ORIGINCLEAR, INC. - Quarter Report: 2008 September (Form 10-Q)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

o	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

(State or other jurisdiction of incorporation or organization)

26-0287664

(I.R.S. Employer Identification No.)

2029 Century Park East, 14th Floor

Los Angeles, CA 93117

(Address of principal executive offices, Zip Code)

(424) 202-6944

(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 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 o	Accelerated filer o
Non-accelerated filer o	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 o No x

The number of shares of registrant’s common stock outstanding, as of October 31, 2008 was 143,430,050.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements		1
Item 2.	Management’s Discussion and Analysis or Plan of Operation		7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		12
Item 4.	Controls and Procedures		12

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		13
Item 3.	Defaults Upon Senior Securities		13
Item 4.	Submission of Matters to a Vote of Security Holders		13
Item 5.	Other Information		13
Item 6.	Exhibits		13

SIGNATURES			14

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

ORIGINOIL, INC.

(A Development Stage Company)

BALANCE SHEETS

	(Unaudited)
	September 30, 2008			December 31, 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	967,450		$	1,267,670
Prepaid expense		22,701			-
Total Current Assets		990,151			1,267,670

PROPERTY & EQUIPMENT, at cost
Machinery and equipment		1,373			-
Furniture and fixtures		18,616			-
Computer equipment		15,111			-
Leasehold improvements		69,623			-
		104,723			-
Less accumulated depreciation		(1,062	)		-
		103,661			-

OTHER ASSETS
Patent		25,828			3,561
Trademark		4,467			4,467
Security deposit		9,650			650
Total Other Assets		39,945			8,678

TOTAL ASSETS	$	1,133,757		$	1,276,348

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	3,609		$	-
Accrued expenses		3,885			14,762
Credit card payable		569			159
Other payable		668			-
Payroll taxes payable		9,713			15,120
TOTAL CURRENT LIABILITIES		18,444			30,041

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 143,430,050 shares issued and outstanding, respectively		14,343			14,343
Additional paid in capital		1,654,103			1,678,055
Common stock payable		848,000			-
Deficit accumulated during the development stage		(1,401,133	)		(446,091	)
TOTAL SHAREHOLDERS' EQUITY		1,115,313			1,246,307

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,133,757		$	1,276,348

The accompanying notes are an integral part of these financial statements

ORIGINOIL, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

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

REVENUE	$	-		$	-		$	-		$	-		$	-

OPERATING EXPENSES
Selling and marketing		144,829			14,594			201,560			19,694			222,034
General and administrative expenses		246,145			142,108			585,551			190,189			1,010,972
Research & development		78,310			-			190,094			-			201,525
Depreciation & amortization expense		494			-			1,062			-			1,062

TOTAL OPERATING EXPENSES		469,778			156,702			978,267			209,883			1,435,593


LOSS FROM OPERATIONS BEFORE BEFORE OTHER INCOME / (EXPENSE)		(469,778	)		(156,702	)		(978,267	)		(209,883	)		(1,435,593	)

OTHER INCOME
Interest income		18			2,277			1,855			2,280			11,553
Dividend income		5,967			-			19,387			-			21,192
Capital gains		-			-			-			-			107
Tax exempt interest		-			-			1,983			-			1,983
Interest expense		-			(375	)		-			(375	)		(375	)

TOTAL OTHER INCOME/(EXPENSE)		5,985			1,902			23,225			1,905			34,460


NET LOSS	$	(463,793	)	$	(154,800	)	$	(955,042	)	$	(207,978	)	$	(1,401,133	)

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

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED		143,430,050			6,866,848			143,430,050			6,866,848

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 June 30, 2008		143,430,050	$	14,343	$	1,678,055		$	-	$	(446,091	)	$	1,246,307
Common stock payable (unaudited)		-		-		-			848,000		-			848,000
Stock issuance cost (unaudited)		-		-		(23,952	)		-		-			(23,952	)

Net Loss for the period ended September 30, 2008 (unaudited)		-		-							(955,042	)		(955,042	)

Balance at September 30, 2008 (unaudited)		143,430,050	$	14,343	$	1,654,103		$	848,000	$	(1,401,133	)	$	1,115,313

The accompanying notes are an integral part of these financial statements

ORIGINOIL, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

				From Inception			From Inception
				June 1, 2007			June 1, 2007
	Nine Months Ended			through			through
	September 30, 2008			September 30, 2007			September 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(955,042	)	$	(207,978	)	$	(1,401,133	)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation		1,062			-			1,062
Contributed capital by investor		-			375			375
Common stock issued for services		-			-			5,000
(Increase) Decrease in:
Prepaid expenses		(22,701	)		-			(22,701	)
Deposits		(9,000	)		(650	)		(9,650	)
Advances to Officers		-			(500	)		-
Increase (Decrease) in:
Accounts payable		3,609			-			3,609
Accrued expenses		(10,877	)		8,364			3,885
Credit card payable		410			526			569
Payroll taxes payable		(5,407	)		12,768			9,713
Other liabilities		668			-			668

NET CASH USED IN OPERATING ACTIVITIES		(997,278	)		(187,095	)		(1,408,603	)

CASH FLOWS USED IN INVESTING ACTIVITIES:
Improvements to building		(69,623	)		-			(69,623	)
Purchase of patents and trademarks		(22,267	)		(4,467	)		(30,295	)
Purchase of equipment and intangibles		(35,100	)		-			(35,100	)

NET CASH USED BY INVESTING ACTIVITIES		(126,990	)		(4,467	)		(135,018	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan payable		-			75,000			75,000
Payment on loan payable		-			(75,000	)		(75,000	)
Proceeds from investors to purchase common stock		848,000			638,000			848,000
Proceeds from stock issuance, net of cost		(23,952	)		445,313			1,663,071

NET CASH PROVIDED BY FINANCING ACTIVITIES		824,048			1,083,313			2,511,071

NET INCREASE/(DECREASE) IN CASH		(300,220	)		891,751			967,450

CASH, BEGINNING OF PERIOD		1,267,670			-			-

CASH, END OF PERIOD	$	967,450		$	891,751		$	967,450

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	-		$	-		$	-
Taxes paid	$	-		$	-		$	-
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
Contributed capital by investor	$	-		$	375

The accompanying notes are an integral part of these financial statements

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 month period ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. 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, 2007.

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 its inception, and 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 Carbon Sciences, 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. FASB #7 defines a development stage activity as 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.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss per Share Calculations

The Company adopted Statement of Financial Standards (“SFAS”) No. 128 for the calculation of “Loss per Share”. SFAS No. 128 dictates 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 period ended September 30, 2008 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

3.	CAPITAL STOCK

During the nine months ended September 30, 2008, the Company issued no shares of common stock.

At September 30, 2008, the Company received $848,000 for stock subscriptions for the purchase of 4,240,000 shares of common stock at a price of $0.20 per share.

4.	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.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. 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, 2008, 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.

5.	SUBSEQUENT EVENT

During October and November 2008, the Company received $106,200 for stock subscription for the purchase of 531,000 shares of common stock at a price of $0.20 per share.

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

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those in the forward-looking statements as a result of various important factors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such should not be regarded as a representation by OriginOil, Inc., or any other person, that such forward-looking statements will be achieved. The business and operations of OriginOil, Inc. and its subsidiaries are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this Report.

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in this Report.

Overview

The Company is 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. Algae, unlike other bio-fuel feedstock such as corn and sugarcane, do not destroy vital farmlands and rainforests, disrupt global food supplies and create new environmental problems. The U.S. Government target for production for biofuels is 36 billion gallons by 2022, of which 22 billion are targeted to come from “second generation” fuels, such as algae.

The Company’s business model is based on licensing this technology to customers such as fuel refiners, chemical and oil companies. The Company is not in the business of producing and marketing oil or fuel, based on algae, as an end product.

A host of factors, including rising oil prices, global warming, and the rapid industrialization of China and India, have greatly increased the demand for a renewable alternative to petroleum. With new technology, algae can be grown economically to replace petroleum.

There are three primary challenges in cultivating algae for oil:

Algae growth is dependent on a calm fluid environment; it does not like agitation. One of the primary challenges is how to optimally introduce carbon dioxide (CO2) and nutrients needed by the growing algae culture without disrupting or over-aerating it.

Algae require light as a source of energy to fuel its growth and oil production facilities. Algae cultivation systems need to distribute light cost-effectively and evenly within the algae culture.

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

To meet these challenges, the Company is developing a portfolio of proprietary technologies, including Quantum Fracturing™ and the Helix BioReactor™.

Quantum Fracturing

Quantum Fracturing, the Company’s patent-pending technology, based on the science of mass transfer and fluid fracturing, addresses, and overcomes, all three challenges above. It works at the microscopic level to unlock many biological and chemical properties that massively enhance the efficiency of algae production and oil extraction.

In Quantum Fracturing, water, carbon dioxide and other nutrients are fractured at very high pressure to create a slurry of micron-sized bubbles, which is then injected into the algae culture awaiting it in a lower-pressure growth vessel, the bioreactor. This process can theoretically achieve total and instantaneous distribution of nutrients to every algae cell in the 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 cells.

Helix BioReactor

The heart of the Company’s system is the Helix BioReactor, an advanced algae growth system that can grow multiple layers of algae biomass around-the-clock with daily harvest. 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 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.

In September 2008, we issued a press release to report that our engineering team has fine tuned the Helix BioReactor subsystems to further increase performance characteristics. These have now yielded sufficient results to begin design and layout of larger scale systems. The technologies we will use to transform algae into a new form of oil have never been utilized on a large scale or commercial basis.

Solvent-Free Extraction Process

Algae walls, which encase the oil, are resilient and difficult to break down, and the process of cracking algae cells to release the oil, known as lysing, has long represented a big challenge for the algae-to-oil industry. Mechanical methods to do so are energy-intensive and often ineffective; commonly-used chemical solvents such as benzene, ether or hexane are toxic and require careful handling. Such practices increase operating costs and make it harder to site algae production systems.

The Company has developed a new algae oil extraction process that does not use chemical solvents. Algae biomass is first sent through a shielded wave guide system where it receives low-wattage, frequency-tuned microwave bursts that break the cell walls. Quantum Fracturing is then applied to the now pre-cracked cells to complete the oil extraction with ease. This unique approach makes low-energy and environmentally-safe algae oil production a reality.

Modular and Scalable System

To reach the production levels necessary to realistically replace petroleum as an energy source, an algae growth system must be fully scalable. The Company’s system to enhance and optimize algae growth allows both 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.

Chief Technology Officer

In October 2008, we hired and appointed Vikram M. Pattarkine, Ph.D. as chief technology officer. Dr. Pattarkine’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. He has extensive international experience covering research, consulting and training. We will rely on Dr. Pattarkine’s technical expertise in environmental engineering combined with his business acumen and research experience will be invaluable as we continue to bring our algae-to-oil technology to market.

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

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 December 2004, the Financial Accounting Standards Board issued two FASB Staff Positions - FSP FAS 109-1, Application of FASB Statement 109 "Accounting for Income Taxes" to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. Neither of these affected the Company as it does not participate in the related activities.

In May 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections.” This new standard replaces APB Opinion No. 20, “Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,” and represents another step in the FASB’s goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. The Company has evaluated the impact of the adoption of Statement 154 and does not believe the impact will be significant to the Company's overall results of operations or financial position

As of December 31, 2007, the Company adopted Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (FAS) No. 123R, that addresses 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 statement eliminates the ability to account for share-based compensation transactions, as we formerly did, using the intrinsic value method as prescribed by Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees,” and generally requires that such transactions be accounted for using a fair-value-based method and recognized as expenses in our statement of income. The adoption of (FAS) No. 123R by the Company had no material impact on the statement of income.

Results of Operations

Revenues

Currently the Company is in its development stage and has no revenues for the three months and nine months ended September 30, 2008. We were incorporated in the State of Nevada on June 1, 2007.

Operating Expenses

Selling and Marketing Expenses

Selling and marketing Expenses (“S&M”) expenses increased by $130,235 or 892.39% to $144,829 for the three months ended September 30, 2008, compared to the prior period. S&M expenses increased by $181,866 or 923.46% to $201,560 for the nine months ended September 30, 2008, compared to from Inception (June 1, 2007) through September 30, 2007. The S&M expenses increased due to an increase in marketing exposure.

General and Administrative Expenses

General and administrative (“G&A”) expenses increased by $104,037 or 73.21% to $246,145 for the three months ended September 30, 2008, compared to the prior period. G&A expenses increased by $395,362 or 207.88% to $585,551 for the nine months ended September 30, 2008, compared to from Inception (June 1, 2007) through September 30, 2007. The G&A expenses consist primarily of salaries and professional fees.

Research and Development Cost

Research and development (“R&D”) cost for the three months ended September 30, 2008 and 2007 were $78,310 and $0 respectively. R&D cost were $190,094 for the nine months ended September 30, 2008, compared to $0 from Inception (June 1, 2007) through September 30, 2007. The R&D costs consist primarily of testing and research of product development.

Net Loss

Our net loss increased by $(308,993) or 199.61% to $(463,793) for the three months ended September 30, 2008, compared to the prior period. Net loss increased by $(747,064) or 359.20% to $(955,042) for nine months ended September 30, 2008, compared to from Inception (June 1, 2007) through September 30, 2007. This is due to continuing operations of the company, technology development, and market exposure.

Liquidity and Capital Resources

As of September 30, 2008, we had $971,707 of working capital as compared to $1,237,629 from inception (June 1, 2007) through December 31, 2007. This decrease of $265,922 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 $997,278 for the nine months ended September 30, 2008, as compared to $187,095 from inception (June 1, 2007) through September 30, 2007. The Company is in the development stage and has generated no revenues.

Net cash used in investing activities was $126,990 for the nine months ended September 30, 2008, as compared to $4,467 from inception (June 1, 2007) through September 30, 2007. The increase of cash used by investing activities was due primarily to the purchase of small equipment, and remodeling office space.

Net cash flows provided from financing activities was $824,048 for the nine months ended September 30, 2008, as compared to $1,083,313 from inception (June 1, 2007) through September 30, 2007. There was a decrease in cash provided from financing activities due to less 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.

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”.

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, 2008, 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.

Not applicable.

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)

10.1		Form of Subscription Agreement, dated July 11, 2007	(2)

10.2		Form of Subscription Agreement, dated August 2007	(2)

10.3		Form of Subscription Agreement, dated November 2007	(3)

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.
(3)	Incorporated by reference to the Company’s Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on February 5, 2008.

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) October 31, 2008