Item 1. Business
Item
1.
Business
Background
Rainmaker
Worldwide Inc. (“RAKR”, the “Company”, “we”, “us” or “our”) is a Nevada corporation
originally formed on February 27, 1998. The corporation became RAKR on July 3, 2017 in a reverse merger. We are currently developing
Water-as-a-Service (“WaaS”) projects in various locations around the globe. We are implementing these projects using proprietary
technology of our former subsidiary based in the Netherlands, Rainmaker Holland B.V. (“RHBV”). The Company retains a 12%
ownership stake in RHBV. RAKR retains access to the technology based on a cost-plus formula, which was negotiated in an exclusive WaaS
Distribution Agreement with RHBV.
Rainmaker
Worldwide Inc. (Ontario) (“RWI”), an Ontario Corporation, was formed in Peterborough, Ontario, Canada on July 21, 2014, under
the Ontario Business Corporations Act to finance and commercialize patented technology and to consolidate the assets, intellectual property,
and executive management expertise of Dutch Rainmaker B.V. (“DRM”). RWI is a wholly owned subsidiary of the Company. DRM
was originally started by Piet Oosterling as a technology company focused on delivering decentralized water solutions to water scarce
regions in the world. In his lifetime, Mr. Oosterling wrote and commercialized over 400 patents. His wealth of knowledge and expertise
continues to inspire and guide the Company’s executive management team and policy, our distribution partners, and RHBV.
On
July 3, 2017, RWI shareholders completed a share exchange with the Company (the “Merger”) pursuant to a share exchange agreement
dated June 28, 2017 (the “Share Exchange Agreement”) among the Company, RWI and RWI’s 45 shareholders at the time.
Upon completion of the Merger, and in accordance with the terms and provisions of the Share Exchange Agreement, the Company acquired
an aggregate of 9,029,562 common shares of stock in the capital of RWI from the RWI Shareholders (being all of the issued and outstanding
shares of RWI) in exchange for an aggregate of 66,818,759 restricted shares of the Company’s common stock, or 7.4 shares for each
share of RWI. Therefore, RWI became a wholly owned subsidiary of the Company effective July 3, 2017. The Company’s former name,
Gold and Silver Mining of Nevada, Inc. (“CJT”) was changed on April 24, 2017, in expectation of and conditional upon completion
of the Merger. The Merger was accounted for as a reverse acquisition with RWI considered the accounting acquirer since the former RWI
shareholders remained in control of the combined entity after the consummation of the transaction. As part of the Merger, net liabilities
of $235,495 were recognized on the Company’s balance sheet. As a result of the Merger, the Company traded on the OTC Pink, but
as of March 17, 2022 the Company now trades on the OTCQB continuing to trade under the symbol, RAKR.
On
July 15, 2020, Sphere 3D Corp. (NASDAQ: ANY) announced that it entered into a definitive merger agreement pursuant to which it would
have acquired all the outstanding securities of Rainmaker Worldwide Inc. Upon closing, Sphere 3D’s name would have changed to Rainmaker
Worldwide Inc., and its business model would focus on WaaS. Rainmaker management would have assumed operational leadership of the combined
entity. The transaction was subject to completion of an equity financing, or series of financings, for a minimum of US$15 million at
a share price to be mutually agreed prior to closing and such other customary regulatory and shareholder approvals, including the approval
of NASDAQ. Closing was originally expected to occur prior to December 31, 2020, but was subject to extension to February 28, 2021, under
certain circumstances if mutually agreed by the parties. As part of this process, Sphere 3D agreed to advance US$1.85 million to Rainmaker
by way of a secured convertible note for Rainmaker to sustain multiple growth initiatives. The funds were used to fulfill recent contracts
and expand its equipment production capacity. This note remains payable and is presented in RAKR’s financial statements. Due to
various transactional and regulatory complications the agreement was ultimately terminated on February 12, 2021 and was subsequently
announced publicly.
As
a result of the incomplete Sphere 3D transaction, on March 31, 2021, the Company, including RWI, entered into a business agreement with
RHBV, DRM and Wind en Water Technologie Holding B.V. (“WWT”). These companies were considered related parties on that date
by virtue of stock ownership exceeding 10%. The parties agreed to an exchange of contractual obligations, debt owed, and shares of common
stock in full settlement of all obligations among the parties. The resultant Financial Statements, in accordance with ASC 205-20-45-1E,
reflect the impact of these exchanges to the Company. The Company and RHBV decided to restructure in order to optimize business operations
and broaden access to the capital markets. The Company and RHBV, as mutual shareholders in each other’s company, continue to pursue
the mission and objective of providing low-cost water to communities and commercial entities in need of water solutions.
3
The
Company operates out of its head office based in Peterborough, Ontario, Canada. In support of its WaaS project implementation strategy,
the Company will utilize two main types of energy-efficient, fresh water-producing/purification technologies: (1) Air-to-Water (“AW”),
which harvests fresh water from humidity and heat in the atmosphere, and (2) Water-to-Water (“WW”), which transforms seawater
or polluted water into drinking water. The technologies can be wind driven, solar based, or can use conventional power sources, such
as grid or generator. It is deployable anywhere and leaves no carbon trace if renewable resources are deployed.
The
Company’s current and ongoing focus is to deliver WaaS, i.e., selling water directly to the customer on a per liter basis, using
the two Rainmaker technologies discussed above or other complementary technologies acquired or licensed by the Company. This focus shall
be administered by forming local joint venture partnerships (“JV”) where demand exists with profitable pricing scenarios.
The JVs will in turn own the water delivery system and related equipment. In most if not all cases, RAKR expects to have ownership stakes
in JVs. Ownership percentages will typically be determined by the relative contribution of the stakeholders.
The
Company has concurrently planned various WaaS projects in Turks and Caicos and other Caribbean countries. Moreover, although there can
be no assurance, our business development activities are expected to yield more commercial contracts in 2022. The implementation dates
have continuously shifted due to logistical and supply chain issues related to Covid-19. Principally, WaaS involves the selling of produced
(AW) or purified water (WW) on a per liter basis either in a bottle for drinking or in bulk for industrial and commercial services. This
commercial activity requires the Company to deliver operational, maintenance, marketing and sales expertise in combination with local
partners in most dealings. Usually, projects often require working with complementary technology for post treatment of water and mineralization
in tandem with bottling plants and renewable energy businesses. Additional commercial activities include but are not limited to the integration
of the foregoing technologies and post implementation operation and maintenance-based functions.
In
the Caribbean, locations have been identified and operating plans defined. We have an AW machine being tested in the Netherlands and
expect delivery by Q3 2022. Specifically, locations have been identified and operating plans defined for Turks and Caicos.
The
Company has generated limited revenue up until the present time, and its operations for the past three years have been typically focused
on business development, market research, technology research and development activities. The Company, on a consolidated basis, had total
assets of $2,558,279, as of December 31, 2020. As of December 31, 2021, net assets were $344,341, reflecting the impact of restructuring
in connection with the previously held RHBV. The ultimate effect of the restructuring has eliminated $2,958,497 in debt, which we believe
will aid us in facilitating the future expected financing needs of the Company. Furthermore, 20,238,606 shares of common stock were returned
to the corporate treasury in exchange for the cancelation of royalty agreements and all obligations therein.
At
present, the Company executes consulting agreements with experienced executive personnel and senior advisors. Sales are heavily driven
by independent distributors and project developers. The Company had no revenue for the years ending December 31, 2021 and 2020 and had
net losses of $2,725,465 and $22,645,796 for the years ended December 31, 2021 and 2020, respectively. A large proportion of the 2021
losses relate to uncustomary expenses associated with the restructuring ($467,118 amortization of debt discount and non-recurring consultancy
expenses of $587,500 as well as losses from equity investments ($112,000) and write-down of inventory ($219,701)). The losses associated
with discontinued operations ($333,733) are not expected to reoccur in future years. The total of these expense categories is $1,720,052
or 63.1% of the net loss. The Company has suffered recurring losses from operations, negative cash flows from operating activities and
has limited resources or revenues to cover its operating costs. The Company’s auditor’s report for 2021 stated that there
was substantial doubt about the Company’s ability to continue as a going concern.
Impact
of COVID-19
On
March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic.
As
a global corporation the economic effects within the Company’s environment have been substantial. In global markets, disruptions
in supply chains and increases in related costs have had a real impact on our ability to deliver WaaS projects. Measures being introduced
at various levels of government to curtail the spread of the virus (such as travel restrictions, closures of non-essential municipal
and private operations, imposition of quarantines and social distancing) have had a material impact on the Company’s operations.
The extent of the impact of this outbreak and related containment measures on the Company’s operations cannot be reliably estimated
at this time but at the same time the impact has been significant since the declaration of the pandemic two years ago. For the Company,
it is particularly disruptive because of limitations on our business development and engineering experts to travel and implement projects.
As global operations open, we expect that we will begin to track according to the original business plan.
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Products
and Services
Overview
Across
the world, fresh water is unevenly distributed. Many regions are desperately under-served, including North Africa, the Middle East, India,
Mexico, large portions of South America, and various island geographies.
Fundamentally,
the WaaS solutions are based on deploying technology with the following attributes to ensure low-cost delivery and Company profitability:
●
Versatile
●
Scalable
& Cost-effective
●
Environmentally
& Socially Sustainable
●
Applying
Proprietary Technology through partners and affiliates
Air-to-Water
(AW) – Harvests fresh water from airborne humidity by using advanced heating and cooling technologies
Water-to-Water
(WW) – Transforms contaminated water (saltwater, sewage, polluted) into safe, clean water by using an environmentally sustainable
process called Multi-Effect Membrane Distillation.
The
operating efficiency of these technologies allows us to provide customers with clean water at a price that is highly competitive relative
to traditional alternatives. We substantially out-perform peer competitors because we can deploy remotely where the water is consumed
and using up to 50% less power than those same competitors. The compact and scalable systems for AW and WW enable decentralized deployment,
in which water is distributed directly to the consumption site with no expensive piping or truck transport. AW and WW are both cost-effective
technology solutions and can be powered by solar, wind, or grid electricity, or a combination of power sources. They can produce roughly
5,000 to 150,000 liters of water per unit, per day, depending on the local conditions and the type of unit deployed.
Cost
Information
With
the core focus on WaaS delivered on a per liter basis, the relevant Cost Information is the cost per liter of alternative suppliers.
Currently in remote locations, the principal source of supply is bottled water. Accordingly, our solutions are optimally profitable when
we compete head-to-head with bottled water that is transported or bulk water that is transported by truck to local communities. In most
remote communities where this water is imported, the minimum cost per liter is US$0.30 reaching as high as US$2.00, according to our
market research. The Company’s fully amortized cost of water per liter through our distributed WaaS model and distribution agreement
with RHBV, bottling, operating and maintenance, distribution and other costs allows us to compete profitably to generate corporate value
beneficial to our shareholders. The market for distilled water supported in part by WW-based technology, which is essential to more specialized
industrial or commercial activities, is expected to increase margins significantly.
Regulatory
Information
The
global nature of our approach means that regulatory conditions vary by jurisdiction. We believe that the ultimate test of profitability
in this complex, cross-jurisdictional environment will be the quality of the water that is bottled and tested. The Company seeks to adhere
to World Health Organization standards for clean water using the technologies that are authorized in a particular sovereign jurisdiction.
WaaS
Recurring Revenue Model
The
RAKR business model begins with the identification of a trusted local partner. The next step is to enter into JV structures, which maximize
value to all stakeholder-parties.
5
The
Rainmaker delivery systems are to be installed by entering contracts with local third-party experts that are typically Heating, Ventilation
and Air Conditioning (“HVAC”) experts.
The
RAKR model charges a market determined price per liter of bottled water or similarly treated water. Revenue sources include bottled water,
bulk water, and industrial water. A representative project in the Caribbean currently under development is expected to generate $110,000
dollars in revenue per month once seven allocated machines are operational. The capital expenses for the project are roughly $650,000
and the payback is less than one year. This representative project reflects the project profile that we will be seeking in the future.
We
believe the value we will offer through our WaaS projects is based on the following factors:
(1)
There
are no upfront costs to the customer.
(2)
Capital
costs are borne through the JVs and other partnerships. Only end-consumers of the water pay on a per liter basis.
(3)
The
combination of (1) and (2) above make it economically viable to deploy in communities that do not have the resources or network infrastructure
to independently finance projects that require high amounts of financial capital.
Potential
Improvements
Potential
improvements and related applications that we are pursuing or plan to pursue include the following:
(1)
Seek
more strategic and technology-based partnerships with complementary technology and business development companies to expand our global
reach and service offering.
(2)
Work
with RHBV to identify relevant technological advances based on lessons learned from previously implemented projects to reduce total
costs and enhance net profits.
Market
Opportunity
In
the past ten years, there has been a growing awareness of the shortage of fresh water—and the associated economic and social effects
the problem magnifies in impoverished and underdeveloped communities. Entities ranging from Water.Org to the United Nations (access to
safe drinking water represents #6 of the 17 Sustainable Development Goals articulated by the United Nations) are at the forefront of
driving international policy momentum and prospects for multilateral cooperation in the realms of global governance and public-private
co-regulation. Common to these efforts is the search for scalable and practical solutions that possess applications uniquely suited to
the problem of shortage.
The
metrics that underpin the international need for ingenuity and action are the same as those that animate and sustain the market opportunity
for our Company:
(1)
Less
than 3% of the world’s water is fresh – the rest is seawater and undrinkable in its current state.
(2)
Of
this 3%, over 2.5% is frozen and locked up in Antarctica, the Arctic and glaciers.
(3)
People
and animals rely on 0.5% of the world’s water. (Source: Unwater.org - Facts and Trends: Water)
Moreover,
at any moment, the atmosphere contains approximately 37.5 million billion gallons of water. This potential is not currently harvested
by the means of private organizations or government institutions and thus presents a significant opportunity for AW technology to satisfy
worldwide demand for water.
The
World Health Organization estimates that 50 liters of water per day is required per individual to meet basic needs. It is estimated by
the OECD that by 2030 nearly half of humanity will be living in a condition of severe water stress. Currently, according to UNICEF, 2.2
billion people around the globe lack safe drinking water. While high-income countries only treat 70% of wastewater, low-income countries
treat 8%. With the world’s population expected to reach 9 billion by 2038, the global need is indisputably high. Much of the population
expansion is or will be in the very areas that are already suffering from the problem of water scarcity.
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The
above analysis points to a global market for water that is extraordinarily immense. Today, the annual global water market for all purposes
and uses is $650 billion and is expected to expand to $1 trillion by 2025. (Source: RobecoSAM Study (2015, June). Water: the market of
the future). Applying RAKR’s approach against the purposes and uses defined above, our solutions are tailored to meet roughly 70%
of that global level of demand.
Current
Projects
Representative
existing projects reside within the Caribbean and specifically Turks and Caicos.
Suppliers
As
stated previously, our principal supplier for the core technologies to be deployed is RHBV. RHBV in turn has built a global supply chain
for its components. Should RHBV not supply the appropriate scale of technology required by a project, RAKR has identified multiple technologies
of different sizes and types.
Supplemental
technology (i.e., bottling, pre-post wastewater treatment, mineralization solutions, and renewable energy) – suppliers are global,
abundant, and highly competitive so as to ensure the lowest cost per liter for any given WaaS project planned implemented by the Company.
Competition
The
Rainmaker WaaS-focused business model that will deliver potable water at the source of demand is uniquely positioned to address alternative
competitive models. We believe that competitive models, while relevant and plausible alternatives, will not ultimately fully support
the global level of demand for water at a reasonable price per liter. In virtue of our current affiliations, we believe we have a cost
per liter competitive advantage. Accordingly, on a global basis, we do not believe competitive conditions will thwart our ability to
produce long-term, corporate value or significantly diminish our financial results in the near term. However, other companies with sufficiently
greater resources may develop competing products and have an advantage over us based on the relative size.
Government
Subsidies and Incentives
While
RAKR is not currently pursuing subsidies and incentives, we believe that over time such programs will be applicable to the Company, and
we will pursue them in due course.
Over
time, RAKR will seek subsidies and incentives through its deployment of WaaS in underserved countries and particular communities within
countries. One example is First Nations in Canada where there is an ongoing and desperate shortage of safe drinkable and general-purpose
water.
Intellectual
Property
We
have indirect access to considerable intellectual property assets as a consequence of our partial ownership of and various partnerships
with RHBV. We believe that this allows us to maintain an edge in the competitive process from a technology and economic cost perspective.
Company
Executive and Consulting Resources
The
direct Executives of RAKR are represented by Michael O’Connor, Director, Executive Chairman and CEO and Kelly White, VP of Finance.
These resources are sourced through consulting agreements.
We
have an extended sales force through our distribution partners. Currently we have distribution partners with global reach.
Legal
services are provided by Sichenzia Ross Ference LLP since November 2017.
M&K
CPAS PLLC has served as the Company’s auditor since 2020.