OriginOil, Inc. by Beacon Equity

Analyst: Victor Sula, Ph.D. Report Update February 17th, 2009

2/13/09

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Company Introduction

MARKET DATA

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OriginOil, Inc. 5645 W Adams Blvd Los Angeles, CA 90016 Phone: (323) 939-6645 Fax: (323) 939-6005 E-mail: ir@originoil.com Website: www.originoil.com

OOIL OTCBB $0.369 Speculative Buy 143.4 Million $51.63 Million 41,766.7

Source: Yahoo Finance, Analyst Estimates

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 replace 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 credits. The OriginOil System can be operated as a stand-alone production 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 cultivating an algal strain with high lipid content and a rapid growth rate, which in turn requires the right combination of water, sunlight, 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 successfully developed a cost-effective cultivation and extraction system that is also safe and energy-efficient. The cultivation system, known as the Helix BioReactor™, is designed to increase and optimize photosynthetic growth of algae. This system has been deployed in OOIL’s laboratory prototypes and will be scaled to largervolume 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-

OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update 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 Company 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.

Cooperative Agreement with Idaho National Laboratory In February 2009, OOIL announced a cooperative agreement with the U.S. Department of Energy’s Idaho National 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 optimize 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 security. 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.

Technology Development Update 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 cultivating algae for oil: 1. Algae growth is dependent on a calm fluid environment; algae don’t like agitation. One of the primary challenges facing growers is how to optimally introduce carbon dioxide (CO2) and nutrients into the system without disrupting or over-aerating the growing algae culture. OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update 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-intensive 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 Quantum Fracturing™ and the Helix BioReactor™. OOIL has six patent applications pending. Its patent-pending processes are described below: • Quantum Fracturing™ is a process that works at the microscopic level to unlock biological and chemical properties, and facilitate total, instantaneous distribution of CO2 and nutrients to the algae culture with minimal disruption. • Helix BioReactor™ is an advanced algae growth system for growing multiple layers of algae biomass aroundthe-clock by optimizing light delivery. • Modular and Scalable Growth System is a system for enhancing and optimizing algae growth through horizontal and vertical “stacking” of multiple Helix BioReactors into an integrated network of fully automated, portable and remotely monitored growth units. • Lysing and Extraction System for Microorganisms is an energy-efficient method for extracting oil from algae using tuned microwaves and Quantum Fracturing without the need for chemical solvents. • Algae Catalyzer is a process relating to the on-site conversion and sequestration of algae biomass for electricity. CO2 recovery minimizes carbon requirements while cogeneration maximizes available energy. • Optimizing Photosynthetic Growth is a process which incorporates further refinements to the Helix Bioreactor™ 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 illuminates 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 energy lights arranged in a helix or spiral pattern, which supplies light for 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 provides the BioReactor’s nutrient delivery system, through which the Quantum Fractured nutrients and CO2 are evenly delivered across the entire algae culture. OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update 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 systems. 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.

Increased Recognition of the Company’s Technology 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 technologies. 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 seminar 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 Corporation, 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.

OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update February 17th, 2009

America’s Alternative Energy Initiatives President Obama is promoting alternative energy as a vehicle 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 significant 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 comprehensive 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 renewable sources by 2012, and 25% by 2025; • Implement an economy-wide program to reduce greenhouse gas emissions 80% by 2050; • Save more oil within 10 years than the U.S. is currently importing from the Middle East and Venezuela combined; 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 prices 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 energy production.

Financial Analysis 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 supporting its technology for fuel refiners and chemical and oil company customers.

OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update February 17th, 2009

Income Statement, $

Revenue Selling and marketing General and administrative expenses Research & development Depreciation & amortization expense Total operating expenses Operating income Total other income/(expense) Net loss

9 months 2007

9 months 2008

Q3 2007

Q3 2008

% chg

14,594 142,108 156,702

144,829 246,145 78,310 494 469,778

892% 73% n/m n/m 200%

19,694 190,189 209,883

201,560 585,551 190,094 1,062 978,267

923% 208%

-156,702 1,902 -154,800

-469,778 5,985 -463,793

n/m 215% n/m

-209,883 1,905 -207,978

-978,267 23,225 -955,042

n/m 1119% n/m

n/m 366%

Source: SEC Filings

The Companyâ&#x20AC;&#x2122;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 consisted 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. Balance sheet $ 31-Dec-07

30-Jun-08

30-Sep-08

Cash and cash equivalents Total Current Assets Total Other Assets Total assets

1,267,670 1,267,670 8,678 1,276,348

Total liabilities Total shareholdersâ&#x20AC;&#x2122; equity Accumulated deficit

30,041 1,246,307 -446,091

Source: SEC Filings

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. OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update February 17th, 2009

Analyst Summary 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 technologies 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 commitment, 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 addresses 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 implemented 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 development of the Company’s technology and facilitate its rapid deployment in lucrative commercial applications.

OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update February 17th, 2009

Management Update Vikram M. Pattarkine Chief Technology Officer

In October 2008, OOIL recruited Vikram M. Pattarkine, Ph.D. to be its 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. 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.

Heather Heath Biochemist

Heather Heath joined the Company as a biochemist who will be developing and managing growth protocols. She brings an extensive laboratory and molecular biology background that includes measuring enzymatic activities (Enzyme Assays), measuring the concentration of substances in biological liquids (Immunoassays), 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 investigation 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.

OriginOil, Inc. (OTCBB: OOIL)

Analyst: Victor Sula, Ph.D. Report Update February 17th, 2009

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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 positions 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. (OTCBB: OOIL)