Edgar Filing: ORIGINOIL INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2009

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER ________________

ORIGINOIL, INC.

(Exact name of registrant as specified in its charter)

Nevada		26-0287664
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5645 West Adams Blvd

Los Angeles, CA 90016

(Address of principal executive offices, Zip Code)

(323) 939-6645

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of registrant’s common stock outstanding, as of November 13, 2009 was 159,420,107.

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis or Plan of Operation	9
Item 3. Quantitative and Qualitative Disclosures About Market Risk	17
Item 4. Controls and Procedures	17

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Submission of Matters to a Vote of Security Holders	18
Item 5. Other Information	18
Item 6. Exhibits	18

SIGNATURES

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

ORIGINOIL, INC.

(A Development Stage Company)

BALANCE SHEETS

	(Unaudited)
	September 30, 2009			December 31, 2008

ASSETS

CURRENT ASSETS
Cash & cash equivalents	$	710,060		$	580,055
Prepaid expenses		19,144			16,929

Total Current Assets		729,204			596,984

PROPERTY & EQUIPMENT
Machinery & equipment		1,372			1,372
Furniture & fixtures		27,056			27,056
Computer equipment		22,268			17,564
Leasehold improvements		94,914			94,914
		145,610			140,906
Less accumulated depreciation		(54,955	)		(13,126	)

Net Property & Equipment		90,655			127,780

OTHER ASSETS
Patent		53,376			25,829
Trademark		4,467			4,467
Security deposit		9,650			9,650

Total Other Assets		67,493			39,946

TOTAL ASSETS	$	887,352		$	764,710

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	354		$	17,871
Accrued expenses		8,002			21,883
Credit card payable		291			2,307
Other payables		5,592			28,420

TOTAL LIABILITIES		14,239			70,481

SHAREHOLDERS' EQUITY
Preferred stock, $0.0001 par value; 50,000 authorized preferred shares		-			-
Common stock, $0.0001 par value; 500,000,000 authorized common shares 154,957,925 and 144,180,050 shares issued and outstanding		15,496			14,418
Additional paid in capital		6,022,130			1,827,980
Common stock subscription payable		804,672			804,200
Deficit accumulated during the development stage		(5,969,185	)		(1,952,369	)

TOTAL SHAREHOLDERS' EQUITY		873,113			694,229

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	887,352		$	764,710

The accompanying notes are an integral part of these financial statements

ORIGINOIL, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

													From Inception
													June 1, 2007
	Three Months Ended						Nine Months Ended						through
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008			September 30, 2009

REVENUE	$	-		$	-		$	-		$	-		$	-

Selling & marketing expense		85,436			144,829			395,587			201,560			726,596
Administrative expense		374,137			246,145			1,259,937			585,551			2,636,565
Research & development		68,641			78,310			290,553			190,094			561,249
Stock compensation expense		2,029,650			-			2,029,650			-			2,029,650
Depreciation & amortization expense		13,943			494			41,829			1,062			54,955

TOTAL OPERATING EXPENSES		2,571,807			469,778			4,017,556			978,267			6,009,015

LOSS FROM OPERATIONS BEFORE OTHER INCOME/(EXPENSE)		(2,571,807	)		(469,778	)		(4,017,556	)		(978,267	)		(6,009,015	)

OTHER INCOME/(EXPENSE)
Interest income		4			18			26			3,838			13,665
Dividend income		31			5,967			800			19,387			26,519
Capital gains		-			-			-			-			107
Penalties		-			-			(86	)		-			(86	)
Interest expense		-			-			-			-			(375	)
					-						-
TOTAL OTHER INCOME		35			5,985			740			23,225			39,830

NET LOSS	$	(2,571,772	)	$	(463,793	)	$	(4,016,816	)	$	(955,042	)	$	(5,969,185	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.02	)	$	(0.00	)	$	(0.03	)	$	(0.01	)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED		151,294,355			143,430,050			148,101,105			143,430,050

The accompanying notes are an integral part of these financial statements

ORIGINOIL, INC.

(A Development Stage Company)

STATEMENT OF SHAREHOLDERS' EQUITY

										Deficit
										Accumulated
					Additional		Common			during the
	Common stock				Paid-in		Stock			Development
	Shares		Amount		Capital		Payable			Stage			Total
Balance at December 31, 2008		144,180,050	$	14,418	$	1,827,980	$	804,200		$	(1,952,369	)	$	694,229

Issuance of common stock for cash in April 2009 (4,521,000 shares issued at $0.20 per share) (unaudited)		4,521,000		452		903,748		(804,200	)		-			100,000

Common stock subscription payable (unaudited)		-		-		-		1,151,350			-			1,151,350

Issuance of common stock for cash in July 2009 (5,756,750 shares issued at $0.20 per share) (unaudited)		5,756,750		576		1,150,774		(1,151,350	)		-			-

Issuance of common stock for cash in July 2009 (203,636 shares issued at $0.22 per share) (unaudited)		203,636		20		44,780		-			-			44,800

Issuance of common stock for cash in August 2009 (336,489 shares issued at $0.22 per share) (unaudited)		296,489		30		65,198		-			-			65,228

Common stock subscription payable (unaudited)		-		-		-		804,672			-			804,672

Stock compensation expense (unaudited)		-		-		2,029,650		-			-			2,029,650

Net Loss for the nine months ended September 30, 2009 (unaudited)		-		-		-		-			(4,016,816	)		(4,016,816	)

Balance at September 30, 2009 (unaudited)		154,957,925	$	15,496	$	6,022,130	$	804,672		$	(5,969,185	)	$	873,113

The accompany notes are an integral part of these financial statement

ORIGINOIL, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

							From Inception
							June 1, 2007
	Nine Months Ended						through
	September 30, 2009			September 30, 2008			September 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,016,816	)	$	(955,042	)	$	(5,969,185	)
Adjustment to reconcile net loss to net cash used in operating activities
Depreciation & amortization		41,829			1,062			54,955
Contributed capital by investor		-			-			375
Common stock issued for services		-			-			5,000
Stock compensation expense		2,029,650			-			2,029,650
Changes in Assets and Liabilities
(Increase) Decrease in:
Prepaid expenses		(2,215	)		(22,701	)		(19,144	)
Other assets		-			(9,000	)		(9,650	)
Increase (Decrease) in:
Accounts payable		(17,517	)		3,609			354
Accrued expenses		(13,881	)		(10,877	)		8,002
Credit card payable		(2,016	)		410			291
Payroll taxes payable		(22,828	)		(4,739	)		5,592

NET CASH USED IN OPERATING ACTIVITIES		(2,003,794	)		(997,278	)		(3,893,760	)

CASH FLOWS USED IN INVESTING ACTIVITIES:
Improvements to building		-			(69,623	)		-
Patent and trademark expenditures		(27,547	)		(22,267	)		(57,843	)
Purchase of fixed assets		(4,704	)		(35,100	)		(145,610	)

NET CASH USED BY INVESTING ACTIVITIES		(32,251	)		(126,990	)		(203,453	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock subscription payable		1,956,022			848,000			2,760,222
Proceeds for issuance of common stock, net		210,028			(23,952	)		2,047,051

NET CASH PROVIDED BY FINANCING ACTIVITIES		2,166,050			824,048			4,807,273

NET INCREASE/(DECREASE) IN CASH		130,005			(300,220	)		710,060

CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD		580,055			1,267,670			-

CASH & CASH EQUIVALENTS, END OF PERIOD	$	710,060		$	967,450		$	710,060

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	-		$	-		$	-
Taxes paid	$	800		$	800		$	-

SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
Stock issued for marketing services	$	-		$	-		$	105,705

The accompanying notes are an integral part of these financial statements

ORIGINOIL, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS-UNAUDITED

SEPTEMBER 30, 2009

1.	Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2008.

Going Concern

The accompanying 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 financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate 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, additional cash infusion. The Company has obtained funds from its shareholders since inception through September 30, 2009. Management believes this funding will continue, and is also actively seeking new investors. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of OriginOil, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Development Stage Activities and Operations

The Company is in its initial stages of formation and has insignificant revenues. A development stage activity is one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant.

Revenue Recognition

The Company will 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. To date, the Company has had no revenues and is in the development stage.

Cash and Cash Equivalent

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

ORIGINOIL, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS-UNAUDITED

SEPTEMBER 30, 2009

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss per Share Calculations

Loss per Share is the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the nine months ended September 30, 2009 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

Stock-Based Compensation

The Company addressed the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for either equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. The transactions are accounted for using a fair-value-based method and recognized as expenses in our statement of income. There was no material impact on the Company’s financial statement of operations.

Recent Accounting Pronouncements

In June 2009, the FASB issued guidance under Accounting Standards Codification (“ASC”) Topic 105, “Generally Accepted Accounting Principles” (SFAS No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles). This guidance establishes the FASB ASC as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS 168 and the ASC are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The ASC supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the ASC has become non-authoritative. Following SFAS 168, the FASB will no longer issue new standards in the form of Statements, FSPs, or EITF Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to update the ASC, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the ASC. We adopted ASC 105 effective for our financial statements issued as of September 30, 2009. The adoption of this guidance did not have an impact on our financial statements but will alter the references to accounting literature within the consolidated financial statements.

In August 2009, the FASB issued guidance under Accounting Standards Update (“ASU”) No. 2009-05, “Measuring Liabilities at Fair Value”. This guidance clarifies how the fair value a liability should be determined. This guidance is effective for the first reporting period after issuance. We will adopt this guidance for our year ending December 31, 2009. We do not expect the adoption of this guidance to have a material impact on our financial statements

3.	CAPITAL STOCK

During the nine months ended September 30, 2009, through a private placement the Company issued 10,277,750 shares of common stock at a price of $0.20 per share for cash of $2,055,550, and 500,125 shares of common stock at a price of $0.22 per share for cash of $110,028; also, the Company received $804,672 in common stock subscriptions to purchase 3,657,600 shares of common stock through a private placement.

ORIGINOIL, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS-UNAUDITED

SEPTEMBER 30, 2009

4.	STOCK OPTIONS AND WARRANTS

The Company adopted a Stock Option Plan for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of Options for Fifteen Million (15,000,000) shares of Common Stock. Options granted under the Plan may be either Incentive Options or Nonqualified Options and shall be administered by the Company's Board of Directors ("Board"). Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective Option agreements may provide. Notwithstanding any other provision of the Plan or of any Option agreement, each Option shall expire on the date specified in the Option agreement, which date shall not be later than the tenth (10th) anniversary from the effective date of this option. During the period ended September 30, 2009, the Company granted 3,600,000 stock options. The stock options vest as follows: 1/48 every 30 days thereafter until the remaining stock options have vested. The stock options are exercisable for a period of five years from the date of grant at an exercise price of $0.32 per share.

	2009
Risk free interest rate		2.29	%
Stock volatility factor		1	%
Weighted average expected option life		5 years
Expected dividend yield		None

A summary of the Company’s stock option activity and related information follows:

	2009
			Weighted
	Number		average
	of		exercise
	Options		price
Outstanding, beginning of period		-	$	-
Granted		3,600,000		0.32
Exercised		-		-
Expired		-		-
Outstanding, end of period		3,600,000	$	0.32
Exercisable at the end of period		67,500	$	0.32
Weighted average fair value of
options granted during the period			$	0.32

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in the financial statements of operations during the period ended September 30, 2009, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of September 30, 2009 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to September 30, 2009, based on the grant date fair value estimated. We account for forfeitures as they occur. The stock-based compensation expense recognized in the statement of operations during the period ended September 30, 2009 is $12,150.

Warrants

During the nine months ended September 30, 2009, the Company issued 11,150,000 warrants with a fair value of $648,000 determined using the Black Scholes pricing model.

ORIGINOIL, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS-UNAUDITED

SEPTEMBER 30, 2009

4.	STOCK OPTIONS AND WARRANTS (Continued)

	2009
Risk free interest rate		2.43% - 2.5	%
Stock volatility factor		1	%
Weighted average expected option life		5 years
Expected dividend yield		None

Warrants

During the period ended September 30, 2009, the Company issued warrants for services. A summary of the Company’s warrant activity and related information follows:

	Period End
	September 30, 2009
			Weighted
			average
			exercise
	Options		price
Outstanding -beginning of period		-	$	-
Granted		11,150,000		0.31
Exercised		-		-
Forfeited		-		-
Outstanding - end of period		11,150,000	$	0.31

5.	INCOME TAXES

The Company 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 and local, or non-U.S. income tax examinations by tax authorities for years before 2006.

Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain.

Included in the balance at September 30, 2009, are no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

6.	SUBSEQUENT EVENT

Management evaluated subsequent events after the balance sheet date of September 30, 2009 through November 20, 2009.

During October 2009, the Company issued 4,363,182 shares of common stock at a price of $0.22 per share for cash of $959,900.

As of November 4, 2009, the Company received through a private placement $23,100 in common stock subscriptions from investors to purchase 105,000 shares of common stock.

Item 2. Management’s Discussion and Analysis or Plan of Operation.

This Form 10-K 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,” ”Business,” “Properties,” 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, including, without limitation, the risks outlined under “Risk Factors” and matters described in this report generally. 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.

Overview

We were incorporated on June 1, 2007 under the laws of the State of Nevada. We have only been engaged in our current and proposed business operations since June 2007, and to date, we have been primarily involved in research and development activities.

We are currently developing a technology to produce a bio-fuel from algae through a cost-effective, high-speed manufacturing process to replace petroleum in various applications such as diesel, gasoline, jet fuel, plastics and solvents.

Our business model is based on licensing this technology to customers such as fuel refiners, chemical and oil companies. We are not in the business of producing and marketing oil or fuel, based on algae, as an end product. We are currently developing our technology and a commercial product. We have not generated any revenues from licensing our technology.

Benefits of Algae Oil Production

Cleaner to Produce and Burn

Petroleum contains sulfur and other toxins. It is a heavy pollutant. Drilling operations are highly noxious; crude spills on sea and land are natural catastrophes; and refineries produce heavy pollutants. By contrast, the algae production process generates no toxins — it’s a lot like growing grass hydroponically. Oil created using OriginOil technology generates no heavy metals or sulfur when burned, and minimal output of greenhouse gases.

Can Be Produced Close to Point of Demand

Petroleum often travels tens of thousands of miles to reach its destination. This adds cost and gives suppliers a stranglehold on consumers. Using OriginOil technology, fuel can now be produced close to the site of usage and demand — virtually eliminating the transport cost of petroleum. In the future, portable OriginOil Systems may be transported to the point of demand and quickly start producing oil for electricity generation or fuel.

Does Not Compete with Food

The ethanol boom is already having a disastrous effect on food prices. Fast-rising prices of corn have caused havoc in global food supplies and the commodities markets. Using algae as a feedstock avoids creating shortages in food supplies or markets.

Works with Existing Refineries

Unlike other solutions which bypass the existing refining infrastructure, OriginOil’s technology enables the production of fully compatible fuels. The petroleum industry has already announced plans to support the refining of biofuels. Of these, algae oil is most like petroleum in structure as it can be readily “cracked” into the lighter components of crude oil such as jet fuel, diesel, gasoline, solvents and plastics.

Works With Existing Gas Stations and Vehicles

Most solutions to the energy problem require massive new infrastructure: hybrids require new cars with toxic batteries; hydrogen cars need a new fuel network; and electric cars need their own recharging stations. By contrast, fuel refined from OriginOil systems can be seamlessly integrated into the current petroleum distribution system.

A Complete Solution to Produce a New Oil

Companies implementing algae oil production systems will need to know that they can generate product consistently at a competitive price. OriginOil’s complete, validated industrial process will ensure that these companies can confidently plan and invest in renewable oil production for the long term.

OriginOil’s Industrial Process

OriginOil's industrial process, with its patent pending devices and methods, optimizes this environment to help algae cells grow at their natural maximum rate - achieving a doubling of the algae population in as little as a few hours. The process then goes on to control the harvesting and oil extraction cycles in a high-speed, round-the-clock, streamlined industrial production of algae oil. Instead of waiting hundreds of millions years for algae to become oil, OriginOil's breakthrough technology and process can transform algae into oil in a matter of days.

Operating at the Quantum Level

OriginOil’s patent-pending technology, Quantum Fracturing, is based on the science of mass transfer and fluid fracturing and addresses some of the challenges of industrializing algae oil production. A quantum is the smallest quantity of some physical property that a system can possess. We use the term to illustrate how we fracture the nutrient delivery environment into very small parts, down to a micron, or a millionth of a meter. Using Quantum Fracturing, water, carbon dioxide and other nutrients are fractured at very high pressure to create a slurry of micron-sized nutrition-bubbles, which is then channeled to the algae culture awaiting it in a lower-pressure growth vessel, the Helix BioReactor™. This process achieves total and instantaneous distribution of nutrients to the algae culture without fluid disruption or aeration. The pressure differentials between the two zones substantially increase contact and exchange between the micronized nutrients and the algae culture.

OriginOil’s system employs Quantum Fracturing in two major stages of algae production. First, at the growth stage where CO2 and nutrients are fractured into a micro-bubble slurry and injected directly into the algae culture for complete contact and nutrient absorption. Second, at the extraction stage, where water and special catalysts are fractured at high ultrasonic intensity, using very little energy, to crack the algae membrane to facilitate extracting its oil content. Quantum Fracturing technology greatly enhances the efficiency of algae production and makes it cost-effective and viable.

The Ultimate Algae Growth Environment

The heart of the OriginOil system is the Helix BioReactor™, an advanced algae growth system that can grow multiple layers of algae biomass around-the-clock with daily harvests. In a natural pond, the sun only illuminates one layer of algae growth, down to about half an inch below the surface. In contrast, the Helix BioReactor™ features a rotating vertical shaft with very low energy lights arranged in a helix or spiral pattern, which results in a theoretically unlimited number of growth layers. Additionally, each lighting element is engineered to produce specific light waves and frequencies for optimal algae growth.

The helix structure also serves as the bioreactor’s nutrient delivery system, through which the Quantum Fractured nutrients, including CO2, is evenly delivered to the entire algae culture, monitored and tuned for optimum growth. This algae growth environment will allow the algae culture to replicate exponentially — doubling the entire colony in as little as a few hours — making for very efficient, low-cost, low-footprint industrial algae production.

Enabling a Distributed Oil Model

To reach the production levels necessary to realistically replace petroleum as an energy source, an algae oil production system must be fully scalable. The OriginOil System is designed to be both modular and scalable. While it can function as a stand-alone oil producing system, it can also be connected in a stacked or parallel network to produce a large number of barrels per day.

OriginOil’s patent pending system design facilitates large scale algae production through the horizontal and vertical “stacking” of many Helix BioReactors™ into an integrated network of fully automated, portable, and remotely monitored growth units.

Further, by the use of such modular design, a large number of Helix BioReactors™ can be connected to a small number of extraction units to achieve both economies of scale and full industrialization of algae production. Additionally, OriginOil systems can be transported and placed anywhere in the world to operate as fully integrated, round-the-clock oil-producing plants. By enabling distributed oil production, we can help decentralize the oil and energy industry, empowering local energy production in villages, townships, communities, states and countries. Someday we will no longer need to import oil.

Speeding Up the Process Further

OriginOil's Helix BioReactor™ growth vessel adds the time-saving efficiency of combining the incubation vessel and larger tanks into one system. Once the algae matures in the Helix BioReactor™, 90% of the culture is transferred out for extraction, and the remaining 10% 'green' water is purified and returned to the growth tank. That remaining 10% is then allowed to re-expand into the Helix BioReactor™, creating a new batch, and the process is repeated. With this system there is no need to re-incubate each batch: the remaining algae culture is already mature and is ready to re-enter the log phase after each harvest and replenishment of growth environment.

Making the Process Viable

To overcome the final hurdle, and to make the entire algae-to-oil process viable, OriginOil devised a method for energy efficient algae oil extraction and does not use hazardous chemical solvents. Overcoming this final hurdle enables low-energy, environmentally-safe and viable, industrialized algae oil production.

The process of breaking down algae cells to release oil, known as lysing, has long represented a challenge — and a final hurdle — for the algae-to-oil industry. Algae cell walls are difficult to break down. Mechanical methods are energy-intensive and often ineffective. Commonly used chemical solvents such as benzene, ether or hexane are toxic and require special handling. Such practices increase operating costs and make it harder to site algae production systems.

In OriginOil's extraction unit, the flowing algae biomass is first sent through a shielded wave guide system where it receives low-wattage, frequency-tuned microwave bursts, weakening the cell walls. Then, Quantum Fracturing is then applied to these pre-cracked cells to complete the oil extraction. Quantum Fracturing, when used for extraction, creates an ultrasonic effect where the algae cell breaks down much in the same way that a high-frequency sound wave breaks glass.

A Modular Oil Producing System

The OriginOil System is designed to be modular. It can function as a standalone oil producing system, or can be connected in a parallel network to produce a large number of barrels per day output. OriginOil Systems can be placed anywhere to operate as round-the-clock oil-producing plants.

A new oil can be cleanly manufactured in an industrialized process using the OriginOil System. By enabling distributed oil production we can help transform the oil and energy industry from a centralized to a distributed model. The ability to generate clean, carbon-neutral energy anywhere can empower industrialization in villages, townships, communities, states and countries. There will be no need to import oil.

Intellectual Property

Since our business is based on licensing of our technology and not manufacturing oil, it is critical to the Company that it achieves one or more patents. We have filed the following patent applications with the U.S. Patent and Trademark Office:

On July 28, 2007, to protect the intellectual property rights for “Algae Growth System for Oil Production”. The inventors listed on the patent application are Nicholas Eckelberry and T. Riggs Eckelberry, the Company’s founders. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On May 23, 2008, to protect the intellectual property rights for “Apparatus And Method For Optimizing Photosynthetic Growth In a Photo Bioreactor”. The inventors listed on the patent application are Steven Shigematsu and Nicholas Eckelberry. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On May 30, 2008, to protect the intellectual property rights for “Modular Portable Photobioreactor System”. The inventors listed on the patent application are Steven Shigematsu and Nicholas Eckelberry. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On June 16, 2008, to protect the intellectual property rights for “In-Line Lysing And Extraction System For Microorganisms”. The inventors listed on the patent application are Steven Shigematsu and Nicholas Eckelberry. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On July 16, 2008, to protect the intellectual property rights for “Renewable Carbon Sequestering Method Of Producing Pollution Free Electricity”. The inventor listed on the patent application is Steven Shigematsu. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On January 6, 2009, to protect the intellectual property rights for “Apparatus And Method For Optimizing Photosynthetic Growth In A Photobioreactor”. The inventor listed on the patent application is Nicholas Eckelberry. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On April 17, 2009, to protect the intellectual property rights for “Device and Method for Separation, Cell Lysing and Flocculation of Algae From Water”. The inventor listed on the patent application is Nicholas Eckelberry. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On July 13, 2009, a provisional filing to protect the intellectual property rights for “Algae Growth Lighting and Control System”. The inventors listed on the patent application are Scott Fraser, Vikram Pattarkine, Ralph Anderson and Nicholas Eckelberry. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

On July 26, 2009, a provisional filing to protect the intellectual property rights for “Procedure For Extraction Of Lipids From Algae Without Cell Sacrifice”. The inventors listed on the patent application are Paul Reep and Scott Fraser. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

10.

On 30 September, 2009, a provisional filing to protect the intellectual property rights for “Methods and Apparatus for Growing Algae on a Solid Surface”. The inventors listed on the patent application are and Scott Fraser and Vikram Pattarkine. We are listed as the assignee. We have not received any correspondence from the USPTO, with respect to this patent application.

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 will 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. To date, the Company has had no revenues and is in the development stage.

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 amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options. Actual results could differ from those estimates.

Fair Value of Financial Instruments

SFAS No. 107, “Disclosures About 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, 2007, the amounts reported for cash, accounts receivable, accounts payable, accrued interest and other expenses, and notes payable approximate the fair value because of their short maturities.

Recently Issued Accounting Pronouncements

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. We do not believe that the implementation of this standard will have a material impact on our financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”. This FSP amends FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 are effective for interim and annual reporting periods ending after June 15, 2009. We do not believe that the implementation of this standard will have a material impact on our financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. This FSP amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial statements. The most significant change the FSP brings is a revision to the amount of other-than-temporary loss of a debt security recorded in earnings. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual reporting periods ending after June 15, 2009. We do not believe that the implementation of this standard will have a material impact on our financial statements.

In November of 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (“IASB”). Under the proposed roadmap, the Company may be required in fiscal 2015 to prepare financial statements in accordance with IFRS. However, the SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. We are currently assessing the impact that this potential change would have on our consolidated financial statements, and we will continue to monitor the development of the potential implementation of IFRS.

In March 2009, FASB unanimously voted for the FASB “Accounting Standards Codification” (the “Codification”) to be effective beginning on July 1, 2009. Other than resolving certain minor inconsistencies in current United States Generally Accepted Accounting Principles (“GAAP”), the Codification is not supposed to change GAAP, but is intended to make it easier to find and research GAAP applicable to particular transactions or specific accounting issues. The Codification is a new structure which takes accounting pronouncements and organizes them by approximately ninety accounting topics. Once approved, the Codification will be the single source of authoritative U.S. GAAP. All guidance included in the Codification will be considered authoritative at that time, even guidance that comes from what is currently deemed to be a non-authoritative section of a standard. Once the Codification becomes effective, all non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force (“EITF”), the American Institute of Certified Public Accountants (“AICPA”), and the SEC did not or are not believed by us to have a material impact on our present or future financial statements.

We have adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

Results of Operations for the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008.

Revenues

We have only been engaged in our current and proposed business operations since June 2007, and to date, we have been primarily involved in research and development activities. We are a development stage company and presently, we do not have revenues and operations related to the manufacture of our products.

Operating Expenses

Selling and Marketing Expenses

Selling and marketing Expenses (“S&M”) expenses decreased by $(59,393) or 41.01% to $85,436 for the three months ended September 30, 2009, compared to the prior period. S&M increased by $194,027 or 96.26% to $395,587 for the nine months ended September 30, 2009, compared to the prior period. The S&M expenses increased due to an increase in marketing exposure.

General and Administrative Expenses

General and administrative (“G&A”) expenses increased by $127,992 or 52.0% to $374,137 for the three months ended September 30, 2009, compared to the prior period. G&A expenses increased $674,386 or 115.17% to $1,259,937 for the nine months ended September 30, 2009, compared to the prior period. The G&A expenses consist primarily of salaries, professional fees and renting of a new space.

Research and Development Cost

Research and development (“R&D”) cost decreased by $(9,669) or 12.35% to $68,641 for the three months ended September 30, 2009, compared to the prior period. R&D cost increased by $100,459 or 52.85% to $290,553 for the nine months ended September 30, 2009, as compared to the prior period. R&D costs consist primarily of testing and research of product development.

Net Loss

Our net loss increased by $2,107,979 or 454.51% to $2,521,722 for the three months ended September 30, 2009, compared to the prior period. Net loss increased by $3,061,774 or 320.59% to $4,016,816 for the nine months ended September 30, 2009, compared to the prior period. The majority of the increase is due to accounting for non-cash stock compensation expense.

Liquidity and Capital Resources

As of September 30, 2009, we had $714,965 of working capital as compared to $971,707 for the prior period. This decrease of $256,742 in working capital was due primarily to ongoing costs of developing the company and preparing its technologies for market.

Net cash used in operating activities was $2,003,794 for the nine months ended September 30, 2009, compared to $997,278 for the prior period. We are in the development stage and have generated no revenues.

Net cash used in investing activities was $32,251 for the nine months ended September 30, 2009, compared to $126,990 for the prior period. The decrease of cash used by investing activities was due primarily to fewer purchases of assets, and no building improvements.

Net cash flows provided from financing activities was $2,166,050 for the nine months ended September 30, 2009, as compared to $824,048 for the prior period. There was an increase in cash provided from financing activities due to equity financing.

We require substantial working capital to fund our business. We cannot predict whether additional financing will be available to us on favorable terms when required, or at all. Since our inception, we have experienced negative cash flow from operations and expect to experience significant negative cash flow from operations in the future.

In August 2007, we completed a private placement for up to 28,000,000 Shares of common stock of the Company for an aggregate sum of $0.4 million. In November 2007, we completed a private placement for 14,180,050 Shares of common stock for an aggregate sum of $1.4 million. In November 2008, we completed a private placement for 4,771,000 Shares of common stock of the Company for an aggregate sum of $1.0 million. In July 2009, we completed a private placement for 6,256,875 Shares of common stock of the Company for an aggregate sum of $1.3 million.

All of the above offerings and sales were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, our business associates or our executive officers, and transfer was restricted by us in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings. Except as expressly set forth above, the individuals and entities to which we issued securities as indicated in this section of the registration statement are unaffiliated with us. We plan on raising additional capital through the sale of additional common stock. Our common stock is quoted on the Over the Counter Bulletin Board under the symbol “OOIL”.

On July 1, 2009, the Company instituted the OriginOil 2009 Incentive Stock Plan (the “Plan”), after approval by the Board of Directors and a majority of the Company’s shareholders. The purpose of the Plan is to retain executives and selected employees and consultants and reward them for making contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the Plan thereby providing participants with a proprietary interest in the growth and performance of the Company.

Under the Plan, 15,000,000 Shares of the Company’s common stock were reserved for use. The Plan shall be administered by the Company’s Board of Directors. As of October 16, 2009, the Company has granted to employees 3,600,000 options to purchase the Company’s common stock at an exercise price of $0.32.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

N/A.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our President, Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our President, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting. During the most recent quarter ended September 30, 2009, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

Item 1A.Risk Factors.

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the period ended September 30, 2009, we completed a private placement for 6,256,875 Shares of common stock at a price of $0.20 per share of the Company for an aggregate sum of $1.3 million.

We issued in October 2009, 4,863,307 Shares of common stock at a price of $0.22 per Share for cash of $1,069,928.

The proceeds from the sale of the common stock have been used to fund ongoing operations. We relied on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”), pursuant to Rule 506 and Section 4(2) of the Act in connection with the foregoing issuances.

Also, warrants were issued to employees and members of the board of directors exercisable for an aggregate of up to 11,150,000 Shares of our common stock were outstanding. Of these warrants 10,100,000 are exercisable at an exercise price of $0.31 per Share and will expire on July 1, 2014. The remaining warrants are exercisable at an exercise price of $0.34 per Share and will expire on August 17, 2014. Each of the warrants contains a customary net issuance feature, which allows the warrant holder to pay the exercise price of the warrant by forfeiting a portion of the exercised warrant shares with a value equal to the aggregate exercise price.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

Exhibit No.	Title of Document	Location
3.1	Articles of Incorporation	(1)

3.3	By-laws	(2)

31.1	Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.	Attached

32.1	Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.	Attached

(1)	Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on March 24, 2008

(2)	Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on December 11, 2007.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ORIGINOIL, INC.

By:	/s/ T Riggs Eckelberry
	T Riggs Eckelberry
	Chief Executive Officer (Principal Executive Officer)
	and Acting Chief Financial Officer (Principal Accounting and Financial Officer)

	November 20, 2009