probably 20 years. I mean, that's a long gestational cycle for us, for a business to run its full gamut. So that's the reason why I think it's a 20 year possibility.

Riggs: Absolutely. Well, you know, we saw with Russian river brewery that Cambrian did and they signed a 15 year service contract. So I think that that's quite reasonable. So looks like a budget is about 225 and further equipment SOS and pricing. SOS?

Dan: Scope of supply.

Commercial Park 

Riggs: Scope of supply, scope of supply. Thank you, sir. All right, let me continue. A commercial park, private commercial real estate development, currently in the final vesting rights stage. What does it, what do we mean by vesting rights?

Dan: So vesting rights, if you are a land developer or you're in the real estate development market, you have to go through the local planning, ordinances and planning processes to seek your local approvals. And as commonly referred to as a vesting rights phase, where you're going to get your master plan approved, you're doing any re-zoning that need to be re-zoned. All of those things are approved by the local zoning boards and that type of thing.

Riggs: Good, essentially it enables the development to go ahead.

Dan: Right. Once they get, once they check those boxes and they're vesting rights are approved, they can rock on with their final site development and move forward into construction.

IFAS System

Riggs: So this is a 25,000 gallon per day containerized system, EveraSKID again. What is IFAS?

Dan: Integrated Film Activated Sludge, it's one of the many different types of biological treatment that we provide with modular water product.

Riggs: Now it is, it is less, it is cheaper than an MBR. Am I right?

Dan: It is. IFAS, I-F-A-S, IFAS systems are more commonly utilized within what I call standard treatment or entry level treatment where you don't need to treat to a very stringent permit. So that's the reason why you see the IFAS system used.

Sewer is Too Far

Riggs: Excellent. All right. So 25,000 gallon per day plug and play, they want, they have to have that. They have to put in a system, they have to put in their own closed circuit system because the public sewer is too far out, et cetera, and would be interested in doing the outsourcing thing. Civil engineers working on this and this about a 350...

TCEQ. What is TCEQ?

Dan: Texas Commission on Environmental Quality. This is the state EQ, it's their environmental department.

Riggs: Got it. Right. This is a more expensive system and it looks like it's not quite as well along as the others.

Dan: It's probably, I would say about 60 to 90 days behind the other two, the other two are much more, much further down the road and much more developed. In fact, the mobile home park, the very first one we looked at, that customer is in the final engineering phase and we've gotten budgetary prices in front of them. Very, the high probability of that one is very, very high.

Riggs: Which one's the most probable at this point?

Dan: The mobile home park, the very first one that we looked at right there.

Moving Ahead

Riggs: $300,000. Well, this is really exciting. So what we're doing here is we're moving ahead as fast as we can with our test system, you know, taking some of the amazing investment money that's been coming in to devote it to this. So this is going to allow us to get into full gear while the remainder of the capital comes in.

So that is wonderful and I can't tell you how excited I am about this. It's just so cool. So thank you for, for pursuing this and obviously there's much more in your pipeline that could be, but you don't want to like open up the door to everyone and then say, 'no, well, actually we don't have the capital yet.'

Dan: Yeah, it can be a challenge. We've had multiple opportunities come in the last seven days, the DBOO opens up doors in ways that you can't open with regular delivery models.

Riggs: Yes. And again, we have to be cautious because, you know, we're still in the capital raise side of building Water on Demand.

Offerings

We opened, well, I'm going to describe the offering actually. So what are we talking about here? Of course, we're talking about, Ken, are you in the house? 

Ken: I am, I was muted, but I am in the house.

Riggs: Pretty cool. Huh?

Ken: Yeah. I love it when a plan comes together, I think it's the A-team, right? I think it's the A-team, 80's television shows, "for a hundred Alex."

Riggs: Nice, nice, good work. Well, and Dan you took your video off, but I just want to thank you very much for your presentation and I'm really happy with how you're doing. So thank you.

Dan: Very welcome Riggs, glad to be a part of it.

Riggs: Right on. So Ken, you know, you hadn't even heard the part about the oil and gas comparison, but I think it's a really good one.

Ken: Thanks for, yeah, thanks for slipping that. I was going 'wow!'. Yeah, that was fun. And we're going to have some more discussions on that tomorrow. I definitely want to drill down on that.

Riggs: Yes. You know, actually it came from, Dan you'll be interested. That idea came from Steve who is the client and Claudia, on our first Pondster™ installation.

And he just said, "Riggs Riggs, oh my gosh." And he got very excited about it. And it was literally this afternoon at 3:30. So he actually wants to help us figure this stuff out, which is great. But obviously we're planning to have them on video, et cetera, around the whole Pondster thing.

Options

But let's talk a little bit about the options here. We are in the investment cycle. People who are accredited are able to come in and get the double digit dividends, the stock redemption, and the triple warrants. Then, if you are good for a million dollar investment, that's these Water on Demand units, and we've opened the $20 million private placement.

Crowdfunding and Regulation A

And then we're working on a couple of crowdfunding. One is to build Water on Demand units with unaccredited investors, and we're in discussions with the portal on that.

And finally, we have a team working on replacing the existing unaccredited investment round that we had that became obsolete on 27 March.

Service Level Agreements

So Ken, it's been going incredibly on number one here on building this capability so much so that we're actually able to put some money on these DBOO systems.

Ken: Yeah, no, I've made multiple similar comments to you during the course of the week where once you arrive here and you start to describe it, you almost ask yourself, "How did we not get here sooner?" Once you've invented something, you go, "I can't believe I didn't think of this five years ago, 10 years ago, 20 years ago."

I think, as I describe how we positioned this, I hear a lot of people kind of say to me, "So this really isn't that dissimilar from something in high-tech." And they've said that the contract is very similar to a service contract as simple as a consumer product like a phone, like a cell phone. I think the service level agreement is very, very powerful.

I got into a conversation today, and I said, "Well, look, imagine if you're an internet... " I've been having this terrible problem in my office with the internet. so I've been crying and moaning about it. And I said, "Imagine if I was an internet service provider who got a guy like me on the phone." "Look, I'll guarantee you a thousand megabits per second. You only pay for the minutes, but you get a thousand minutes."

Guarantees of Quality

I'd be the only internet service provider in a week, right? In the world. Because nobody promises quality. Basically you're going to pay your 600 bucks a month, no matter what. Sometimes you'll get close to your thousand megabits per second, and very often you'll fall well below that. And we've come to accept that as consumers. Well, it's the best you've got.

By setting up this system, and by creating that guarantee of quality, we've literally eliminated any need for anyone not to engage in this process. So our investors, when I first joined three years ago, what was the first comment I made to you?

Greatest Investors in the World

Well, because at that time they were your investors. Now they're our investors. But I said, "You you have the greatest investors in the world." People that so believed in what we were doing. They're also some of the smartest investors, and maybe it's because they followed us along for so long.

And they've kind of viewed our progress over the past six months or so, but they've already intuitively arrived at where we're taking the company. And the excitement is just incredible, just incredible. It's a pleasure, I'm exhausted, but it's a pleasure to engage in this.

Call Ken

Riggs: Well, your Calendly bookings is a testimony to how hard you've been working.

Ken: I got a break yesterday. I shouldn't say that because now I'll get clubbed, but I got a little bit of a break in the action. So I thought I could eat a meal. It was going to be cool. Not at my desk. I mean, I was going to live like a king.

Riggs: Wow. However, there are some slots available for next week. So we're going to book you up. People can just type oc.gold/ken.

Ken: The Riggs Diet.

Riggs: But there's actually, for another day or so, the existing...

Ken: Through tomorrow.

Riggs: Exactly. The existing Series R, the 200% redemption is still on. So it stayed on longer than we thought, because we were waiting for an investor to bring his money in. But now tomorrow that money is expected, and we are closing things down.

Chats

Well, JRW says, "Good evening, everyone." Keith Roeten says, "Very cool." Thank you. And Keith was commenting on that point of use slideshow that you had, Dan. And what we're going to do is, I'd like to actually cover your experience talking to the engineers every week or two with these webinars, what you're presenting, what you're experiencing and how is it driving the quality and the quantity of the business, as well as viability.

Dan: I would love the opportunity.

Acknowledgements

Riggs: Fantastic.  Guys, it's been amazing. I'm as always blown away by how many people stick around on these shows, even though we get technical sometimes, but we're going to be seeing you next week.

And what I'd like to do is bring Dan back with this cool presentation that some people saw before the show started because of this show before the show. And again, Dan, thank you so much. Ken, I have to say you've been a one-armed paper hanger for the last few weeks and I thank you for it.

Ken: My pleasure.

Riggs: All right, everyone. Thank you. It's been a wonderful show, and be sure to tune in next week, and meanwhile, have a wonderful weekend. Goodnight.

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