The following discussion and analysis contain forward-looking statements about
our plans and expectations of what may happen in the future. Forward-looking
statements are based on a number of assumptions and estimates that are
inherently subject to significant risks and uncertainties, and our results could
differ materially from the results indicated by our forward-looking statements
as a result of many known or unknown factors, including, but not limited to,
those factors discussed in Item 1A. "Risk Factors" in our on Form 10-12GA below
in Part II Item 1A. "Risk Factors" of this Form 10-K and in the "Cautionary Note
Regarding Forward-Looking Statements" set forth at the beginning of this report.
You should read the following discussion and analysis in conjunction with the
audited financial statements, and the related footnotes thereto, appearing
elsewhere in this Form 10-K, and in conjunction with management's discussion and
analysis and the audited financial statements included in our Form 10-12GA. In
addition, we intend to use our media and investor section on our website
(www.rainmakerww.com/category/investor-updates/), SEC filings and press releases
to communicate with the public about Rainmaker, its services and other issues.
Overview
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
projects in various locations around the globe using RAKR and partner
technologies. 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.
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.
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 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.
13
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 "WaaS". Rainmaker management would have assumed
operational leadership of the combined entity. 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. The
Company retains a 12% ownership stake in RHBV. RAKR retains access to the
technology based on a cost-plus formula.
The Company is based in Peterborough, Ontario, Canada. 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 use the two Rainmaker technologies
discussed above or other complementary technologies acquired or licensed by the
Company. This focus shall be administered by forming joint venture partnerships
("JV"). 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.
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
2023. Specifically, locations have been identified and operating plans defined
for various locations.
The Company has generated no 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, on a consolidated basis, had total assets of $43,038 as of December
31, 2022. 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, 2022 and 2021 and had net losses of $1,837,611 and
$2,725,464 for the years ended December 31, 2022 and 2021, 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 losses in 2022 have been reduced by 33% compared to 2021. The 2022 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.
Due to a lack of sales, a review of the inventory required that it be fully
impaired at December 31, 2023 which amounted to $335,000 of the 2022 losses. The
Company still plans to sell the inventory and if successful will report
according to US GAAP. The Company's auditor's report for 2022 stated that there
was substantial doubt about the Company's ability to continue as a going
concern.
On June 29, 2022, the Company held a Special Meeting of Stockholders that
confirmed majority vote was achieved. Each share of the Company's common stock
was entitled to one vote per share. The matter voted upon and the results are
set forth below. The Proposal presented: Increase in Authorized Shares and
Establishment of Preferred shares. Stockholders approved an increase in the
Company's authorized common stock to 500,000,000 and the establishment of
1,000,000 preferred shares.
For Against Abstentions Broker Non-Votes
78,263,619 1,051,137 305,787 0
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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
were substantial and there are still lingering economic impacts globally. In
global markets, disruptions in supply chains and increases in related costs have
had a real impact on our ability to deliver 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) 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 three years ago. For the Company, it was
particularly disruptive because of limitations on our business development and
engineering experts to travel and implement projects. As global operations have
recently become more open, we have begun reopening our connections with
distributors to deliver products to market.
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, our 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 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
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. 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.
15
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.
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 to be installed by entering into contracts with local third-party experts
that are typically Heating, Ventilation and Air Conditioning ("HVAC") experts.
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 is with Miranda Environmental and Water Treatment
Technologies, Energy, Natural Resources, Engineering, Consulting, Construction
and Commerce Inc. ("Miranda").
On July 28, 2022, the Company signed a Joint Development Agreement ("JDA") with
Miranda whose primary manufacturing operations reside in Ankara, Turkey. This
JDA allows for reciprocal distribution rights for all of RAKR and Miranda's
combined technologies and fosters a long-term technological integration strategy
between the two companies. They have been delivering systems for more than ten
years across 40 countries globally. As a result, their global experience in
invaluable to Rainmaker and Rainmaker shareholders.
On October 5, 2022, the Company entered into a Memorandum of Understanding (the
"MOU") with Miranda to formalize the mutual intention to integrate the two firms
at both strategic and operating levels. This was a non-binding agreement
allowing for standard due diligence to take place before the creation of
definitive agreements. The MOU was renewed on March 21, 2023 and will remain in
force until May 30, 2023. There can be no assurance that the parties will reach
a definitive agreement.
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)
16
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.
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.
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.
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.
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. 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
technology 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.
17
Results of Operations for the Years ended December 31, 2022 and 2021
Revenue
Revenue was $0 for the years ended December 31, 2022 and December 31, 2021.
General and Administrative Expenses
General and administrative expenses primarily include consultant expenses and
benefit costs and stock-based compensation expense for executive consultants,
outside legal and professional services, marketing and advertising, and
facilities costs. General and administrative expenses for the years ended
December 31, 2022 and December 31, 2021 were as follows (in thousands):
Years Ended Increase
December 31, (Decrease)
2022 2021 $ %
General and administrative
expense $ 1,514 $ 1,516 $ (2 ) (0.1 )%
Stock-based compensation expense
included in general and
administrative expense $ 410 $ 62 $ 348 561.3 %
General and administrative expenses, including stock-based compensation, for the
year ended December 31, 2022 decreased $1,829, compared to the same period in
2021. This minor decrease primarily relates to (1) a decrease of $519,000 in
consulting fees, (2) marketing and advertising decreased $17,273, and (3) rent
expense reduced by $12,364 due to the reduction in our commitment of our office
lease. These decreases were offset by the following increases to expense
categories; stock-based compensation increased $347,922, general and
administrative expenses increased $194,210 due to the impairment of inventory at
December 31, 2022 ($335,000) and travel $4,676). Excluding stock-based
compensation, general and administrative expenses decreased $349,751
Liquidity and Capital Resources
Management's Plans
Similar to other development stage companies, our products have yet to generate
revenue. As a result, we have historically suffered recurring losses and we do
not have required cash resources to fully execute our business plans. However,
we have completed the assembly of three machines, which, after a review for
impairment at December 31, 2023, have been removed from inventory. We believe
these machines can be converted into cash flow and will be appropriately
reflected under US GAAP at such time as they are transferred to prospective
clients.
Historically, the Company's major sources of cash have comprised proceeds from
various private offerings of its securities (including common stock) and debt
financings. From 2015 through to the fiscal year end date December 31, 2022, the
Company raised approximately $8 million in gross proceeds from various private
offerings of our common stock and convertible debt. These funds were raised
during various stages of the company and allowed us first to develop a
commercial ready product and as soon as logistics and supply chains allow,
deliver these products into identified projects and begin to generate revenue.
The Company has sustained losses from operations in each fiscal year since our
inception, and we expect losses to continue for the indefinite future. As of
December 31, 2022 and December 31, 2021, the Company had an accumulated deficit
of approximately $73 million and $71 million, respectively, and stockholders'
equity of approximately $(10.3) and $(8.9) million, respectively. As of December
31, 2022, the Company had approximately $7 thousand in cash.
The Company recognizes the need to raise additional capital in order to continue
to execute its business plan in the future. There is no assurance that
additional financing will be available when needed or that the Company will be
able to obtain financing on terms acceptable to it or whether the Company will
become profitable and generate positive operating cash flow.
18
Off-Balance Sheet Arrangements
As of December 31, 2022, the Company had no off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and related
disclosures in the financial statements. Management considers an accounting
estimate to be critical if:
? it requires assumptions to be made that were uncertain at the time the
estimate was made, and
? changes in the estimate or different estimates that could have been selected
could have material impact in our results of operations or financial
condition.
While we base our estimates and judgments on our experience and on various other
factors that we believe to be reasonable under the circumstances, actual results
could differ from those estimates and the differences could be material. The
most significant estimates impact the following transactions or account
balances: stock compensation.
See Note 2 to our condensed consolidated financial statements for a discussion
of our significant accounting policies.
Recently Issued Accounting Standards Not Yet Effective or Adopted
Until December 31, 2021, the Company evaluated embedded conversion features
within convertible debt under ASC 815 Derivatives and Hedging to determine
whether the embedded conversion feature(s) should be bifurcated from the host
instrument and accounted for as a derivative at fair value with changes in fair
value recorded in earnings. If the conversion feature did not require derivative
treatment under ASC 815, the instrument was evaluated under ASC 470-20 Debt with
Conversion and Other Options for consideration of any beneficial conversion
features. On January 1, 2022 the Company adopted ASU 2020-06 using the modified
retrospective method and reviewed and calculated the impact on the outstanding
financial instruments as of this adoption date concluding there was no impact.
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RAINMAKER WORLDWIDE INC. 
