# Originclear, Inc.: Form 10-Q for the period ended Mar 31, 2024 - Company: [Originclear, Inc.](/companies/ocln.md) (CIK 1419793) - Form: 10-Q - Filed: 2024-05-15 - Accepted by EDGAR: May 15, 2024, 17:30 ET - Period: 2024-03-31 - Accession: 0001213900-24-043834 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1419793/000121390024043834/ea0206172-10q_originclear.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1419793/000121390024043834/ ## Management's discussion and analysis As filed, 32,319 characters. This Quarterly Report on 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 was founded as OriginOil® in 2007 and began trading on the OTC in 2008. In 2015, it was renamed as OriginClear® to reflect its new mission to develop breakthrough businesses in the industrial water sector. Today, OriginClear structures itself as the Clean Water Innovation Hub™ (“CWIB”) and intends to use its well-developed retail investor development capabilities to help bring potentially disruptive companies to market. For the foreseeable future, however, OriginClear intends to devote its entire capabilities to the success of its subsidiary, Water On Demand, Inc. (WODI). In 2023, OriginClear combined three of its operating divisions into the single WODI subsidiary, in anticipation of a merger of such subsidiary with Fortune Rise Acquisition Corp (“FRLA”) a Special Purpose Acquisition Company. The definitive merger agreement between WODI and FRLA was announced on October 24, 2023: https://www.originclear.com/company-news/originclears-water-on-demand-and-fortune-rise-acquisition-corporation-announce-business-combination-to-create-nasdaq-listed-company. WODI is composed of three operating units, Modular Water Systems (“MWS”), Progressive Water Treatment (“PWT”), and Water on Demand (“WOD”), the last being a development stage business. - PWT is responsible for a significant percentage of the Company’s revenue, specializing in engineered water treatment solutions and custom treatment systems. - MWS houses a worldwide, exclusive master license to the intellectual property of Daniel M. Early, consisting of five patents and related intellectual property, know-how and trade secrets (“Early IP”). In April 2023, OriginClear commissioned a valuation of the Early IP, which yielded a nominal value between $26,637,185 and $53,224,807. MWS features products differentiated by the Early IP and complemented with additional knowhow and trade secrets. - WOD is an incubation of the Company which intends to offer private businesses water self-sustainability as a service - the ability to pay for water treatment and purification services on a per-gallon basis. This is commonly known as Design-Build-Own-Operate (“DBOO”). ### Water Businesses The Company develops and incubates businesses in its role as the Clean Water Innovation Hub™ (“CWIB”). The mission of CWIB in general, is to create valuable properties through an incubation process that results in the launching of valuable spinoffs that add value to the world’s water industry, among others. Currently, OriginClear’s mission as the CWIB is the following: 1\. Support the rollout of the WODI post-merger entity (by retaining name). OriginClear has proposed a post-merger management services contract with WODI, which over time will be phased out as WODI builds its own internal team and capabilities; 2\. In particular, OriginClear is assisting WODI with its aggressive acquisitions plan, starting now and to be finalized post the SPAC merger (there is no assurance of success for the merger or for the planned acquisitions); 3\. Initiate non-binding agreements for the acquisition of related businesses by WODI or the post-merger entity, which will depend on the outcome of the BCA process; and 4\. For its own account, to accelerate new businesses that it may create (as it did with MWS in 2018 and with WOD in 2021), acquire (as it did with PWT in 2015) or partner with strategically. For this new phase, the Company may also engage in projects outside the water industry. On April 2, 2024 OCLN announced a strategic partnership with entrepreneur Kevin Harrington, a co-founding board member of the Entrepreneur’s Organization, to bring critical global attention to OriginClear's crowdfunding campaign, now in a preview invitational stage. https://www.originclear.com/company-news/original-shark-kevin-harrington-brings-his-star-power-to-originclear-crowdfunding-campaign. ### Water On Demand The Company is developing an outsourced water treatment business called Water On Demand (“WOD”), which it conducts through its subsidiary, Water on Demand, Inc. (“WODI”). The WOD model intends to offer private businesses water self-sustainability as a service, the ability to pay for water treatment and purification services on a per-gallon basis, with a percentage of net profits paid to investors and stakeholders. This is commonly known as Design-Build-Own-Operate or “DBOO”. The Company is currently evaluating pilot opportunities to enable outsourced water treatment as a managed service and that is paid by the gallon as an alternative to having to come up with significant up-front capital for in-house wastewater treatment. Recently, the Company announced agreements with water services company Enviromaintenance and utility network software provider Klir, to help develop a WOD commercial pilot in the Mobile Home Park sector. WODI may build, maintain and service the water treatment systems it finances, but as these expand it intends to contract with regional water service companies to carry out these functions. On April 6, 2022, an agreement in principle was reached to work with the first of these intended contractors, Envirogen Technologies (www.envirogen.com), a 30-year international provider of environmental technology and process solutions (www.originclear.com/company-news/originclear-and-envirogen-to-partner-on-water-on-demand). Future resources to build, maintain and service these financed systems may come from acquisitions; however, these are not actively being planned. WODI delegates the building and operating of WOD-financed systems to regional water companies under performance contract, with the aim of developing a network of such partners. This is expected to enable rapid scale-up of the WOD program, and the partner network would create a high barrier to entry for competitors. At the time of this filing, the WOD division of WODI has no staff or independent resources. WODI’s PWT and MWS divisions have a total of 32 employees. The Board of Directors of OriginClear serves as the Board for WODI, the CEO of OriginClear serves as CEO of WODI, and the CFO of OriginClear also serves as CFO of WODI. Under a management services arrangement, OCLN provides WODI with staffing and administrative resources in return for the funding for WODI’s prospective merger with FRLA and the making of certain special distributions. On February 15, 2024, the Company and Fortune Rise Acquisition Corporation (Nasdaq: FRLA), a Special Purpose Acquisition Company (SPAC), announced the filing of a registration statement on Form S-4 with the SEC which includes a preliminary proxy statement and prospectus in connection with the proposed business combination with OCLN subsidiary Water On Demand (WODI), an investor-funded service offering decentralized water management solutions and technologies to businesses and communities, potentially without the burden of upfront capital expenditures. WODI is a subsidiary of OriginClear, Inc. (OTC Other: OCLN). https://www.originclear.com/company-news/originclears-water-on-demand-and-fortune-rise-acquisition-corporation-seek-to-combine-under-form-s-4-registration-statement. On March 26, 2024, the Company announced the signing of a Memorandum of Understanding (MOU) between Modular Water Systems (MWS) and Enviromaintenance of Georgetown, TX to collaborate on its planned Water On Demand pilot program focusing on mobile home parks (MHP) in the Greater Central Texas Region. https://www.originclear.com/company-news/originclears-modular-water-systems-and-enviromaintenance-partner-for-water-on-demand-pilot-program On April 9, 2024, the Company announced the selection of Klir, Inc. (www.klir.com) to support its planned Water On Demand pilot program focusing on mobile home parks (MHP) in the Greater Central Texas Region. https://www.originclear.com/company-news/modular-water-systems-and-klir-partner-for-water-on-demand-pilot-program. ### Progressive Water Treatment Inc. Progressive Water Treatment (“PWT”) is a Dallas-based designer, builder and service provider for a wide range of industrial water treatment applications. PWT aims to offer a complementary, end-to-end offering to serve growing corporate demand for outsourced water treatment. PWT designs and manufactures a complete line of water treatment systems for municipal, industrial and pure water applications. Its uniqueness is its ability to gain an in-depth understanding of customer’s needs and then to design and build a turnkey water treatment system using multiple technologies to provide a complete solution for its customers. PWT utilizes a wide range of technologies, including chemical injection, media filters, membrane, ion exchange and SCADA (supervisory control and data acquisition) technology in turnkey systems. PWT also offers a broad range of services including maintenance contracts, retrofits and replacement assistance. In addition, PWT rents equipment in contracts of varying duration. Customers are primarily served in the United States and Canada, with the company’s reach extending worldwide from Siberia to Argentina to the Middle East. ### Modular Water Systems Modular Water Systems (“MWS”) offers a unique product line of prefabricated water transport and treatment systems. Daniel “Dan” Early P.E. (Professional Engineer) heads the MWS division. On June 25, 2018, Dan Early granted the Company a worldwide, exclusive non-transferable license to the technology and knowhow behind MWS (See “Intellectual Property”). A ten-year renewal on May 20, 2020 added the right to sublicense and create manufacturing joint ventures. With PWT and other companies as fabricators and assemblers, MWS designs, manufactures and delivers prefabricated water transport (pump and lift stations) under the EveraMOD™ brand; and wastewater treatment plant (“WWTP”) products under the EveraSKID™ and EveraTREAT™ brands to customers and end-users which are required to clean their own wastewater, such as schools, small communities, institutional facilities, real estate developments, factories, and industrial parks. On August 12, 2022, the Company announced the inaugural delivery and installation of its pre-engineered EveraBOX™ to implement a low-risk Liquid Ammonium Sulfate (LAS) disinfectant system for Pennsylvania’s Beaver Falls Municipal Water Authority (BFMA). Typical of MWS products, EveraBOX is manufactured using inexpensive, long-lasting High-Density Polyethylene (HDPE) or Polypropylene (PP) materials. These are also classified as Structural Reinforced Thermoplastic Pipe (SRTP). These materials have proven to be less affected by supply chain issues currently impacting metal and fiberglass construction. On January 10, 2024, OCLN and Buda, Texas-based Plastic Welding and Fabrication, Ltd. (PWF) jointly announced a Memorandum of Understanding (MOU) for a strategic partnership between OriginClear’s subsidiary, Water On Demand, Inc. (“WODI”), and PWF. https://www.originclear.com/company-news/originclears-water-on-demand-in-strategic-partnership-with-the-intent-to-acquire-manufacturer-for-its-proprietary-modular-products. PWF is already a key fabricator of highly durable, patent-based enclosures for Modular Water Systems (MWS), the technology division of WODI that designs and develops highly scalable systems for self-contained water treatment and transportation. The MOU enhances the strategic relationship and enables MWS to build its complete water systems right where the enclosures are manufactured, for maximum efficiency and speed. Additionally, the parties signed a Letter of Intent (LOI) which provides a framework for negotiating a definitive agreement for WODI to acquire PWF and, if executed, would establish the first in-house manufacturing facility for WODI’s Modular Water Systems division. The acquisition is expected to be accretive. The parties caution that talks are in an early stage and may not succeed. On March 26, 2024, OCLN announced the signing of a Memorandum of Understanding (MOU) between Modular Water Systems (MWS) and Enviromaintenance of Georgetown, TX to collaborate on sales of standardized systems in the Greater Central Texas Region, from Waco to San Antonio. Enviromaintenance (www.enviromaintenance.com) is a leading provider of large community scale-on-site wastewater treatment and disposal systems, with a significant market presence in the Mobile Home Park (MHP) industry in the greater Austin area. The company plans to recommend MWS’s fully integrated, modular wastewater treatment systems to MHPs, thereby providing mobile home park owners an affordable, reliable and efficient way to treat their wastewater. https://www.originclear.com/company-news/originclears-modular-water-systems-and-enviromaintenance-partner-for-water-on-demand-pilot-program. ### Patents and Intellectual Property On June 25, 2018, Dan Early granted the Company a worldwide, exclusive non-transferable license to intellectual property consisting of five issued US patents, and design software, CAD, marketing, design and specification documents (“Early IP”). On May 20, 2020, we agreed on a renewal of the license for an additional ten years, with three-year extensions. We also gained the right to sublicense, and, with approval, to create ISO-compliant manufacturing joint ventures. The license to the Early IP was included as part of the sale of the MWS assets to WODI on April 14, 2023. The Early IP consists of combined protection on the materials and configurations of complete packaged water treatment systems, built into containers. The patents consist of the following: | # | Description | Patent No. | Date Patent Issued | Expiration Date | | ---: | --- | --- | --- | --- | | 1 | Wastewater System & Method | US 8,372,274 B2 Applications: WIPO, Mexico | 02/12/13 | 07/16/31 | | 2 | Steel Reinforced HDPE Rainwater Harvesting | US 8,561,633 B2 | 10/22/13 | 05/16/32 | | 3 | Wastewater Treatment System CIP | US 8,871,089 B2 | 10/28/14 | 05/07/32 | | 4 | Scum Removal System for Liquids | US 9,205,353 B2 | 12/08/15 | 02/19/34 | | 5 | Portable, Steel Reinforced HDPE Pump Station CIP | US 9,217,244 B2 | 12/22/15 | 10/20/31 | On May 10, 2021, OriginClear announced that it had filed a patent application titled “System And Method For Water Treatment Incentive”, for using blockchain technology and non-fungible tokens (NFT) to simplify the distribution of payments on outsourced water treatment and purification services billed on a pay-per-gallon basis ahead of inflation. With the rising need for local, point-of-use or point-of-discharge water treatment solutions, the Modular Water Systems licensed IP family is the core to a portable, integrated, transportable, plug-and-play system that, unlike other packaged solutions, can be manufactured in series, have a longer life and are more respectful of the environment. The common feature of this IP family is the use of a construction material (Structural Reinforced ThermoPlastic), for the containers that is: - more durable: an estimated 75 to 100-year life cycle as opposed to a few decades for metal, or 40 to 50 years maximum for concrete; - easier to manufacture: vessels manufacturing process can be automated; and - recyclable and can be made out of biomaterials In addition, Patent No. 8,372,274 relates to the use of vessels or containers made out of this material combined with a configuration of functional modules, or process, for general water treatment. Patent Nos. 8,561,633 and 8,871,089 are currently expired, however the Company believes these may be reinstated. Patent No. 8,561,633 is a stormwater filtration patent that does not pertain to the MWS business model. Patent No. 8,871,089 is a Continuation-in-Part (CIP) on the original Patent No. 8,372,274. This original patent and Patent No. 9,217,244 are the basis for the current MWS business and therefore the status of the CIP is not considered material. Other subsequent patents, which build upon the original claims, focus on more targeted applications. These patents outline a given combination of modules engineered inside the vessel to address a specific water treatment challenge. With the spinoff of Water On Demand Inc and its operating divisions, the Company holds no patents directly, but indirectly has access to the licensed patents through MWS. The licensed intellectual property consists of five issued US patents, and design software, CAD, marketing, design and specification documents. On May 10, 2021, the Company announced that it filed “System And Method For Water Treatment Incentive”, a patent application for using blockchain technology and non-fungible tokens (NFT) to simplify the distribution of payments on outsourced water treatment and purification services billed on a pay-per-gallon basis ahead of inflation. The application status is provisional. The ORIGINCLEAR trademark application has newly registered as US Trademark Registration 7,296,730 issued on February 6, 2024. The ORIGINCLEAR logo trademark application has registered as US Trademark Registration 7,296,731 issued on February 6, 2024. Other trademarks in process of registration include: Trademarks: $H2O, WATERPRENEUR, CLEARAQUA, THE WATER COIN FOR THE WORLD, WATER - THE BLUE GOLD, THE CLEAN WATER INNOVATION HUB. The Company relies and expects to continue to rely on a combination of confidentiality agreements with its employees, consultants, and third parties with whom it has relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect its proprietary rights. ### New Role of the Company The Company, in its role as the CWIB, seeks to create, incubate or accelerate businesses in the water industry, and potentially outside of it. Having achieved a spinoff of its three major properties into a company that achieved a $32 million valuation at the time of the Business Combination of October 24, 2023, the Company now intends to achieve similar results with other companies, in which it may take an equity position in addition to charging management fees. We believe that our main strength is in helping to capitalize such companies through retail corporate development activities; and to help them achieve commercial proof of concept and scale; and to assist with mergers and acquisitions. The Company cautions that suitable candidates for this new role may not be identified and even if identified, may not become partners or achieve commercial successes. The Company's focus for the foreseeable future remains the financing, development and support of its WODI subsidiary. ### 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. Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined. Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts for the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to costs and income, which are recognized in the period the revisions are determined. ### Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, valuations of non-cash capital stock issuances and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that the Company believes 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 December 31, 2023, the amounts reported for cash, prepaid expenses, accounts payable and accrued expenses approximate the fair value because of their short maturities. ***Results of Operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.*** ### Revenue and Cost of Sales Revenue for the three months ended March 31, 2024 and 2023 was $6,573 and $6,573, respectively. There was no cost of sales for the three months ended March 31, 2024 and 2023, respectively. ### Selling and Marketing Expenses For the three months ended March 31, 2024, we had selling and marketing expenses of $526,640, compared to $796,619 for the three months ended March 31, 2023. The decrease in selling and marketing expenses was primarily due to a decrease in marketing expenses. ### General and Administrative Expenses For the three months ended March 31, 2024, we had general and administrative expenses of $893,300 compared to $905,916 for the three months ended March 31, 2023. The increase in general and administrative expenses was primarily due to an increase in outside services. ### Other Income and (Expenses) Other income and (expenses) increased by $17,639,232 to $(12,239,373) for the three months ended March 31, 2024, compared to $5,399,859 for the three months ended March 31, 2023. The increase was due primarily to an increase in loss on non-cash accounts associated with the change in fair value of the derivatives in the amount of $16,642,571 and gain on redemption of common stock of $1,114,765, offset by an increase in unrealized gain on investment securities of $31,646, impairment of receivable of $50,000 and decrease in interest expense of $36,458. ### Net Income/(Loss) Our net loss increased by $15,404,749 to $(15,896,283) for the three months ended March 31, 2024, compared to net loss of $(491,534) for the three months ended March 31, 2023. The majority of the increase in net loss was due primarily to an increase in other expenses associated with the net change in fair value of derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. ### Liquidity and Capital Resources Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, raising additional capital and increasing sales. We obtained funds from investors during the three months ending March 31, 2024. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing. In connection with our prior sale of Series M Preferred Stock conducted under Regulation A under the Securities Act, we may be subject to claims for rescission. If this occurs, it may have a negative effect on our liquidity. At March 31, 2024 and December 31, 2023, we had cash of $157,351 and $114,640 and a working capital deficit of $45,837,183 and $32,249,892 respectively. The increase in working capital deficit was due primarily to an increase in non-cash derivative liabilities, current liabilities held-for-sale and accrued expenses, with a decrease in convertible promissory notes. During the period ended March 31, 2024, we raised an aggregate of $252,500 from the sale of preferred stock in private placements and $1,386,230 for WODI convertible secured promissory notes and warrants. 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 $725,756 for the three months ended March 31, 2024, compared to $1,906,841 for the prior period ended March 31, 2023. The decrease in cash used in operating activities was primarily due to a decrease in value added to note purchase agreements, impairment of receivable and gain on redemption of common stock, with an increase in contracts receivable, contract assets, accrued expenses and contract liabilities. Net cash flows used in investing activities was $561,500 for the three months ended March 31, 2024, compared to $1,662,420 for the prior period ended March 31, 2023. The decrease in cash used in investing activities was primarily due to a decrease in notes receivables during the period. Net cash flows provided by financing activities was $1,458,596 for the three months ended March 31, 2024, as compared to $3,210,161 for the three months ended March 31, 2023. The decrease in cash provided by financing activities was due primarily to a decrease in proceeds for issuance of preferred stock and promissory notes. To date we have principally financed our operations through the sale of our common and preferred stock and the issuance of debt. We do not have any material commitments for capital expenditures during the next twelve months. Although our proceeds from the issuance of securities together with revenue from operations are currently sufficient to fund our operating expenses in the near future, we will need to raise additional funds in the future so that we can maintain and expand our operations. Therefore, our future operations are dependent on our ability to secure additional financing, which may not be available on acceptable terms, or at all. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations. We have estimated our current average burn, and believe that we have assets to ensure that we can function without liquidation for a limited time, due to our cash on hand, growing revenue, and our ability to raise money from our investor base. Based on the aforesaid, we believe we have the ability to continue our operations for the immediate future and will be able to realize assets and discharge liabilities in the normal course of operations. However, there cannot be any assurance that any of the aforementioned assumptions will come to fruition and as such we may only be able to function for a short time. ### Off-Balance Sheet Arrangements We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures. ## Market risk As filed, 1,070 characters. As of the date of the filing of this report, the Company has 50 shares of Series F preferred stock outstanding which the Company failed to redeem on September 1, 2020, for an aggregate redemption price (equal to the stated value) of $50,000. As of the date of the filing of this report, the Company has 25 shares of Series G preferred stock outstanding which the Company was required to, and failed to redeem on April 30, 2021, for an aggregate redemption price (equal to the stated value) of $25,000. As of the date of the filing of this report, the Company has 25 shares of Series I preferred stock outstanding which the Company was required to, and failed to redeem between May 2, 2021 and June 10, 2021, for an aggregate redemption price (equal to the stated value) of $25,000. As of the date of the filing of this report, the Company has 297 shares of Series K preferred stock outstanding which the Company was required to, and failed to redeem between August 5, 2021 and March 26, 2022, for an aggregate redemption price (equal to the stated value) of $297,150. ## Controls and procedures As filed, 1,903 characters. #### Evaluation of Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. #### Changes in Internal Control Over Financial Reporting There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15f of the Exchange Act) that occurred during the fiscal quarter ended March 31, 2024 that has materially affected, or are reasonably likely to materially affect, the our internal control over financial reporting. #### Limitations on Internal Controls In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Filed May 15, 2024. Source: SEC EDGAR, the filing index for accession 0001213900-24-043834. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.