Rainmaker Worldwide Inc. 10-K

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. 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”). On March 31, 2023, the Company sold a 60% interest in RWI leaving the Company, with a 40% interest going forward. RWI in turn finalized the purchase of a 60% interest Miranda Environmental and Water Treatment Technologies, Energy, Natural Resources, Engineering, Consulting, Construction and Commerce Inc.(“Miranda”). The remaining 40% of the Miranda shares will be acquired over a maximum two-year period. RWI is now focused on business development activities in North, South and Central America along with the Caribbean. We are implementing projects going forward using proprietary technology of Rainmaker Holland B.V. (“RHBV”). The Company now owns 12% ownership interest in 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. The Company trades on the OTC: Pink 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 have focused on Water-as-a-Service (“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 retains a 12% ownership stake in RHBV. RAKR retains access to the technology based on a cost-plus formula. 3 The Company utilizes 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 the full range of wastewater to contaminated water using a combination of the Company’s technologies with the now broadened product portfolio thanks to the acquisition of Miranda. The Company has generated limited revenue up until the present time, and its operations for the past four years have been typically focused on business development, market research, technology research and development activities. The Company had total assets of $43,038, as of December 31, 2022. As of December 31, 2023, net assets were $30,725. At present, the Company executes consulting agreements with experienced executive personnel and senior advisors. Future sales will be heavily driven by independent distributors and project developers. The Company had $78,912 in revenue for the year ending December 31, 2023 and no revenue for the year ending December 31, 2022 and had net losses of $1,218,908 and $1,837,611 for the years ended December 31, 2023 and 2022, respectively. The losses in 2023 have been reduced by 34% compared to 2022. The 2023 losses are driven by operating expenses, the first important component being the cost associated with maintaining the Company’s listing and current filing status with the SEC. The second component is consulting expenses including stock option expenses which incorporate derivative liabilities for warrants, the majority of which remains on the balance sheet as related party payables. 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 2023 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 for the Company were substantial and there are still lingering economic impacts globally. 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 Company’s 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 environmentally sustainable processes. 4 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 use 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. Cost Information 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 including bottling, operating and maintenance, distribution and other costs allows us to compete profitably to generate corporate value beneficial to our shareholders. Business Model The RAKR business model typically begins with the identification of a trusted local partner. When applicable, the next step is to enter into JV structures which maximize value to all stakeholder-parties. The Rainmaker delivery systems are installed by our team and serviced by entering into contracts with local third-party experts that are trained in the technology. In addition, over the course of the past year, we have been developing partnerships with highly experienced developers of complementary technology. That gives RAKR the ability to have a more comprehensive product set when proposing solutions to communities, developers and commercial entities. The most significant agreement to date was with Miranda. The Miranda distribution agreements formed in 2023 have now been formalized with the acquisition of Miranda in January of 2024. RAKR and Miranda’s combined technologies are part of the Company’s long-term technological integration strategy. Miranda has been delivering systems for more than ten years across 40 countries globally. As a result, their global experience is invaluable to Rainmaker and Rainmaker shareholders. 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. 5 Potential Improvements Potential improvements and related applications that we are pursuing or plan to pursue include seeking more strategic and technology-based partnerships with complementary technology and business development companies to expand our global reach and service offering. 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 treat 70% of wastewater, low-income countries treat only 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. The above analysis points to a global market for water that is very large. In 2015, the annual global water market for all purposes and uses was $650 billion and it 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. Suppliers As stated previously, our principal suppliers for the Company’s technologies to be deployed will either be RHBV or Miranda. Should RHBV not supply the appropriate scale of technology required by a project, RAKR has identified multiple alternative sources of technologies. The Company now has access to an impressive suite of water purification technologies by virtue of its acquisition of Miranda. We also have suppliers of complementary technology that we expect to be delivering in 2023 to diversify the Rainmaker business model. Complementary and 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. The Company and RWI will continue to seek relationships with other technologies in the market that are complementary to our collective offering. Competition The Rainmaker 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. By 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. 6 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. RWI, RAKR’s 40% owned subsidiary, will begin to seek Subsidies and Incentives as it is now majority Canadian shareholder owned. One example is First Nations in Canada where there is an ongoing and desperate shortage of safe drinkable and general-purpose water. Over time, RAKR will seek international subsidies and incentives through its deployment of technology in underserved countries and particular communities within countries. Intellectual Property We have indirect access to considerable intellectual property assets as a consequence of our partial ownership of and various partnerships with RHBV and Miranda. We believe that this allows us to maintain a competitive edge. Company Executive and Consulting Resources The direct Executives of RAKR are represented by Michael O’Connor, Director, Executive Chairman and CEO and Kelly White, EVP 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 have been provided by Sichenzia Ross Ference LLP since November 2017. M&K CPAS PLLC has served as the Company’s auditor since 2020.