originoil, inc

Analyst: Victor Sula, Ph.D.Report Update

February 17th, 2009

OriginOil, Inc. (OTCBB: OOIL) 1


February 17th, 2009

Company Introduction

OriginOil, Inc.5645 W Adams BlvdLos Angeles, CA 90016 Phone: (323) 939-6645 Fax: (323) 939-6005E-mail: [email protected] Website: www.originoil.com

MARKET DATA

SymbolExchangesCurrent PriceRatingOutstanding SharesMarket Cap.Average 3M Volume

Source: Yahoo Finance, Analyst Estimates

OOILOTCBB$0.369

Speculative Buy143.4 Million

$51.63 Million41,766.7

OriginOil Inc. (OOIL) is developing a portfolio of new technologies for producing oil from algae, a next-generation biofuel feedstock that may yield 30 times more energy per acre than crops such as soybeans. The biofuel produced by the OriginOil System can re-place petroleum in various applications such as diesel, gasoline, jet fuel, plastics and solvents. In addition. the biomass remaining after extraction of the oil can be made into natural gas or liquid fuel, as well as animal feed and fertilizer. By creating a fuel that replaces fossil fuel, OOIL also helps producers garner saleable carbon cred-its. The OriginOil System can be operated as a stand-alone produc-tion system or connected in a parallel network. OOIL’s proprietary process is supported by intellectual property assets that include six patent filings and one international Patent Cooperation Treaty (PCT).

Efficiently producing oil from algae in a closed system requires cul-tivating an algal strain with high lipid content and a rapid growth rate, which in turn requires the right combination of water, sun-light, nutrients and carbon dioxide. In addition, algae organisms are protected by a tough cell wall, which must be cracked to extract the oil. This is normally an energy-intensive process. OOIL has suc-cessfully developed a cost-effective cultivation and extraction sys-tem that is also safe and energy-efficient. The cultivation system, known as the Helix BioReactor™, is designed to increase and op-timize photosynthetic growth of algae. This system has been de-ployed in OOIL’s laboratory prototypes and will be scaled to larger-volume prototypes in 2009,, with field trials expected thereafter. In December 2008, OOIL announced the successful automation of its Helix BioReactor™ system, which makes large-scale commercial al-

2/13/09

volume

0.45

0.40

0.35

0.30

0.25

400

300

200

100

0

© BigCharts.com

OOIL daily

Dec 09 Feb

Thou

sand

s


February 17th, 2009



February 17th, 2009


gae production scalable. To help dissolve nutrients in the growth phase and solve the tough cell wall problem in the extraction phase, the Company has developed the Quantum Fracturing™ process, which uses ultrasound from intense fluid fracturing to break down algae cells, much in the same way a high-frequency sound wave breaks glass. Combined with the use of tuned low-power microwave radiation, this process maximizes oil yield while minimizing energy use.

Since the Company’s shares began trading on the OTCBB market in late April of last year, OOIL has garnered considerable media attention. The Company was discussed in Forbes.com, and both the Los Angeles Business Journal and Biodiesel magazine printed stories about OOIL in their August 2008 issues. In addition, the Com-pany was recently selected as one of the “50 Hottest Companies in Bioenergy” by Biofuels Digest, and named as one of the “Top 100 Clean Energy Technologies” by the New Energy Congress.

In February 2009, OOIL announced a cooperative agreement with the U.S. Department of Energy’s Idaho Na-tional Laboratory (INL). The parties agreed upon a multi-phase research program that will focus on validating and commercially scaling OOIL’s technology for producing algae-based fuels, utilizing INL’s state-of-the-art equipment, capabilities, scientists and engineers.

The initial phase of the research program, which began in February, focuses on the collaborative development of an energy balance model for photobioreactor-based algae systems. OOIL anticipates using this model to op-timize its algae-to-oil technology as early as the first quarter of 2009. Subsequent phases will seek to validate OOIL’s processes and pilot specific commercial applications.

The Idaho National Laboratory is a science-based, applied engineering national laboratory that supports the Department of Energy (DOE) on energy research and national defense. Its mission is to ensure U.S. energy se-curity. Part of INL’s mandate is to facilitate the development of advanced renewable energy technologies into cost-effective, scalable industrial processes. OOIL’s partnership with INL may help advance America’s progress toward energy independence.

The Company is developing a technology for producing biofuel from algae using a cost-effective, high-speed process. Biofuel may replace petroleum in diesel, gasoline, jet fuel, plastics and solvents applications.

OOIL’s research addresses the three primary challenges of cul-tivating algae for oil:

1. Algae growth is dependent on a calm fluid environment; algae don’t like agitation. One of the primary challenges fac-ing growers is how to optimally introduce carbon dioxide (CO2) and nutrients into the system without disrupting or over-aerating the growing algae culture.

Cooperative Agreement with Idaho National Laboratory

Technology Development Update


February 17th, 2009



February 17th, 2009


2. Algae require light as a source of energy to fuel its growth. Algae cultivation systems must also distribute light cost-effectively and evenly within the algae culture.

3. Algae organisms are protected by a tough cell wall. That wall must be cracked — normally an energy-inten-sive process — to extract the oil. The challenge is to maximize oil yield by cracking as many of the algae cells as possible with the minimal amount of energy.

The Company is developing a portfolio of proprietary technologies to address these challenges, including Quan-tum Fracturing™ and the Helix BioReactor™. OOIL has six patent applications pending. Its patent-pending pro-cesses are described below:

• QuantumFracturing™ is a process that works at the microscopic level to unlock biological and chemical prop-erties, and facilitate total, instantaneous distribution of CO2 and nutrients to the algae culture with minimal disruption.

• HelixBioReactor™ is an advanced algae growth system for growing multiple layers of algae biomass around-the-clock by optimizing light delivery.

• ModularandScalableGrowthSystem is a system for enhancing and optimizing algae growth through hori-zontal and vertical “stacking” of multiple Helix BioReactors into an integrated network of fully automated, portable and remotely monitored growth units.

• LysingandExtractionSystemforMicroorganisms is an energy-efficient method for extracting oil from algae using tuned microwaves and Quantum Fracturing without the need for chemical solvents.

• AlgaeCatalyzer is a process relating to the on-site conversion and sequestration of algae biomass for electric-ity. CO2 recovery minimizes carbon requirements while cogeneration maximizes available energy.

• OptimizingPhotosyntheticGrowth is a process which incorporates further refinements to the Helix Bioreac-tor™ advanced algae growth system.

Helix BioReactor automation

The heart of the Company’s system is the Helix BioReactor, an advanced algae growth system for growing multiple layers of algae biomass around-the-clock. In a natural pond, the sun il-luminates only one layer of algae growth, penetrating down to about half an inch below the surface. In contrast, the Helix BioReactor features a rotating vertical shaft with very low en-ergy lights arranged in a helix or spiral pattern, which supplies light for a theoretically unlimited number of layers. Addition-ally, each lighting element is engineered to produce specific light waves and frequencies for optimal algae growth.

The helix structure also provides the BioReactor’s nutrient de-livery system, through which the Quantum Fractured nutrients and CO2 are evenly delivered across the entire algae culture.


February 17th, 2009


Nutrients can be monitored and adjusted for optimum growth.

In September 2008, the Company reported improvements to the Helix BioReactor subsystems that enhance its performance characteristics. The Company is now in the process of designing and laying out larger-scale sys-tems.

In December 2008, OOIL announced the successful automation of its Helix BioReactor system for optimizing algae growth and making commercial algae production scalable. The Helix BioReactor’s unique design allows algae culture to replicate exponentially within a smaller installation footprint. Automation of this system is a key step toward continuous algae production, allowing greater control of the growth environment and efficient, low-cost industrial algae production.

The Company has been widely recognized for its promising clean energy technology.

In December 2008, OOIL was selected as one of the “50 Hottest Companies in Bioenergy” by Biofuels Digest, the most widely-read biofuels newsletter. Winners of this Biofuels Digest award will be honored at a presentation in Washington, D.C. on April 20, 2009, in conjunction with the Advanced Biofuels Development Summit. Rankings were determined by the Biofuels Digest award panel and recognize the important technology advances made by OOIL in 2008.

In November 2008, the New Energy Congress recognized OOIL as having one of the top 100 clean energy tech-nologies. NEC ranked OOIL as the top algae company. The New Energy Congress is an association of energy professionals who review existing and up-and-coming energy technologies to identify technologies that are clean, renewable, affordable, reliable, easy to implement and safe.

OOIL to present at World Biofuels Markets conference to be held March 16-18, 2009, in Brussels, Belgium

The Company’s CEO, Riggs Eckelberry, will be presenting at the upcoming Algae Fuels Forum, a full-day semi-nar that will examine the viability of algae as a sustainable, low-cost feedstock for the biofuels industry. Other panelists scheduled to appear with Mr. Eckelberry include representatives from BP Biofuels, Verenium Corpora-tion, Boeing Commercial Airplanes and eBIO (the European Bioethanol Fuel Association). The World Biofuels Markets event attracts more than 1,500 attendees and more than 1,000 exhibitors from around the world.

Increased Recognition of the Company’s Technology


February 17th, 2009


President Obama is promoting alternative energy as a ve-hicle for creating jobs and reducing U.S. dependence on imported fossil fuels. America’s addiction to foreign oil significantly undermines national security and damages the environment. President Obama’s plan calls for signifi-cant new investments in alternative and renewable energy technologies, with the goal of ending America’s addiction to foreign oil, addressing the global climate crisis and creating millions of new jobs. Particularly, the Obama-Biden com-prehensive New Energy for America plan aims to: • Create 5 million new jobs by investing $150 billion over

the next 10 years to support private sector efforts to build a clean energy future;

• Ensure that 10% of U.S electricity will come from renew-able sources by 2012, and 25% by 2025;

• Implement an economy-wide program to reduce green-house gas emissions 80% by 2050;

• Save more oil within 10 years than the U.S. is currently importing from the Middle East and Venezuela com-bined; and

• Put 1 million Plug-In Hybrid cars manufactured in America on the road by 2015.

The alternative energy sector received a strong infusion of new capital last year with record investments in new projects. Venture capital investment in the industry reached a record $4.7 billion in 2008. However, falling oil pric-es and frozen credit markets took their toll in the fourth quarter of 2008, and venture capital investments dropped 44% during the quarter to $954 million.

We expect the government financial stimulus package to fuel renewed growth in the clean energy sector going forward, including development-stage technology companies such as OOIL. President Obama’s plan includes spending of $14.4 billion for government energy efficiency and renewable-energy programs, $4.5 billion for a smart electricity grid, $2.9 billion to weatherize low-income homes and a tax-credit extension for renewable en-ergy production.

Income statement

The Company is still in the development stage and generated no revenues during the three months and nine months ended September 30, 2008. OOIL expects to generate revenues in the future from licensing fees and sup-porting its technology for fuel refiners and chemical and oil company customers.

America’s Alternative Energy Initiatives

Financial Analysis


February 17th, 2009


The Company’s operating expenses consisted mainly of salaries and professional fees, technology testing and research, and the costs associated with registering for a public share offering in the first nine months of 2008, for an aggregate $978,267.

Research and development expenses were $190,094 for the nine months ended September 30, 2008, and con-sisted primarily of testing, research and product development.

Liquidity and capital resources

As of September 30, 2008, OOIL had $971,707 in working capital, down from $1.2 million at December 31, 2007. This decline is attributable to ongoing costs for developing the technology. Operating funds have been obtained through share sales.

OOIL will likely require significant additional financing to bring its technology to market. However, there is no assurance that additional financing will be available to the Company on favorable terms, if at all. The Company plans to raise additional capital through equity sales.

Source: SEC Filings

Revenue

Selling and marketingGeneral and administrative expensesResearch & developmentDepreciation & amortization expenseTotal operating expenses

Operating incomeTotal other income/(expense)Net loss

-

14,594142,108

--

156,702

-156,7021,902

-154,800

-

144,829246,145

78,310494

469,778

-469,7785,985

-463,793

-

892%73%n/mn/m

200%

n/m215%

n/m

0

19,694190,189

--

209,883

-209,8831,905

-207,978

0

201,560585,551190,094

1,062978,267

-978,26723,225

-955,042

-

923%208%

n/m366%

n/m1119%

n/m

Q3 2007 Q3 2008 % chg9 months 2007

9 months 2008

Income Statement, $

Source: SEC Filings

Cash and cash equivalentsTotal Current AssetsTotal Other AssetsTotal assets

Total liabilitiesTotal shareholders’ equityAccumulated deficit

1,267,6701,267,670

8,6781,276,348

30,0411,246,307-446,091

1,267,6701,267,670

8,6781,276,348

30,0411,246,307-446,091

1,267,6701,267,670

8,6781,276,348

30,0411,246,307-446,091

31-Dec-07 30-Jun-08 30-Sep-08

Balance sheet $


February 17th, 2009


Since our initial report in September of 2008 when it was at $0.42, OOIL’s share price has declined as low as $0.25 following the steep decline in oil prices, but recovered in December 2008-January 2009 to the current range of $0.34-$0.44 on expectations that the Obama administration will give strategic support to alternative fuels.

OOIL is in the early stages of developing a technology for producing biofuels from algae. Although the Company is likely years from commercializing its systems, its technology holds significant promise and the potential payoff may be enormous.

Algae has emerged as a viable feedstock in the renewable energy sector, and the Company is developing tech-nologies for the commercial production of algae oil. The Obama administration has already proposed a $150 billion plan to further advance U.S. renewable and alternative energy initiatives over the next 10 years. This com-mitment, coupled with growing consumer demand for non-petroleum energy sources, creates opportunities for OOIL and others to develop and commercialize new energy technologies.

The Company has an end-to-end algae growth and oil extraction system for continuous oil production that ad-dresses the challenges that up to now have limited the prospects for algae-based biofuel.

In the next 12 months, OOIL plans to develop prototypes and commence scale up. The Company plans to build and operate a small-scale installation which it will use to demonstrate its technology for potential licensees and business partners. OOIL anticipates developing a mid-sized prototype in February 2009, and to continuing to quantify its technology in 2009.

OOIL will likely focus on a small number of potential ‘plug-in’ applications where algae production can be im-plemented relatively easily and pursue licensing opportunities. The Company plans to begin developing these applications with partners in 2009. For example, OOIL is already exploring opportunities for algae production in industrial gas-fired kilns, where algae can be used to absorb CO2 emissions and the resulting biomass can be gasified for use directly in the furnace.

Regional partners will be recruited for local fabrication, sales, installation and support of the systems. OOIL has a goal of recruiting a first geographic partner by year-end 2009.

OOIL also plans to license its technology to fuel refiners, chemical and oil companies and other customers, thus generating licensing and servicing revenue. This business model ensures that OOIL’s technology can be deployed worldwide in a quick and efficient manner.

Robust clean energy demand, OOIL’s progress in advancing its biofuel technology, and the significant revenue stream likely to result from royalties and licensing fees, are reasons we continue to rate OOIL a Speculative Buy. In addition, the recently signed partnership agreement with Idaho National Laboratory (INL) could accelerate de-velopment of the Company’s technology and facilitate its rapid deployment in lucrative commercial applications.

Analyst Summary


February 17th, 2009


Heather Heath joined the Company as a biochemist who will be developing and managing growth pro-tocols. She brings an extensive laboratory and molecular biology background that includes measuring enzymatic activities (Enzyme Assays), measuring the concentration of substances in biological liquids (Im-munoassays), DNA amplification via polymerase chain reaction (PCR) or recombinant DNA techniques, Gravimetric Analysis and Potentiometric and pH Titration measurement. Prior to joining OOIL, she served as a biochemist and research associate at Siemens Healthcare Diagnostics, one of the world’s largest clinical diagnostics companies, where she was involved with experimental preparation, experimental investiga-tion and data preparation. She received a Bachelor of Science degree from California State University at Northridge and graduated cum laude with an Associate of Science degree in veterinary technology from Harcum College.

Heather Heath Biochemist

In October 2008, OOIL recruited Vikram M. Pattarkine, Ph.D. to be its chief technology officer. Dr. Pattar-kine’s career spans more than 25 years as a chemical-environmental engineer, with expertise in processes related to waste treatment, nutrient management, water quality and renewable energy. Dr. Pattarkine has extensive international experience covering research, consulting and training. The Company will benefit from Dr. Pattarkine’s technical expertise in environmental engineering as well as his business acumen and research experience.

Vikram M. PattarkineChief Technology Officer

Management Update


February 17th, 2009


Disclaimer

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice. The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company. An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report. Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

The report is a service of BlueWave Advisors, LLC, a financial public relations firm that has been compensated by the companies profiled. All direct and third party compensation received has been disclosed within each individual profile in accordance with section 17(b) of the Securities Act of 1933. This compensa-tion constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BlueWave Advisors, LLC, and/or its affiliated will hold, buy, and sell securities in the companies profiled. When compensated in shares, all readers should be aware that is our policy to liquidate all shares immediately. We reserve the right to buy or sell the shares of any the companies mentioned in any materials we produce at any time. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BeaconEquity.com is a Web site wholly-owned by BlueWave Advisors, LLC. BlueWave Advisors, LLC has been compensated a total of forty five thousand dollars directly from OriginOil Inc. (OOIL) as a marketing budget to manage a comprehensive investor awareness program including the creation and distribution of this report as well as other investor relations efforts.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking state-ments are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ ma-terially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or com-pleteness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst

Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant posi-tions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

originoil, inc

Documents

originoil system

cultivation system

victor sula

report updatefebruary

closed system

helix bioreactor system

company introduction

oil yield