CEO

Transcript from recording:

Riggs: Okay everyone, it is now the 9th of January. Very happy to have you on board. As I'd said in today's CEO update, we have a massive upgrade happening to the CEO briefing. What we understood is that the CEO briefing is really, really a valuable piece of our communications, and is actually far more important than a great deal of other things.

 And so what we've done is we've brought on board an agency, since I haven't publicly disclosed it in a public disclosure, I'm not going to say their name. I don't know if you've experienced this in Facebook and such, but there's some really, really good promotion out there. They call them funnels and you go, "Oh my God." Like for example, I love keto. Keto is for me fantastic. So, I just get barraged with keto, so I end up buying way too much.

The other day I got something about opportunity zones and I go, well we might use an opportunity zone for the benefit of our investors or whatever. Facebook really knows who I am. They get me every time. I'll put out, $50 here, $100 there, et cetera. But what this really says is that the landscape for marketing and PR has dramatically changed. I was just talking to the head of the agency today, and he pointed out something very interesting, which is that traditional media has dramatically changed. I'm quoting him. “In most cases, these traditional channels don't have the ROI (return on investment) in them anymore. They simply don't control eyeballs as well as they used to.” We used to say PR is the new advertising, but the problem is in the age of Trump is that the noise level is huge.

I don't know if you've noticed, I'm not making a political statement at all, I'm making a marketing statement. Impeachment was all the news a couple of weeks ago, now it's not. The news cycle has moved on to whatever's going on in the middle East. And so what we have is an extremely noisy environment, which you somehow have to transcend. And it's not done anymore with mass market communications. It's done with one-to-one communications. So, what we decided to do was to take the CEO briefing, which is every week. I'm basically telling you within the limits of what I can disclose publicly always, what's going on, what the trends are, how things are going, where things are at from my point of view. And we're going to upgrade that to a full webinar using the Zoom platform, which is what our company has standardized on. My good friends in the WebEx days spun off a wonderful product called Zoom.

The webinars will run in Zoom now. You'll still be able to dial in using your phone and listen, but what I'm expecting to do is to create a deck, a slide deck that we'll run through each week, we'll do quick here, catch you up, five slides on who we are, blah blah, blah, get everybody up to speed and then some additional slides, what the news of the day is and I'll be able to talk through it. And then that webinar is archived on our website and it's all very easy for people to replay and so forth. And we'll be moving away from all the transcription we've been doing and so on. And what the plan is to get a lot of people to listen to OriginClear through the CEO briefings, and we believe that we can get it up into the hundreds.

Right now it's some somewhere shy of a hundred and that's fine, but we want to move way up and the UberConference platform is limited to a hundred. We're going to be driving a lot of people to listen to the company and it will start as early as next week. So next Thursday, and you can still sign up on the website, the usual website that I keep publicizing in my CEO updates, but we'll be transferring you over and that's going to be very exciting. I look forward to doing that. Now, one of the things that's making this possible is the fact that, I'm excited to say, we really have a management team today. For example, my COO, Tom Marchesello, our head of business development, Ken Berenger and the president of the manufacturing division in Texas, which is called Progressive Water, Marc Stevens, all went to an important meeting with a potential strategic partner and I did not have to deal with it. I provided various documents and timelines and this and that, but they went ahead and ran a five hour meeting entirely by themselves without my support.

To me that's enormous because at the end of the day all you have with a company is the management team, and it's been tough not having a team. Marc has been amazing. Marc is right where the rubber meets the road, he's building the systems and then me as the strategist and various other things, and in between there was a vacuum. I think that what we're seeing with Tom, who's got just amazing credentials in running divisions and companies in major Fortune 500s and has done buy-side financing, so to him the acquisition game is something he's been there and done that. And then of course Ken Berenger is a master at putting together financing packages and I couldn't say good enough things about the two of them.

So I think Marc is going to find himself thoroughly supported. The company is changing because we're fleshing out the management bench in a way that we didn't have it before. You can't just put an ad out and find people necessarily that are good, you have to encounter them over time and they have to fall in love with the company. Tom Marchesello was probably the best outcome of the whole crypto project that we had running in 2018 called WaterChain™, which by the way is still in the lab. I'll talk in a bit about that. Tom came along, fell in love with what we were doing with the water industry, decentralization and so forth. He essentially grew into, once we put WaterChain on the back burner, he remained to do initially our Modular Water System™ business and then eventually he stepped into the COO position.

It was really because I actually have superior connections in the whole high tech space, and once I was doing something high tech like the cryptocurrency, then I started getting real talent. So, it's amazing to have Tom on board. And just as a side note about WaterChain, I just wanted to address that briefly. We think that WaterChain is really, really important for the company. I'm tracking what's happening in cryptocurrency, and basically there's been a tremendous amount of, shall we say, not real cryptocurrencies out there, there's a lot of manipulation of markets going on, but there are friends and colleagues of mine who are beginning to make some headway, and there's a prominent law firm that is actually part of WaterChain at the stockholder level and they are very much in the loop with some of the latest things happening.

Really what's happening with WaterChain is that we're in a holding pattern. We're waiting to see what happens, but it's not the first priority to the company. First priority of the company is twofold, first is to continue to integrate the operating units that we have, which are Modular Water Systems and Progressive Water. Basically Progressive Water has the bulk of the revenue and then Modular Water has been basically added to the Progressive Water operation. This gives Marc Stevens high level design skills from Dan Early and this is really, really, really powerful. What Dan Early creates is unique, and therefore he has a tremendous loyalty so you don't get this horrible experience of spending months on a project and then somebody else comes in and cuts the price by 10%, or even takes a loss because they want the account and you get it scooped out from underneath you.

Dan Early actually gets a tremendous amount of loyalty. So he adds that to the game with his engineer, Robb Litos, they bring that very important design and engineering factor to the people building systems. Dan himself now gets the platform of manufacturing, I call it Progressive Water, but really formally it's our manufacturing division now. So Dan for a while there was really stuck because he'd make a big sale and he'd run off and literally have to install it himself. We have a case study of this automotive dealership in Pennsylvania that we installed a system for. Well, Dan sold it and then had to go deliver it. That is not brilliant because of course the guy selling these systems has to stay on that, designs and sells them and then passes it off to operations. That's where Tom has been working with Marc Stevens and Dan Early and the financial team to integrate them all.

So that's one major activity of the company that's ongoing, and I'm happy to say that a lot of the open-ended items from Modular Water Systems have now been completely integrated and they are operating as one. Along with that, I don't want to get too complicated, but there is a very important factor in running any business that's based on projects, and that is to have what's called a CRM or a customer relationship management system. And we have implemented Insightly. Insightly is very well suited to the big-ticket project management that we do. It fully integrates with QuickBooks Online, and it is also what Dan Early had been using all along and brought to us. We've been putting everybody on Insightly and that is providing a really important flow because when you have good project management software, then you don't have to create invoices out of the blue or whatever. Once you push things along, things are triggered and purchase orders are triggered, and all that good stuff.

So that's been the work of the team. We have some very good talent down in Texas. Tracy Allen is our accountant there and she's doing a fantastic job with Eric Sandler back here in Los Angeles as controller, with Tom Marchesello basically running the show. Of course we've got our outside accountants and so forth, Glen Duffy as our external accountant with her team. What they've been doing is really creating a company because the second part of what we're doing and something that I've been working on for a long time is getting acquisitions done. I keep disclaiming it because acquisitions can make such a huge difference to the revenue of a company. If I look at potential acquisitions that are in front of me, it could increase our revenue by 10 but I can't tell you what's going to happen because that is such a huge factor that I would be conditioning the market by telling you that we're doing a deal when frankly we do not have a binding agreements with these targets and so we cannot rely on them.

But I can tell you about process. So, from the point of view of process, public companies are very good for acquiring companies because, imagine that you created a water treatment company 25 years ago or 20 years ago, you're in your 50s or early 60s, what are your options? Your kids have moved on, they're lawyers, doctors, rock stars, whatever. They're not in the water industry. You've got some people in management but not enough to really take over the show. And so your options are to basically continue until you drop and then just before you do sell your company to a large water treatment company and all they will do is buy the clients and then they will destroy. They'll just fold everything and they'll just take your clients over and there'll be that and what you spent a lifetime building will be gone.

Now our approach is very, very different because I suffered through this kind of being acquired during the .com era and there are two different companies that I was an executive with and in both cases we had this ‘wonderful outcome’ of, “Hey, you've been acquired.” And in both cases, everything that I built for my companies was destroyed completely. So this is a point where, yeah, the cash was good, but we don't necessarily work just for cash. We want to actually accomplish something and a lot of water people feel that way. From day one we've said, “Look, we want you to come onboard and stay.” “We don't want you to go off and play golf.” “We want you to keep operating what you've got.” “We're going to go ahead and take the accounting and other CRM and so forth, Customer Relationship Management Systems, all these website systems.”

You name it, things that can be centralized we’ll take away from you and you can just keep on selling and it's what you love to do anyway. So we'll take all the stuff that you really don't want to know about away from you and we'll soon be able to liberate you to keep selling in your particular market. So that is actually really, really popular. That's appreciated. People know, people understand that we understand and so we have no lack of companies to acquire. The issue really comes down to financing. Basically, our experience with financing has been either people being ineffective or just took retainers from us and that was really painful or they were very predatory. These deals were like, “Oh my God.” You're basically saying the good news is you acquired a company. The bad news is you're acquiring a company.

They were deals out there, these frogs. We just didn't want to kiss those frogs because it would have been horrendous. We believe we have a solution that is going to be very attractive. I can't speak about it, but it is something that is going to be very effective to get this done, I believe. So, we think we've got the solution and I will say no more about that for now, but that is the second major activity of ours, acquisitions, and we are working on it very aggressively. And as I say, “I have a heck of a team.” The rest of it really is secondary to those two things. Are we getting productivity and integrating the company, company's operations and secondly the acquisition game and making that happen. So that's that part. I've been talking about decentralization a lot and that is because it's evident that there is decentralization process happening where more and more industrial water treatment companies have to do their own water treatment because of various reasons.

Now, let's take as an example what I was talking about this morning in the CEO update, which back in February that the photo that I posted on the CEO update was a system that is basically a pool cleaning system and what it does is works like a kidney dialysis system. It runs all the water in the pool through the trailer and all the systems in the trailer. It means that the pool owner is not going to have to flush away all that water because you can only shock a pool so many times. Anyway, so long story short, this demonstrated that we could do it and  Marc Steven’s operation is well-proven to be able to deliver these trailer based systems.

Recently, Dan Early came up with an opportunity and I'm going to read from what he emailed to me today, “There is a need to supply on-site potable water and wastewater treatment to support the crews that man and operate the drill rigs 24/7.  The equipment needs to be modular and mobile as each rig site may only be in operation for a short while before the crew moves on to the next site (typically less than a year).  Our ability to manufacture and deploy advanced water and wastewater treatment units in enclosed trailers that can be towed by small trucks positions us to be a major supplier for this water system opportunity”

Now remember, this is an opportunity, it's not a done deal, but this gives you a sense of how we can leverage our demonstrable skills.

“Each site may only need to treat and supply about 2500 GPD of potable water while collecting, treating, and disposing of generally the same amount of high strength blackwater.”]

Black water means the product of toilets, right? What comes out of showers is gray water and that's not this tough.

“The systems will comply with TCEQ (Texas Commission for Environmental Quality) regulations relative to public potable water systems while complying with the state's stringent wastewater disposal regulations.” He goes on to talk about the kind of systems that will be deployed, the remote monitoring, internet-based, controlling, and he says, “Our prior work developing the trailer mounted pool cleaning system is important in that we have already done this before albeit for another industry. From my assessment, it appears that the addressable market could be as many as 200 systems as serviced by up to five major service providers who contract with the drilling companies.  I am still trying to confirm this.”

So again, I'm not pretending that we're going to sell two hundred systems, but what it says is that there are these small number of major service providers who provide this service to the E&P (Exploration and Production) companies, and they in turn need a solution that is proven and that works and that is simple. We have that capability. This is very important. So, we have a good sales rep network that some of these sales rep organizations are extremely capable and they trust us. We've got a number of deals through these organizations and they know that we get the work done.

It's a long way to getting a deal done and when you get the deal done, it's a long way to actually deliver it. So again, I'm not making this into a revenue forecast but rather to show that we have this scalability and I love that that Dan has come up with this and that meanwhile he is doing current immediate work that is not long-term. I look at the forecast every day and one of the things that will be coming out as soon as possible is to give you an idea of what we did last quarter, which is I think going to be satisfactory. That's the most I can say for now. But there is current business being done by Dan and by Marc Stevens who are getting things done while also working on these really major opportunities. Now, here's the issue in the oil patch and that is that fracking, when you clean frack water it's a wonderful business, but let me tell you something, it is a complex system.

Cleaning frack water in my opinion, is an activity that's best done by large companies that integrate pieces into the whole thing. And sure enough, what we've been finding is opportunities that are simple, such as a few weeks ago I talked about working with the saltwater disposal well operators to recycle some of the water that they’re dumping down the SWDs (Saltwater Disposal Wells). Here's another one where we're doing a relatively small project but it scales very nicely and we know what to do. So, we really have understood that we're best with the small modular opportunities. We're not best with the big humongous deals that are really best done by the multi-billion dollar companies like American Water Works.

I like it because what happens at the edge is really the growing business. It is this activity of, as decentralized water treatment grows, and it definitely is growing. We are really positioned to be the big player. We'll call it the big small player, right? Because it's a small systems that we hope to ramp up both through the efforts of our in house team and of course acquisitions. So that's where we stand right now. As I say, I'm really heartened by today's news that the team went ahead and put together a major meeting offsite and I was not even on the phone for it. I provided logistical support but they are really able to run with the ball and I'm super proud of them. So with that I'm going to wrap up this call. I really appreciate you guys more than you know. Again next week we'll be moving to a different platform, but feel free to sign up on the existing link, which is totally okay.

The team of course you can reach us at (323) 939-6645 extension for Ken Berenger is 201 and you can give him a hard time about the fact that I made his ears burn today because he really is a rockstar. Then of course, Devin Angus is always available at extension 116 and he is really the channel to talk to me. He helps me with shareholder relations and so forth and both these guys are fantastic. We are wrapping up our offering that has been so successful. Please do discuss it if you are accredited, we'd like to see if you are qualified either by previous investment or that you really see this as an opportunity. It's a well-designed offering. Again, Ken Berenger did a wonderful job on that. With that, I'm going to leave you. Good night and I'll catch up with you next week. Thank you and have a nice weekend.

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