Financial Analysis

11. WODI WODI is a subsidiary of OriginClear, Inc. that provides water treatment services under a DBOO model, allowing private businesses to pay for water treatment on a per-gallon basis. WODI collaborates with regional water service companies to finance, build, and operate these systems. On April 14, 2023, WODI acquired the MWS business unit from OriginClear, Inc. The acquisition included all assets, licenses, patents, and associated transactions of MWS. From the acquisition date, all MWS revenues, accounts receivable, accounts payable, and liabilities were transferred to WODI. On September 21, 2023, WODI merged with PWT, forming a combined entity operating under WODI. The merger was structured to enhance enterprise value in preparation for a planned business combination with FRLA. As part of the merger, all WODI shares and convertible notes were either exchanged or assumed, and in return, OriginClear, Inc. received 2,171,068 shares of the combined Water On Demand entity. On October 24, 2023, WODI and FRLA entered into a definitive Business Combination Agreement with the goal of listing WODI on Nasdaq through a de-SPAC transaction. The following day, FRLA shareholders approved extending the deadline to complete the business combination to November 5, 2024 , with provisions for twelve one-month extensions . On December 9, 2024, WODI and FRLA mutually agreed to terminate the Business Combination Agreement due to prolonged regulatory delays, escalating costs, and increasing mar …

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14. Commitments and Contingencies Facility Rental The Company leases a production facility at 5225 W. Houston, Sherman, Texas, under a non-cancelable operating lease classified in accordance with ASC 842, Leases. The lease commenced on July 1, 2024. Under a Triple Net (NNN) arrangement, the Company is responsible for property taxes, insurance and maintenance., with a currently monthly rent of $13,313. Warranty Reserve PWT projects are generally warranted against defects in materials and workmanship for one year from the date of completion, with certain construction areas and materials having extended guarantees. Based on historical experience, known risks related to critical components, and managements assessment, the Company recorded a warranty reserve of $50,000 as of December 31, 2025. This reserve reflects potential liabilities related to high-value components (pumps, RO membranes, and EDI modules). Management believes this reserve is adequate to cover probable warranty claims. …

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6. CONVERTIBLE PROMISSORY NOTES OriginClear, Inc. As of December 31, 2025, the outstanding convertible promissory notes are summarized as follows: Convertible promissory notes $ 2,617,692 Less current portion 597,944 Total long-term liabilities $ 2,019,748 Maturities of long-term debt are as follows: Period ending December 31, Amount 2026 1,875,000 2027 680,417 2028 62,275 2029 - $ 2,617,692 2014-2015 Notes Between November 2014 and April 2015, the Company issued unsecured convertible promissory notes, referred to as the 2014-2015 Notes, which were later extended to maturity dates ranging from November 2023 through April 2024. These notes bear interest at an annual rate of 10% and are convertible into common stock at prices ranging from $4,200 to $9,800 per share or 50% of the lowest trade price following issuance. Due to the reset conversion terms, the conversion feature is classified as a derivative liability under ASC 815. As of December 31, 2025, the remaining balance was $683,700, classified as long-term. OID Notes The Companys unsecured convertible promissory notes, known as OID Notes, had an aggregate remaining balance of $62,275 as of December 31, 2024. These notes were extended to mature on June 30, 2028, and include reset conversion terms, classifying them as derivatives under ASC 815. The conversion price was amended to the lesser of $5,600 per share or 50% of the lowest trade price recorded since issuance. As of December 31, 2025, the remaining balance was $62,275 …

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5. Restricted stock grants and warrants Restricted Stock Grants to CEO, the Board, Employees and Consultants The Company has entered into RSGAs with its CEO, Board, Employees, and Consultants to incentivize management and enhance the Companys economic performance. All shares issuable under these agreements are performance-based and granted upon achieving specific financial milestones. The first milestone requires consolidated gross revenue to reach or exceed $15,000,000 for the trailing twelve-month period, as reported in the Companys quarterly or annual consolidated financial statements. The second milestone requires consolidated operating profit to reach or exceed $1,500,000 for the trailing twelve-month period, calculated in accordance with GAAP, which includes operating revenue minus cost of goods sold, operating expenses, depreciation, and amortization. As of December 31, 2025, the Company has not recognized any costs related to these milestones, as their achievement is not yet considered probable. The Board of Directors approved an amendment to the RSGAs to include an alternative vesting schedule for grantees. Under this alternative vesting structure, if the fair market value of the Companys common stock on the vesting date is lower than its fair market value on the effective date of the RSGAs, the number of vested shares issuable will be adjusted to ensure the aggregate fair market value of the vested shares equals the fair market value on the effective date. If a Comp …

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10. Income taxes The Company is subject to U.S. federal and state income taxes and files income tax returns in the U.S. federal jurisdiction and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2017. The Companys policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended December 31, 2024, and 2025, the Company did not recognize any interest or penalties related to income tax positions. As of December 31, 2025, the Company had net operating loss (NOL) carryforwards of approximately $14,986,565. Due to the uncertainty of realizing the benefits of these NOL carryforwards, a valuation allowance equal to the total deferred tax asset has been recorded. Accordingly, no tax benefit has been reported in the accompanying consolidated financial statements. No tax positions included in the balance at December 31, 2025, involve ultimate deductibility that is highly certain but uncertain regarding timing. Due to deferred tax accounting, such uncertainties would not affect the annual effective tax rate but could accelerate cash payments to taxing authorities. The Company continues to monitor potential changes in tax legislation and regulations that may impact future tax positions. The Companys income tax provision differs from the expected income tax determined b …

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3. Leases The Company leases a production facility at 5225 W Houston Sherman, Texas, under a non-cancelable operating lease classified in accordance with ASC 842, Leases. The lease commenced on July 1, 2024, with a 61-month term. Under a Triple Net (NNN) arrangement, the Company is responsible for property taxes, insurance and maintenance costs. Right-of-Use (ROU) Asset and Lease Liability At lease commencement, the Company recorded a ROU asset and corresponding lease liability, both measured at the present value of lease payments over the lease term, discounted at an incremental borrowing rate of 11.84%. The ROU asset is amortized on a straight-line basis over the lease term, while the lease liability is reduced using the effective interest method, with each lease payment allocated between interest expense and principal reduction. Lease balances as of December 31, 2025 The components of lease-related assets and liabilities as of December 31, 2025: Description Amount Right of Use Asset, net $ 479,261 Lease liability - current portion 22,543 Lease liability - non-current portion 478,580 Total lease liability $ 501,123 Lease Expense For the year ended December 31, 2025, the Company recognized lease-related expenses in COGS, as the leased facility is directly related to production: Amortization of ROU Asset $147,814 Interest expense on Lease Liability $65,678 Future Minimum Lease Payments Future minimum lease payments as of December 31, 2025, are as follows: Period Amount Year 1 …

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Recently Issued Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 820); which enhances annual and interim segment disclosures. The Company adopted ASU 2023-07 for the year ended December 31, 2024. The Company has disclosed the title and role of the CODM, the nature of financial information reviewed by the CODM, and the basis for aggregating operating segments into a single reporting segment. See Footnote 14 Segment Reporting, for further information. …

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15. Related party As of December 31, 2025, the Company issued two promissory notes to its CEO. Promissory Note for $208,000 On September 2, 2024, the Company issued an unsecured promissory note to the CEO for a principal amount of $208,000, which includes a $200,000 cash advance and an $8,000 loan fee. The note accrues interest at 10% per annum, with monthly payments of $13,877 starting on October 4, 2024. The entire principal and accrued interest are due upon the earlier of March 2, 2025 (six months from the issuance) or upon the occurrence of certain events of default. The note is subordinate to other Company indebtedness. Promissory Note for $100,000 On December 17, 2025, the Company issued a promissory note to the CEO with a principal amount of $100,000. The note accrues interest at a rate of 8% per annum. Both promissory notes were reviewed and approved by the Companys Board of Directors in accordance with the Companys Related Party Transaction Policy. The proceeds from the notes will be used for general corporate purposes. Takeoff Services Inc On September 9 th , 2024, the CEO of WODI Kenneth A. Berenger became partners in a separate company called Takeoff Services Inc. (TSI). The purpose of TSI is to assist early-stage companies in their funding. This is not a function of the Company and there is no transfer of assets intended. Benefits mayaccrue to the Company, in terms of helping Water on Demand in its fund raising activities. by continuously improving the channels t …

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7. Revenue from contracts with customers Equipment Contracts Revenue and related costs on equipment contracts are recognized over time as performance obligations are satisfied in accordance with ASC 606. Revenue and associated profit are recognized as the customer obtains control of the goods and services specified in the contract. Un-allocable indirect costs and general and administrative expenses are charged for the periods as incurred. If a loss on a contract is anticipated, the loss is recognized immediately. The following table represents a disaggregation of revenue by type of good or service from contracts with customers for the years ended December 31, 2025, and 2024. Twelve Months Ended December 31, 2025 2024 Equipment Contracts $ 5,945,552 $ 3,054,718 Component Sales 125 1,253,833 Pump Stations 733,407 Waste Water Treatment Systems - - Services Sales 137,759 99,230 Rental Income - 9,523 Commission & Training - - $ 6,816,843 $ 4,407,781 Revenue recognition for other sales arrangements, such as component sales and service sales, remained materially consistent during the periods presented. Contract Balances Contract assets represent revenue recognized in excess of amounts billed on contracts in progress, while contract liabilities reflect billings that exceed revenue recognized. Assets and liabilities related to long-term contracts are classified as current in the balance sheets, as they are expected to be settled within the normal course of contract completion. As …

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18. Reporting Segments The Company has determined that it operates as a single reporting unit, in accordance with ASC 280, Segment Reporting. While management monitors the performance of distinct business operations PWT, MWS and WODI the operations share common characteristics and are aggregated into one reportable segment for external financial reporting purposes. This assessment is based on similarities in economic characteristics, products and services, customers, and the regulatory environment. The Companys CEO serves the CODM. Internally, WODI is structured into three operating segments, each aligned with its core business activities. The CODM evaluates performance and allocates resources based on these segments to drive execution: Water System Solution Engineering focuses on designing and delivering custom-engineered water treatment solutions, enabling decentralized and efficient water management. Full-Service Systems provides Water-as-a-Service solutions, including design-build-operate models, allowing customers to pay per gallon rather than making upfront investments. Corporate expenses, including general and administrative costs, executive salaries, and shared functions, are reported separately under Corporate. The CODM assesses segment performance based on revenue, operating income, and key expense categories, with operating income serving as the primary profitability metric. The following table summarizes financial results by segment for the year ended December 31, …

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2. Summary of significant accounting policies This summary provides clarity on the preparation and presentation of the Companys consolidated financial statements. Management is responsible for their accuracy, integrity, and objectivity. The accounting policies comply with generally accepted accounting principles in the United States of America (GAAP) and are applied consistently. Principles of consolidation The consolidated financial statements include the accounts of OriginClear, Inc. and its subsidiaries: WODI, PWT, MWS, Water on Demand #1., and OriginClear Technologies, Ltd. All material intercompany transactions and balances are eliminated in consolidation. Cash and cash equivalents The Company classifies all highly liquid investments with original maturities of three months or less as cash equivalents. Concentration risk Cash balances may, at times, exceed Federal Deposit Insurance Company (FDIC) limits. As of December 31, 2025, the Company held a cash balance of $828,007, with $822,292 in one bank, exceeding the FDIC-insured limit of $250,000 per insured bank. Accordingly, $572,292 of the balance was uninsured. The Company has not experienced any losses on uninsured cash balances and considers the credit risk to be minimal. Use of estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclo …

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4 . Equity OriginClear, Inc. Preferred Stock Series C On March 14, 2017, the Board of Directors authorized the issuance of 1,000 shares of Series C preferred stock, par value $0.0001 per share, to the CEO in exchange for his continued employment with the Company. The Series C preferred stock does not carry any dividend or liquidation preference rights and is not convertible into common stock. The holder of Series C preferred stock is entitled to 51% of the total voting power of the Companys stockholders. The purchase price was $0.0001 per share, for a total of $0.10 for 1,000 shares. As of December 31, 2025, 1,000 shares of Series C preferred stock were issued and outstanding. Series D-1 On April 13, 2018, the Company designated 50,000,000 shares of its authorized preferred stock as Series D-1 preferred stock. Series D-1 preferred stock does not entitle holders to dividends or a liquidation preference. Each share is convertible into 0.0005 of one share of common stock, subject to a beneficial ownership limitation of 4.99%, which may be increased to 9.99% upon 61 days written notice by the holder. As of December 31, 2025, 31,500,000 shares of Series D-1 preferred stock were issued and outstanding. Series F On August 14, 2018, the Company designated 6,000 shares as Series F preferred stock. Each share has a stated value of $1,000 and entitles the holder to quarterly cumulative dividends at an annual rate of 8% of the stated value. Series F preferred stock carries a liquidation …

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19. Subsequent Events Management has evaluated subsequent events through the issuance date of these consolidated financial statements and concluded that, except as disclosed, there are no additional events requiring adjustments or further disclosure: On January 2, 2026, 50 shares of Series Q preferred stock were converted to 89,285,716 common shares at $0.00112 per share. Between January 2, 2026, and January 3, 2026, an aggregate of 170 shares of Series R preferred stock were converted to 303,571,429 common shares at $0.0011 per share. Between January 2, 2026, and January 7, 2026, an aggregate of 85 shares of Series W preferred stock were converted to 152,447,092 common shares at $0.00112 and $0.00108 per share. On January 8, 2026, 15 shares of Series S preferred stock were converted to 29,411,766 common shares at $0.0010 per share. Between January 15, 2026, and January 31, 2026, OriginClear issued an aggregate of 26,069,930 in exchange for services at $0.001, $0.00067 and $.00073 per share. Between January 9, 2026, and March 4, 2026, the Company, through OriginSpark Holdings LLC, raised aggregate gross proceeds of approximately $228,000 from investors in exchange for the issuance of 6,840 units of OriginSpark Holdings LLC common membership interests at a purchase price of $33.33 per unit. On February 13, 2026, the Company entered into a Share Exchange Agreement with Water on Demand, Inc., pursuant to which the Company contributed 9,000,000 shares of Water on Demand, Inc. com …

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