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What changed in 374Water Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of 374Water Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+390 added−299 removedSource: 10-K (2025-03-28) vs 10-K (2024-03-29)

Top changes in 374Water Inc.'s 2024 10-K

390 paragraphs added · 299 removed · 162 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

28 edited+103 added−48 removed5 unchanged
Biggest changeSanitation Projects in developing countries Regional centralized facilities, decentralized treatment facilities (villages, schools) Municipal sludge and biosolids, mixed wastes Environmental remediation and compliance Contaminated site clean-up Wastewater treatment Hazardous and non-hazardous wastes, recalcitrant(1) organics, CECs(3) and PFAS __________ (1) Resistant to chemical decomposition; decomposing extremely slowly (2) Pharmaceuticals and Personal Care Products (3) Contaminants of Emerging Concern (4) Water that has percolated through a solid and leached out some of the constituents (5) Containing low concentrations of contaminants, resulting from the cleaning of containers, etc.
Biggest changeIndustrial Manufacturing Battery Recycling, Oil & Gas, Pharmaceutical, Semiconductor, Pulp & Paper, Food and Beverage, Agriculture, Textile Industry, Tanneries and Leather, Chemical Manufacturing, Cosmetics and Personal Care Hazardous and non-hazardous wastes, recalcitrant (1) organics, microplastics, PPCPs (2), CECs (3) and PFAS, Concentrated waste streams, rinsates (5), AFFF (6) (PFAS), petroleum refining by-products TSDF Facilities Waste Management & Environmental Services including TSDFs (Treatment, Storage, and Disposal Facilities), Waste Brokers & Consultants, Remediation Companies, Municipal Customers, Federal & State Government, and Industrial Customers Hazardous and non-hazardous wastes, recalcitrant (1) organics Environmental remediation and compliance Contaminated site clean-up, and Wastewater treatment Hazardous and non-hazardous wastes, recalcitrant (1) organics, CECs (3) and PFAS Sanitation Projects in developing countries Regional centralized facilities, and decentralized treatment facilities (villages, schools) Municipal sludge and biosolids, mixed wastes __________ (1) Resistant to chemical decomposition; decomposing extremely slowly (2) Pharmaceuticals and Personal Care Products (3) Contaminants of Emerging Concern (4) Water that has percolated through a solid and leached out some of the constituents (5) Containing low concentrations of contaminants, resulting from the cleaning of containers, etc.
Municipal sludge is typically treated in large biological treatment processes that allow for the wastewater to reside for extended periods in an air or oxygen rich environment (aerobic digestion or anaerobic digestion) that promotes biological breakdown of organic solids. This process generates a final residue known as biosolids, as it mainly consists of biological bacteria.
Municipal sludge is typically treated in large biological treatment processes that allow for the wastewater to reside for extended periods in an air or oxygen rich environment (aerobic digestion) or in an oxygen deficit environment (anaerobic digestion) that promotes biological breakdown of organic solids. This process generates a final residue known as biosolids, as it mainly consists of biological bacteria.
For example, the construction and operation of our AirSCWO units may require obtaining air permits from various states or, alternatively, obtaining a formal determination from a state that a permit is not required.
For example, the construction and operation of our AirSCWO systems may require obtaining air permits from various states or, alternatively, obtaining a formal determination from a state that a permit is not required.
Identification of high-performing talent will be linked to succession planning and development of the future-workforce will be embedded in employee professional development schemes. 5 Table of Contents We are setting clear standards with respect to generating an open and transparent working environment in which everyone has a voice.
Identification of high-performing talent will be linked to succession planning and development of the future-workforce will be embedded in employee professional development schemes. We are setting clear standards with respect to generating an open and transparent working environment in which everyone has a voice.
We are pioneers in a new era of waste management that supports a circular economy and enables organizations to achieve their environment, social, and governance (ESG) goals. Our vision is a world without waste and our mission is to help create and preserve a clean and healthy environment that sustains life. Our principal executive offices are located at 701 W.
We are pioneers in a new era of waste management that supports a circular economy and enables organizations to achieve their environment, social, and governance (ESG) goals. Our vision is a world without waste and our mission is to help create and preserve a clean and healthy environment that sustains life.
This will invoke effective personal development discussions and provide the opportunity to conduct performance reviews supported by transparent data and open conversation.
This will include effective personal development discussions, and provide the opportunity to conduct performance reviews supported by clear performance objectives, transparent data, and open conversation.
We may also be required to obtain state and local treatment works approval to install our AirSCWO systems if a unit is connected to a system which is permitted pursuant to the United States National Pollutant Discharge Elimination Systems Act (NPDES).
We may also be required to obtain state and local treatment works approval to install our AirSCWO systems if a unit is connected to a system, which is permitted pursuant to the United States National Pollutant Discharge Elimination Systems Act (“NPDES”), which governs the discharge of pollutants into navigable waters of the U.S.
All of our human resource initiatives will be supported by key performance indicators to monitor their effectiveness and gain insight into gaps that can be addressed quickly and ensure our overall human resource strategy is adapted as required and maintained to a high degree.
All of our human resource initiatives will be supported by key performance indicators, to monitor their effectiveness, gain insight into gaps that can be addressed quickly, and ensure our overall human resource strategy is adapted as required and maintained to a high degree. Corporate Information 374Water Inc. is a Delaware corporation which was formed in September 2005 as PowerVerde, Inc.
Government Regulations Our operations and AirSCWO system may be subject to various United States federal, state and local laws and regulations and requirements governing the protection of the environment, public health and safety, and other matters.
This may have an effect on our future revenue and profitability. 9 Table of Contents Government Regulations Our operations and AirSCWO system may be subject to various United States federal, state and local laws and regulations and requirements governing the protection of the environment, public health and safety, and other matters.
One of our key markets is sludge treatment, which includes both municipal and industrial wastes. Sludge is the semi-solid by-product obtained from the treatment of residential and commercial (i.e., municipal) or industrial wastewater.
Sludge is a semi-solid by-product obtained from the treatment of residential and commercial (i.e., municipal) or industrial wastewater.
Our Technology We have developed AirSCWO, a proprietary treatment system based on “supercritical water oxidation.” AirSCWO leverages the unique properties of water in its supercritical phase (above 374 o C and above a barometric pressure of 221 atm).
Our Technology 374Water has developed AirSCWO, a proprietary waste destruction/treatment system which harnesses the power of supercritical water oxidation (“SCWO”). AirSCWO leverages the unique properties of water in its supercritical phase (above 374 o C and above a barometric pressure of 221 Bar).
If the operators of our AirSCWO™ units are treating hazardous waste, such operators may be required to obtain special hazardous waste technician training. Additionally, we are currently evaluating whether our AirSCWO systems may be regulated pursuant to the United States Occupational Safety and Health Act and thereby be subject to inspections thereunder.
We may incur training costs, monitoring costs, and remediation costs in relation to such regulations. Additionally, we are currently evaluating whether our AirSCWO systems may be regulated pursuant to the United States Occupational Safety and Health Act (“OSHA”) and thereby be subject to inspections thereunder.
We intend to apply a wide range of retention initiatives that include rewarding high-performance and opening opportunities for progression and career development.
As we move forward our recruitment strategy will include partnerships with recruitment firms for technical positions and we will expand our sourcing strategy to include new platforms. We intend to apply a wide range of retention initiatives that include rewarding high-performance and opening opportunities for progression and career development.
Moving forward we intend to deliver a total reward strategy which appropriately supports achievement of organizational aims and priorities, and will help position us as an employer of choice which employees value and understand. This will undergo periodical review to ensure we are able to attract and retain top talent in a financially sustainable way.
Moving forward we will engage with a compensation partner to deliver a total reward strategy, which appropriately supports achievement of organizational priorities, and will help position us as an employer of choice, and which employees value and understand.
Our focus areas in creating a working environment that draws out the best in our employees and allows them to fulfill their potential and support the Company to attain its goals are as follows: 1) Attract, identify, develop and retain high-performing talent across all areas. 2) Develop and support the growth of leadership. 3) Enable the development of a high-performance culture in which staff performance can be supported, rewarded, enhanced and managed effectively. 4) Foster a values-based culture focused on diversity, inclusivity, well-being and positive staff engagement. 5) Develop a total reward approach which is valued by staff and facilitates organizational objectives. 6) Provide excellent core HR, professional development and health and safety services across all business areas to enable the effective operation of the organization.
We are working towards a human resources strategy that will help drive the right culture, leadership, talent management, performance, reward and recognition, personal development, and ways of working to ensure the Company achieves its objectives and our people benefit from an exceptional experience. 10 Table of Contents Our focus areas in creating a working environment that draws out the best in our employees and support the Company objectives are as follows: 1) Attract, identify, develop and retain high-performing talent across all parts of the company. 2) Develop and support the growth of leadership. 3) Enable the development of a high-performance culture where staff performance can be supported, rewarded, enhanced and managed effectively. 4) Develop a market-based total reward approach, which is valued by staff, and supports retention of our employees 5) Provide excellent core HR services across all business areas to enable the effective operation of the organization.
At that time, the Company was focused on developing, commercializing and marketing a series of unique electric generating power systems designed to produce electrical power with zero emissions or waste byproducts, based on a pressure-driven expander motor and related organic rankine cycle technology. 9 Table of Contents On April 16, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger”) with 374Water Inc., a privately held company based in Durham, North Carolina, (“374Water Private Company”) and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde.
At that time, the Company was focused on developing, commercializing and marketing a series of unique electric generating power systems designed to produce electrical power with zero emissions or waste byproducts, based on a pressure-driven expander motor and related organic rankine cycle technology.
ITEM 1. BUSINESS. Overview 374Water Inc. (the “Company”, “374Water”, “We”, or “Our”) offers a technology that transforms wet wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., “per-and polyfluoroalkyl substances” or “PFAS”) into recoverable resources by focusing on waste as a valuable resource for water, energy, and minerals.
Our AirSCWO system is designed to effectively convert solid and liquid wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., “per-and polyfluoroalkyl substances” or “PFAS”) into recoverable resources including water, minerals, and heat energy, by focusing on waste as a valuable resource.
We are also targeting additional high value markets that we expect will contribute to the Company’s revenue and thereby help fuel our growth plans.
We believe our AirSCWO technology is well positioned to provide a compelling waste destruction solution to TSDF market participants. 374Water is targeting high value markets that we expect will contribute to the Company’s revenue and thereby help fuel our growth plans.
In some cases, to meet the AirSCWO inlet requirements (e.g., water percentage, total dissolved solids), a pre-treatment is added to our system to ensure our system performance or a post-treatment packaged system to enhance the system outputs value (e.g., carbon dioxide utilization or sequestration, minerals recovery and upgrade, and water purification).
Our post-treatment packaged systems are designed to enhance the system outputs value (e.g., carbon dioxide utilization or sequestration, minerals recovery and upgrade, water purification, and energy recovery/recycling, etc.).
All forward-looking statements attributable to 374Water or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. 11 Table of Contents
All forward-looking statements attributable to 374Water or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. INDUSTRY AND MARKET DATA Certain industry data and market data included in this Annual Report were obtained from independent third-party surveys, market research, publicly available information, reports of governmental agencies, and industry publications and surveys.
Sludge and biosolids management are a key part of any wastewater treatment process. Those high strength streams are prime for the AirSCWO™ technology since they contain significant calorific content that can be treated effectively and self-propel the oxidation process.
Sludge and biosolids management are a key part of any wastewater treatment process. Those high strength streams are ideal for our AirSCWO technology since they contain significant calorific content that facilitates the oxidation or destruction process. Landfills: Landfill Leachate is a liquid that forms when water percolates through waste material in a landfill, picking up various dissolved and suspended substances.
Our recruitment strategy is based on identifying top talent, predominantly via existing networks and referrals, and offering competitive remuneration packages that combine salary, benefits and equity. As we move forward our recruitment strategy will expand to wider platforms allowing outreach to a wider audience. In 2023, we hired a full-time human resources individual.
Our goal is to ensure we have the right talent in the right seat to enable the organization to execute on our strategic objectives. Our recruitment strategy is based on identifying top talent, predominantly via existing networks and referrals, and offering competitive remuneration packages that combine salary, benefits and equity.
In the event our AirSCWO systems are used to treat metals, the resulting mineral stream may constitute heavy metals under the United States Resource Conservation and Recovery Act (the “RCRA”) and require separation and regulated disposal if such heavy metals were deemed to be hazardous waste under the RCRA.
In the event our AirSCWO systems are used to treat metals, the resulting mineral stream may constitute heavy metals under the RCRA. These regulations impose detailed requirements for the handling, storage, treatment and disposal of hazardous waste.
As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests. 10 Table of Contents FORWARD-LOOKING STATEMENTS Prospective investors are cautioned that the statements in this annual report on Form 10-K (the “Report”) that are not descriptions of historical facts may be forward-looking statements that are subject to risks and uncertainties.
References to our website and any information contained therein or connected thereto is not intended to be incorporated by reference into this report and should not be considered a part of this report, and the referenced websites are not intended to act as active hyperlinks. 11 Table of Contents FORWARD-LOOKING STATEMENTS Prospective investors are cautioned that the statements in this annual report on Form 10-K (the “Report”) that are not descriptions of historical facts may be forward-looking statements that are subject to risks and uncertainties.
Such solutions may be developed by the Company or by its strategic partners to provide a complete solution and integrated treatment train. In addition, the Company intends to offer sales agreements for supply of parts, maintenance and repairs. Human Capital and Culture We currently employ twenty-six full-time employees and six consultants on a full or part-time basis.
Pre- and Post-Treatment Solutions We offer, as part of a broader solution package, ancillary equipment to pre-treat the inlet waste stream and post-treat the byproduct stream, depending on the application. Such solutions may be developed by the Company, or by its strategic partners, to provide a complete solution and integrated treatment train.
Our current projections are to increase the workforce to approximately forty full-time employees in 2024 and fifty full-time employees in 2025. We recognize and value our people as our most important asset in achieving our strategic goals and growing a great company.
We have made a significant investment to build out the company’s leadership team, and recognize and value our people as our most important asset in achieving our strategic goals.
We intend that our operations and AirSCWO systems will be in material compliance with, and in many cases surpass, minimum standards required by applicable laws and regulations. Corporate Information 374Water Inc. is a Delaware corporation which was formed in September 2005 as PowerVerde, Inc.
We intend that our operations and AirSCWO systems will be in material compliance with, and in many cases surpass, minimum standards required by applicable laws and regulations. Human Capital and Culture As of December 31, 2024, we employed 27 full-time employees and 10 contractors. Our current plans are to increase our workforce to approximately 60 full-time resources in 2025.
The drivers that are facilitating adoption of our technology include but are not limited to: population growth and urbanization, increasing quantity/complexity of waste streams, climate change, carbon economics, resource scarcity, corporate sustainability targets, commodity prices, energy security and tightening regulations.
Primary demand drivers for waste destruction include excessive cost of current disposal practices, the desire for waste destruction at the source of waste generation, aging, outdated and/or inadequate waste disposal infrastructure, poor waste disposal processes or options, population growth and urbanization, increasing quantity/complexity of waste streams, public health, underlying business economics, existing State and Federal regulations, the threat of additional regulations, threat from contaminant of emerging concern (“CECs”), resource scarcity, corporate sustainability targets, commodity prices, climate change, and energy security.
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The supercritical phase produces unique properties of water which when combined with air convert organic matter to energy and minerals that are safe byproducts that can be recovered and put to economically productive use. We call our systems AirSCWO , as it utilizes a combination of ambient air and the supercritical water oxidation process.
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(the “Company”, “374Water”, “We”, or “Our”) is a global industrial technology and services company providing innovative solutions addressing global organic waste destruction/treatment and waste management issues within the municipal, federal, and industrial markets. 374Water offers our proprietary AirSCWO system, which is designed to efficiently destroy and mineralize a broad spectrum of non-hazardous and hazardous organic wastes producing safe dischargeable water streams, safe mineral effluent, safe vent gas, and recoverable heat energy.
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Because our AirSCWO systems convert any organic material, we believe the AirSCWO systems have the capability of treating a variety of complex, hazardous and non-hazardous wet waste streams, thus creating opportunities for multiple applications in diverse market verticals on an international scale.
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Importantly, our AirSCWO system is designed to eliminate recalcitrant organic wastes without creating waste byproducts, as well as to simplify existing, complex waste processing and disposal practices utilized throughout our target markets.
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The technology is addressing environmental challenges that the Company believes, until now, have been considered insurmountable due to science/engineering and/or cost barriers. For example, we believe our systems can treat certain types of PFAS. 4 Table of Contents Products and Services We believe AirSCWO systems have the ability to address environmental issues across multiple market verticals.
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In fiscal year 2024, 374Water outlined a new strategic plan and tactical roadmap.
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Our revenue model includes both capital equipment sales and long- term service agreements. Our sales and market strategy is a combination of direct customer and channel partner sales routes, depending on the specific market and territory.
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Throughout the year, we executed our plan reaching critical milestones we believe position the Company’s business outlook well for fiscal year 2025. 2024 achievements include ruggedizing and optimizing our AirSCWO system to effectively process a variety of organic waste streams; deploying our first commercial scale AirSCWO system to the City of Orlando’s Iron Bridge Water Reclamation Facility; completing federal and industrial waste destruction demonstrations; growing our backlog and demand in the municipal, federal and industrial markets; relocating our laboratory facility to a significantly larger state-of-the-art Biosafety Level 1 Laboratory to meet increasing lab-scale waste destruction demand and expedite the advancement of our AirSCWO technology “AS”); pursuing Waste Destruction Services (“WDS”) operations with potential partner Treatment, Storage, and Disposal Facility (“TSDF”) operators; relocating our manufacturing operations; and strengthening our leadership team and organization.
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Additionally, the AirSCWO systems may be sold directly to other solution providers who may integrate our equipment with other equipment as part of an integrated system and solution. We sell AirSCWO as a modular and containerized system.
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As we begin 2025, we believe 374Water is well positioned with a robust plan to scale revenue, operations, and capitalize our business.
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The units are compact and prefabricated so that they may be cost effectively shipped, installed, and operated within the footprint of an existing plant. We are currently offering a six (6) wet ton per day throughput capacity system and anticipate beginning the manufacturing of a thirty (30) wet ton per day throughput capacity system in 2025.
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During 2025, we expect to complete our commercial-scale demonstration under our contract with the City of Orlando; deploy a permanent AirSCWO system to The Orange County Sanitation District (“OC San”) in Fountain Valley, CA; deploy an AS system to Detroit, MI in partnership with the Defense Innovation Unit for a demonstration of AirSCWO’s waste destruction effectiveness for specific Department of Defense applications;; deploy an AirSCWO system to St.
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We also anticipate designing a two hundred (200) wet ton per day throughput capacity system in the future. We also intend to sell, as part of a broader solution package, ancillary equipment that is required to pre-treat the inlet waste stream and post-treat a product stream, depending on the application.
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Cloud, MN, as part of a Legislative-Citizen Commission on Minnesota Resources (LCCMR) initiative to demonstrate its effectiveness destroying Minnesota waste; further scale our manufacturing capacity to meet client demand for AirSCWO systems of various sizes; continue to improve our AirSCWO technology and develop larger size AirSCWO systems; negotiate waste destruction service agreements with one or more TSDFs; and begin accepting Third-party waste streams for our initial TSDF WDS hub(s).
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We are working towards a human resources strategy that will help drive the right culture, leadership, talent management, performance, reward and recognition, personal development, and ways of working vital to ensure the Company achieves its strategic goals whilst our people benefit from an exceptional experience.
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The supercritical phase of water has unique properties, which when combined with air, destroys “waste” by oxidizing organic matter and yielding recoverable energy, minerals, and water. Our AirSCWO technology platform sits at the heart of our waste destruction solutions.
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We are dedicated to embedding Diversity, Equity and Inclusion (DE&I) as an important part of developing our culture through delivery of innovative initiatives and internal workshops, ensuring that DE&I policies touch on all aspects of the Company from recruitment practices to company behavior/operating frameworks. These policies will also be reviewed periodically as required and updated accordingly.
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The effectiveness of AirSCWO has been demonstrated on a wide variety of organic waste streams at commercial and lab bench scale with waste destruction results at or above 99.99%. Our AirSCWO technology has treated a wide variety of non-hazardous and hazardous solid and liquid organic wastes.
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Markets and Industries We are seeking to create a more robust and sustainable approach to waste stream management for our customers.
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Our technology can effectively process solid wastes, which can be pre-processed into slurries for treatment, including wastewater sludges and biosolids, spent granular activated carbon (“GAC”), spent ion exchange resins (“IX”), and hard-to-degrade plastics, to name a few.
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The AirSCWO technology is designed to address those key market drivers and provides a complete, compact, energy efficient, and decentralized solution able to treat a broad range of waste. The AirSCWO technology can treat diverse waste streams across different industries and market segments.
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In addition, our technology can process liquid wastes such as aqueous film forming foam (“AFFF”) used in firefighting, landfill leachate, light-non-aqueous phase liquid (“L-NAPL”), military wastes, industrial solvents, oily sludges, pharmaceuticals, foamate streams, pesticides, and other industrial wastes, to name a few.
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We believe our technology provides a unique value proposition that will support its adoption across various markets, including, but not limited to: · Generating value from waste by recovering clean energy in the form of heat, water, and minerals; · Providing a highly energy efficient, compact and sustainable waste treatment option that can deliver unprecedented elimination of many environmentally persistent pollutants, e.g., PFAS, 1,4 Dioxane, microplastics, pharmaceuticals and personal care products (PPCPs), and other contaminants of emerging concern (CECs); · Treating waste at the source thereby eliminating haulage and transportation needs and reducing greenhouse gas (GHG) emissions; and · Offsetting methane emissions by offering a solution to waste that does not form methane as a byproduct.
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AirSCWO has been shown to treat (destroy) wastes to levels at or below regulatory standards, reduce or eliminate disposal costs, remove operational bottlenecks, and reduce liabilities and other risks associated with waste management.
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The global demand for municipal and industrial sludge treatment is expected to generate revenue of above $9.0 billion by the end of 2026, growing at a Compound Annual Growth Rate (CAGR) of around 5.7% between 2020 and 2026 (Research and Markets Report, August 2020).
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Our AirSCWO system is designed to be a continuous flow waste destruction process with a unique system design that includes highly efficient energy recapture technology, to minimize overall energy demand and maximize reusable energy. Our AirSCWO system testing so far has demonstrated that our system can run continuously at commercial scale with periodic stops for routine maintenance and checkups.
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Growing populations and economic advancement have resulted in increased volumes of sludge, which drives the market for municipal and industrial sludge treatment. The municipal sludge market is expected to drive the near-term growth of the Company’s revenue because of increasing disposal costs, and future regulation on organic CECs (e.g PFAS, Microplastics, Pharmaceuticals).
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We continue to shorten the duration and lessen the frequency of such maintenance downtime, to increase process efficiency in our AirSCWO systems for our clients. Our technology addresses multiple applications in diverse market verticals on a global scale.
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Table 1 below shows near-term target markets, their subsegments, and the relevant applications associated with those markets. 6 Table of Contents Table1: Representative target markets, their subsegments and applications Key Markets Subsegments Applications Industrial: manufacturing Chemical, Pharmaceutical, Semiconductor, Food & Beverage Hazardous and non-hazardous wastes, recalcitrant(1) organics, microplastics, PPCPs(2), CECs(3) and PFAS.
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The technology we continue to refine and innovate is designed to address business operations and environmental challenges, that we believe have been inadequately addressed and poorly resourced until now.
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Municipal Utilities Landfills Sludge and biosolids, Landfill leachate(4) Defense Military Bases Government owned manufacturing facilities Fuel and oil residuals, rinsates(5), AFFF(6) (PFAS) Oil and Gas Exploration, Extraction/Offshore & Onshore Petroleum refining Concentrated waste streams, rinsates(5), AFFF (6)(PFAS), petroleum refining by-products Agricultural Farms, Slaughterhouses, Poultry houses Manure, concentrated waste streams Waste Management Recycling Centers Incinerators Landfills Landfill leachate(4), food waste, waste oils; Fats, Oil & Greases (FOG), hazardous and non-hazardous organic waste.
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While we are still developing the technology, we believe 374Water’s AirSCWO technology is a paradigm-shift across sectors of waste management. 3 Table of Contents Products and Services AirSCWO Solutions 374Water’s ability to provide scaled waste destruction solutions is a significant differentiator across waste treatment and destruction providers.
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(6) Aqueous Film Forming Foam The markets shown represent multi billions in Total Addressable Market (TAM) value, with typical 5-year CAGRs of between 5%-8%. Strategy The execution of our growth strategy includes a blend of opportunities: Growth Initiatives We have sold our first commercial unit to a public agency responsible for 2.6 million people in Southern California.
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We intend to offer four (4) commercial-scale AirSCWO system models and corresponding pre- and post-treatment technologies to fully support end customers' organic waste destruction needs. These AirSCWO models include the AirSCWO1 (“AS1”), AirSCWO6 (“AS6”), AirSCWO30 (“AS30”) and AirSCWO 100+.
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The AirSCWO 6 system, which is named for the 6 wet tons the unit can process per day (WMT/d) of wastewater in a 40-foot standard shipping container, is expected to be installed in the 2nd quarter of 2024. Upon successful installation, we expect to receive several additional purchase orders for our systems.
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The highly mobile AS1 system is designed to process over 700 kg per day of wet waste and is ideal for onsite demonstrations, event cleanups, and down-scaled WDS deployments. We are currently finalizing the design and construction of our first AS1 system, which will then be deployed following for various demonstrations.
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Additionally, we are in the process of the design of larger capacity systems to process thirty (30) WMT/d (AirSCWO 30) and later on two hundred (200) WMT/d (AirSCWO 200), respectively.
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The mobile AS6 system is designed to process up to six (6) metric tons per day of wet waste, and is well-suited for smaller municipal, federal, and industrial sites and may be utilized for both permanent onsite destruction and mobile WDS customer needs.
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We anticipate initial sales of our thirty (30) ton system within the next twenty-four months. 7 Table of Contents We intend for the Company’s growth over the next two years to be predominantly driven by sales of AirSCWO systems in the identified key markets, which we hope will lead to customer base expansion, and ultimately, with the municipal market expected to generate a significant portion of the Company’s revenue.
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We currently have two of the AS6 systems, oneis already operating in Orlando, FL and the second is scheduled for delivery to OC San in 2025. The AS30 system is currently still in the design phase. We intend for the AS30 system to be able to process up to 30 metric tons per day of wet waste.
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Our initial geographical focus will be North America and EMEA (to include Europe, the Middle East and Africa). Our business model includes direct sales to end-users and indirect sales via channel partners.
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We believe that, once developed, manufactured and ready for deployment, this unit will be ideal for mid-sized municipal, federal, and industrial sites, as well as regional TSDF and landfill WDS facilities. We hope to begin manufacturing one or more AS30s in 2025, depending on the level of customer demand and having sufficient capital.
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In some markets, we believe revenue will be generated from a mix of capital equipment sales and a Service Agreement (SA), which is a paid service for waste treatment pursuant to long-term contracts. The latter will be offered through a separate financing division that we are targeting to establish in 2024 and will initially be deployed via direct end-user engagement.
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Finally, our largest bespoke AirSCWO100+ systems will be designed to process up to 100 or more metric tons of wet waste per day and will be permanent installations. We have currently not begun the process of designing and building the AirSCWO 100+ system, and we expect such work to begin in the coming years.
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The financing systems to be sold via SAs will lower barriers to entry in our key markets and facilitate more rapid expansion of our client base. Examples of models to be used can include, but are not limited to: Build-Operate-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT), depending on clients’ preferences and limitations.
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As these are bespoke systems, we expect our timeframe for building these will be impacted by the level of customer demand. We believe these systems will be well suited for large municipal wastewater treatment, industrial, and TSDF facilities. All AirSCWO systems are designed to be flexible solutions to meet the specific needs of municipal, federal, and industrial customers.
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We envisage that in some cases, public private partnerships (PPPs) will be established, particularly when selling to public utilities and addressing projects in developing geographies.
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Our AirSCWO systems are designed to augment or replace conventional waste management infrastructure or be the sole waste destruction solution. In addition, our AirSCWO systems are designed to operate in parallel, thereby allowing customers to easily and efficiently expand or contract waste destruction capacity needs, as necessary.
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In addition, during the next two to three years, we are planning to conduct further product development and expand our product portfolio, which we believe will facilitate entry into new market subsegments where particularly complex waste streams require treatment. This is most relevant to some industrial manufacturing, defense, and waste management applications.
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Our pre-treatment packaged systems are designed to condition waste streams to meet the AirSCWO inlet requirements (e.g., water percentage, total dissolved solids, particulate size, calorific content, etc.). Our pre-treatment systems are installed upstream of our AirSCWO system to ensure system waste destruction processing performance.
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Our intention is to maintain a research and development budget sufficient to attain this goal. Third Party Growth Initiatives As an early-stage growth company with what we believe to be a highly differentiated technology platform, we expect to leverage strategic partnerships with larger companies that offer environmental services or execute on targeting various end markets.
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Our post-treatment systems are installed downstream of our AirSCWO system to improve performance and byproduct valorization. 4 Table of Contents Waste Destruction Services During 2024, we announced the launch of our WDS business. Along with capital sales and service contracts, we intend for WDS to provide our customers with a fit-to-need waste destruction service without significant capital investment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur need to apply for and receive permits could substantially limit our ability to operate and grow our business. · We may be involved in litigation matters or other legal proceedings that are expensive and time consuming. · Developments in, and compliance with, current and future environmental and climate change laws and regulations could impact our business, financial condition or results of operations. · If we become subject to claims relating to handling, storage, release or disposal of hazardous materials, we could incur significant cost and time to comply. · Failure to effectively treat emerging contaminants could result in material liabilities. · Wastewater operations entail significant risks that may impose significant costs. · We may incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees, which could reduce our profitability. · Our operations will be subject to multiple layers of complex environmental health and safety regulation. · Developments in, and compliance with, current and future climate change laws and regulations could impact our business, financial condition or results of operations. · Our insurance may not provide adequate coverage. · We may be unable to obtain or maintain insurance for our commercial products. · Product and services liability suits, whether or not meritorious, could be brought against us. · Our financial results depend on successful project execution and may be adversely affected by cost overruns, failure to meet customer schedules or other execution issues. · We have inadequate capital and need for additional financing to accomplish our business and strategic plans. · Undetected problems in our products could impair our financial results and give rise to potential product liability claims. 12 Table of Contents Risks Related to Our Financial Position and Capital Requirements · Our financial results depend on successful project execution and may be adversely affected by cost overruns, failure to meet customer schedules or other execution issues. · We have inadequate capital and need for additional financing to accomplish our business and strategic plans.
Biggest changeOur need to apply for and receive permits could substantially limit our ability to operate and grow our business. · We have in the past and may in the future be involved in litigation matters or other legal proceedings that are expensive and time consuming. · Developments in, and compliance with, current and future environmental and climate change laws and regulations could impact our business, financial condition or results of operations. · If we become subject to claims relating to handling, storage, release or disposal of hazardous materials, we could incur significant cost and time to comply. · Failure to effectively treat emerging contaminants could result in material liabilities. · Wastewater operations entail significant risks that may impose significant costs. · We may incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees, which could reduce our profitability. · We enter into various contracts in the normal course of our business, some or all of which may require us to indemnify the other party to the contract.
We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with a larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, and greater financial, research and development, marketing, distribution, and other resources than we do and the ability to offer financing for projects.
We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, greater ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with a larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, and greater financial, research and development, marketing, distribution, and other resources than we do and the ability to offer financing for projects.
We have never employed our technology under the conditions or in the volumes that will be required for us to be profitable and cannot predict all of the difficulties that may arise. Accordingly, our technology may not perform successfully on a commercial basis and may never generate any revenues or be profitable.
We have never employed our technology under the conditions or in the volumes that will be required for us to be profitable and we cannot predict all of the difficulties that may arise. Accordingly, our technology may not perform successfully on a commercial basis and we may never generate any revenues or be profitable.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include: · Inability to obtain additional capital; · Failure to meet or exceed financial or operational projections we may provide to the public; · Failure to meet or exceed the financial or operational projections of the investment community; · Significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; · Additions or departures of key management personnel; · Significant lawsuits, including shareholder litigation; · If securities or industry analysts issue an adverse or misleading opinion regarding our common stock; · Changes in market valuations of similar companies; · General market or macroeconomic conditions; · Sales of shares of our common stock by us or our shareholders in the future; and · Trading volume of our common stock. 30 Table of Contents In addition, companies trading in the stock market in general, and on the Nasdaq Capital Market, have experienced extreme price and volume fluctuations, and we have in the past experienced volatility that has been unrelated or disproportionate to our operating performance.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include: · Inability to obtain additional capital; · Failure to meet or exceed financial or operational projections we may provide to the public; · Failure to meet or exceed the financial or operational projections of the investment community; · Significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; · Additions or departures of key management personnel; · Significant lawsuits, including shareholder litigation; · If securities or industry analysts issue an adverse or misleading opinion regarding our common stock; · Changes in market valuations of similar companies; · General market or macroeconomic conditions; · Sales of shares of our common stock by us or our shareholders in the future; and · Trading volume of our common stock. 26 Table of Contents In addition, companies trading in the stock market in general, and on the Nasdaq Capital Market, have experienced extreme price and volume fluctuations, and we have in the past experienced volatility that has been unrelated or disproportionate to our operating performance.
If we are unable to provide a solution to the potential defect or problem that is acceptable to its customers, we may be required to incur substantial product recall, repair and replacement and even litigation costs. These costs could have a material adverse effect on our business and operating results.
If we are unable to provide a solution to the potential defect or problem that is acceptable to our customers, we may be required to incur substantial product recall, repair and replacement and even litigation costs. These costs could have a material adverse effect on our business and operating results.
If these third parties do not properly manufacture, assemble, and install our AirSCWO technology and sub-systems, or otherwise do not perform adequately, or if we fail to recruit and retain third parties to deploy our systems in particular geographic areas, our business, financial condition and results of operations could be adversely affected.
If these third parties do not properly manufacture, assemble, and install our AirSCWO technology and systems, or otherwise do not perform adequately, or if we fail to recruit and retain third parties to deploy our systems in particular geographic areas, our business, financial condition and results of operations could be adversely affected.
Further, we are subject to all the risks inherent in a new business including, but not limited to: intense competition; lack of sufficient capital; loss of protection of proprietary technology and trade secrets; difficulties in commercializing our products, managing growth and hiring and retaining key employees; adverse changes in costs and general business and economic conditions; and the need to achieve product acceptance, to enter and develop new markets and to develop and maintain successful relationships with customers, third party suppliers and contractors. 13 Table of Contents Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management.
Further, we are subject to all the risks inherent in a new business, including, but not limited to: intense competition; lack of sufficient capital; loss of protection of proprietary technology and trade secrets; difficulties in commercializing our products, managing growth and hiring and retaining key employees; adverse changes in costs and general business and economic conditions; and the need to achieve product acceptance, to enter and develop new markets and to develop and maintain successful relationships with customers, third party suppliers and contractors. 14 Table of Contents Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management.
If there are defects in the design, production or testing of our products and systems, we could face substantial repair, replacement or service costs, potential liability and damage to our reputation. Defects or malfunctioning of our products, if they were to occur, would likely result in significant damage and loss of life.
Furthermore, if there are defects in the design, production or testing of our products and systems, we could face substantial repair, replacement or service costs, potential liability and damage to our reputation. Defects or malfunctioning of our products, if they were to occur, would likely result in significant damage and loss of life.
Developments such as the adoption of new environmental laws and regulations, stricter enforcement of existing laws and regulations, violations by us of such laws and regulations, discovery of previously unknown or more extensive contamination, litigation involving environmental impacts, our inability to recover costs associated with any such developments, or financial insolvency of other responsible parties could in the future have a material adverse effect on our financial condition and results of operations. 17 Table of Contents If we become subject to claims relating to handling, storage, release or disposal of hazardous materials, we could incur significant cost and time to comply.
Developments such as the adoption of new environmental laws and regulations, stricter enforcement of existing laws and regulations, violations by us of such laws and regulations, discovery of previously unknown or more extensive contamination, litigation involving environmental impacts, our inability to recover costs associated with any such developments, or financial insolvency of other responsible parties could in the future have a material adverse effect on our financial condition and results of operations. 18 Table of Contents If we become subject to claims relating to handling, storage, release or disposal of hazardous materials, we could incur significant cost and time to comply.
For example, the manufacture, assembly and installation of the hydraulic, control and automation and electrical sub-systems of our AirSCWO technology are performed by third-party suppliers. The mechanical sub-system is installed (moored) at the relevant project site by third-party engineering service providers.
For example, the manufacture, assembly and installation of the hydraulic, control and automation and electrical sub-systems of our AirSCWO systems are performed by third-party suppliers. The mechanical sub-system is installed (moored) at the relevant project site by third-party engineering service providers.
Inflation has the potential to adversely affect our business, results of operations, financial position and liquidity by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
Inflation has the potential to adversely affect our business, results of operations, financial position and liquidity by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we expect to charge our customers.
Moreover, the following can limit our ability to protect our intellectual property and technology: · intellectual property laws in certain jurisdictions may be relatively ineffective; · detecting infringements and enforcing proprietary rights may divert management’s attention and company resources; · contractual measures such as non-disclosure agreements and confidentiality provisions may afford only limited protection; · any patents we may receive will expire, thus providing competitors access to the applicable technology; · competitors may independently develop products that are substantially equivalent or superior to our products or circumvent our intellectual property rights; and · competitors may register patents in technologies relevant to our business areas; In addition, various parties may assert infringement claims against us.
Moreover, the following can limit our ability to protect our intellectual property and technology: · intellectual property laws in certain jurisdictions may be relatively ineffective; · detecting infringements and enforcing proprietary rights may divert management’s attention and company resources; · contractual measures such as non-disclosure agreements and confidentiality provisions may afford only limited protection; · any patents we may receive will expire, thus providing competitors access to the applicable technology; · competitors may independently develop products that are substantially equivalent or superior to our products or circumvent our intellectual property rights; and · competitors may register patents in technologies relevant to our business areas. 23 Table of Contents In addition, various parties may assert infringement claims against us.
Any product liability claims brought against us could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. While we maintain product liability insurance, we may not have sufficient insurance coverage for all future claims.
Any product liability claims brought against us could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. We may not have sufficient product insurance coverage for all future claims.
Many climate change predictions, if true, present several potential challenges to water and wastewater service providers, such as increased precipitation and flooding, potential degradation of water quality and changes in demand for water services. We may incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees, which could reduce our profitability.
Many climate change predictions, if true, present several potential challenges to water and wastewater service providers, such as increased precipitation and flooding, potential degradation of water quality and changes in demand for water services. 19 Table of Contents We may incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees, which could reduce our profitability.
We may not be able to negotiate new arrangements with these third parties on acceptable terms, or at all. In addition, we rely on third parties, under our oversight, for the deployment and installation of our AirSCWO technology.
We may not be able to negotiate new arrangements with these third parties on acceptable terms, or at all. In addition, we rely on third parties, under our oversight, for the deployment and installation of our AirSCWO systems.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected products, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
Risks Relating to our Common Stock and Capital Structure The market price of our common stock historically has been highly volatile and is likely to continue to be volatile, and you could lose all or part of your investment.
Risks Related to our Common Stock and Capital Structure The market price of our common stock historically has been highly volatile and is likely to continue to be volatile, and you could lose all or part of your investment.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred. 15 Table of Contents We face competition in our industry, and we may be unable to attract customers and maintain a viable business.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred. We face competition in our industry, and we may be unable to attract customers and maintain a viable business.
These events could also lead to product recalls, safety or security alerts, or result in the removal of a product from the market, issuance of credits, warranty or liability claims or contractual damages against us.
These events could also lead to product recalls, safety or security alerts, or result in the removal of a product from the market, warranty or liability claims or contractual damages against us.
Developments in, and compliance with, current and future climate change laws and regulations could impact our business, financial condition or results of operations. Our business, operations, and product and service offerings are subject to and affected by many federal, state, local and foreign environmental laws and regulations, including those enacted in response to climate change concerns.
“Legal Proceedings.” Developments in, and compliance with, current and future environmental and climate change laws and regulations could impact our business, financial condition or results of operations. Our business, operations, and product and service offerings are subject to and affected by many federal, state, local and foreign environmental laws and regulations, including those enacted in response to climate change concerns.
Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties. 25 Table of Contents We also employ individuals who were previously employed at other companies in our industry, including our competitors or potential competitors.
Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties. We also employ individuals who were previously employed at other companies in our industry, including our competitors or potential competitors.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. 26 Table of Contents We employ individuals or hire consultants who are employed by or otherwise affiliated with universities and have commitments or obligations under employment agreements, policies, and other contracts with those universities.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. We employ individuals or hire consultants who are employed by or otherwise affiliated with universities and have commitments or obligations under employment agreements, policies, and other contracts with those universities.
Our research and development expenses may increase in the future. Our research and development expenses primarily relate to our efforts to increase the output, durability and commercial viability of our technology. The results of such research and development can be unforeseen and undesirable and therefore our forecasted costs related to such research and development are associated with great uncertainty.
Our research and development expenses primarily relate to our efforts to increase the output, durability and commercial viability of our technology. The results of such research and development can be unforeseen and undesirable and therefore our forecasted costs related to such research and development are associated with great uncertainty.
There is a risk that workers are exposed to these contaminants and pathogens before material is treated, the unit is not operated property and the waste is not fully treated during the process, or there is a malfunction and waste is not property treated creating a risk of third-party exposure to contaminants in byproducts that are generated.
There is a risk that workers may be exposed to these contaminants and pathogens before material is treated, the unit may not be operated properly and waste not fully treated during the process, or there is a malfunction and waste is not properly treated, creating a risk of third-party exposure to contaminants in byproducts that are generated.
Some of our competitors may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market share, or a failure to grow market share for us.
Some of our competitors may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market share, or a failure to grow market share for us once we attain commercialization.
Our management team may not be able to successfully implement our business strategies. If our management team is unable to execute on its business strategies, then our development, including the establishment of revenues and our sales and marketing activities would be materially and adversely affected.
Our management team may not be able to successfully implement our business strategies. If our management team is unable to execute on its business strategies, then our development, including the establishment of revenues and our sales and marketing activities would be materially and adversely affected. As described in “Item 1.
Unexpected changes in business conditions, materials pricing, labor issues, wars such as the current conflict in Ukraine, trade policies, natural disasters, health epidemics, trade and shipping disruptions, port congestions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational.
Unexpected changes in business conditions, materials pricing, labor issues, natural disasters, health epidemics, trade and shipping disruptions, port congestions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational.
We do not and will not own the patents or patent applications that are a subject of these licenses. Our rights to use these technologies and employ the inventions claimed in the licensed patents and patent applications are or will be subject to the continuation of and compliance with the terms of those licenses.
Our rights to use these technologies and employ the inventions claimed in the licensed patents and patent applications are or will be subject to the continuation of and compliance with the terms of those licenses.
Our continued growth will depend in part on executing a higher volume of large projects, which will require us to expand and retain our project management and execution personnel and resources. We have inadequate capital and need for additional financing to accomplish our business and strategic plans. Terms of subsequent financing, if any, may adversely impact your investment.
Our continued growth will depend in part on executing a higher volume of large projects, which will require us to expand and retain our project management and execution personnel and resources. We have inadequate capital and need for additional financing to accomplish our business and strategic plans.
These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businesses described elsewhere in this Report for the year ended December 31, 2023. Summary of Risk Factors An investment in our company involves various risks.
These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businesses described elsewhere in this Report for the year ended December 31, 2024.
The potential impact of a failure to treat is difficult to predict and could lead to an increased risk of exposure to property damage, natural resource damage, personal injury or even product liability claims, increased scrutiny by federal and state regulatory agencies and negative publicity.
The potential impact of a failure to adequately treat is difficult to predict and could lead to an increased risk of exposure to property damage, natural resource damage, personal injury or even product liability claims, increased scrutiny by federal and state regulatory agencies and negative publicity. Wastewater operations entail significant risks that may impose significant costs.
Although not currently part of our sales agreements, we anticipate that our customers will require product warranties as to the proper operation and conformance to specifications of the products we manufacture or install and performance guarantees as to any effluent produced by our equipment and services.
We anticipate that our customers may require product warranties as to the proper operation and conformance to specifications of the products we manufacture or install and performance guarantees as to any effluent produced by our equipment and services.
If any of our current or future products and services that we make or sell (including items that we source from third parties) are defectively designed or manufactured, contain defective components, are misused, have safety or quality issues, have inadequate operating guidelines, malfunctions or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation.
In addition, defending claims is costly and can impose a significant burden on our management. 17 Table of Contents If any of our current or future products and services that we make or sell (including items that we source from third parties) are defectively designed or manufactured, contain defective components, are misused, have safety or quality issues, have inadequate operating guidelines, malfunctions or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation.
Similarly, if we are relying on a third party to indemnify us and the party is denied insurance coverage, or the indemnification obligation exceeds the applicable insurance coverage and does not have other assets available to indemnify us, our business, financial condition and results of operations could be adversely affected. 19 Table of Contents Our operations will be subject to multiple layers of complex environmental health and safety regulation.
Similarly, if we are relying on a third party to indemnify us and the party is denied insurance coverage, or the indemnification obligation exceeds the applicable insurance coverage and does not have other assets available to indemnify us, our business, financial condition and results of operations could be adversely affected.
Risks Related to Our Business and General Economic Conditions · A sustainable market for our products may never develop. · We have a limited operating history with no material revenues. · Our ability to recruit and retain qualified management. · Our management team may not be able to successfully implement our business strategies. · Our executive officers have other business interests. · Our products may have defects. · Our ability to generate revenue will depend in part on government contracts. · Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business. · We may be unable to obtain required licenses from third parties for product development. · We face other risks in our expected international sales. · If we fail to manage growth or to prepare for product scalability effectively, it could have an adverse effect on our employee efficiency, product quality, working capital levels and results of operations. · We may be adversely affected by the effects of inflation. · We face competition in our industry, and we may be unable to attract customers and maintain a viable business. · Our ability to treat hazardous wastes on a commercially viable basis is unproven, which could have a detrimental effect on our ability to generate or sustain revenues. · We are required to obtain permits in different areas of the world in order to utilize our products in such regions.
SUMMARY RISK FACTORS Risks Related to Our Business and General Economic Conditions · A sustainable market for our products may never develop. · Our ability to treat hazardous wastes on a commercially viable basis is unproven, which could have a detrimental effect on our ability to generate or sustain revenues. · We have a limited operating history with no material revenues. · Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management. · Our products may have defects, which could damage our reputation, decrease market acceptance of our products, cause us to lose customers and revenue and result in costly litigation or liability. · Our management team may not be able to successfully implement our business strategies. · Our ability to generate revenue will depend in part on government contracts which expose us to the uncertainties of governmental budgetary and funding constraints and local, national and international political conditions and events. · We have identified material weaknesses in our internal control over financial reporting. · Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business. · We may be unable to obtain required licenses from third parties for product development. · If we fail to manage growth or to prepare for product scalability effectively, it could have an adverse effect on our employee efficiency, product quality, working capital levels and results of operations. · We may be adversely affected by the effects of inflation. · We face competition in our industry, and we may be unable to attract customers and maintain a viable business. · We are required to obtain permits in different areas of the world in order to utilize our products in such regions.
These risks could be increased by the potential physical impacts of climate change on our operations. The physical impacts of climate change are highly uncertain and would vary depending on geographical location, but could include changing temperatures, water shortages, changes in weather and rainfall patterns and changing storm patterns and intensities.
The physical impacts of climate change are highly uncertain and vary depending on geographical location, but could include changing temperatures, water shortages, changes in weather and rainfall patterns and changing storm patterns and intensities.
We may have to engage in common equity, debt, or preferred stock financings in the future. Your rights and the value of your investment in the common stock could be reduced by the dilution caused by future equity issuances. Interest on debt securities could increase costs and negatively impact operating results.
We may have to engage in common equity, debt, or preferred stock financings in the future. Your rights and the value of your investment in the common stock could be reduced by the dilution caused by future equity issuances.
If one or more of these analysts elect to cover us and subsequently cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
If one or more of these analysts elect to cover us and subsequently cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. Additionally, there may be risks associated with us becoming public through a merger.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including: · the scope of rights granted under the license agreement and other interpretation-related issues; · the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; · our diligence obligations under the license agreement and what activities satisfy those diligence obligations; · the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and · the priority of invention of patented technology. 27 Table of Contents In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including: · the scope of rights granted under the license agreement and other interpretation-related issues; · the extent to which our products, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; · our diligence obligations under the license agreement and what activities satisfy those diligence obligations; · the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and · the priority of invention of patented technology.
Although we may take measures to mitigate the impact of this inflation through pricing actions and efficiency gains, if these measures are not effective our business, results of operations, financial position and liquidity could be materially adversely affected.
If we are unable to take measures to mitigate the impact of inflation through pricing actions upon commercialization of our product and efficiency gains, then our business, results of operations, financial position and liquidity could be materially adversely affected.
In the event we are permitted to issue preferred stock pursuant to the terms of our articles of incorporation, preferred stock could be issued in series from time to time with such designation, rights, preferences, and limitations as needed to raise capital.
In the event we issue preferred stock pursuant to the terms of our certificate of incorporation, preferred stock could be issued in series from time to time with such designation, rights, preferences, and limitations as needed to raise capital. The terms of preferred stock would be more advantageous to those investors than to the holders of common stock.
We may need to depend on certain technologies that are licensed to us. We would not control these technologies and any loss of our rights to them could prevent us from selling our products.
We would not control these technologies and any loss of our rights to them could prevent us from selling our products.
The interests of our principal stockholders, officers and directors, who collectively beneficially own approximately 55% of our stock, may not coincide with yours and such stockholders will have the ability to control decisions with which you may disagree.
The interests of our principal stockholders, officers and directors, who collectively beneficially own a significant amount of our common stock, may not coincide with yours and such stockholders will have the ability to control decisions with which you may disagree. At December 31, 2024, our principal stockholders, officers and directors beneficially owned approximately 43.5% of our common stock.
If we are unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain and parts management, we may incur unexpected production disruption, storage, transportation and write- off costs, which may harm our business and operating results. 29 Table of Contents Failure by third parties to supply or manufacture components of our products or to deploy our systems timely or properly could adversely affect our business, financial condition and results of operations.
If we are unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain and parts management, we may incur unexpected production disruption, storage, transportation and write- off costs, which may harm our business and operating results.
The failure to obtain patents and/or protect our intellectual property rights could have a material and adverse effect on our business, results of operations and financial condition. 24 Table of Contents In addition, we have taken steps to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with all of our executive officers, employees, consultants and advisors, however, such agreements may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements.
In addition, we have taken steps to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with our executive officers, employees, consultants and advisors; however, such agreements may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements.
Future sales or potential sales of our common stock in the public market could cause our share price to decline. If the existing holders of our common stock, particularly our directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock.
If the existing holders of our common stock, particularly our directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock.
Risks Related to our Reliance on Third Parties · We depend on a single supplier; if our relationship with our supplier deteriorates, this could have an adverse impact on our business. · Our suppliers may fail to deliver materials and parts according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these materials and parts effectively.
Risks Related to our Reliance on Third Parties Our suppliers may fail to deliver materials and parts according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these materials and parts effectively.
If our treatment systems fail or do not operate properly, or if there is a spill, untreated or partially treated wastewater could discharge onto property or into nearby streams and rivers, causing various damages and injuries, including environmental damage. Liabilities resulting from such damages and injuries could materially adversely affect our business, financial condition, results of operations or prospects.
Wastewater treatment involves various unique risks. If our treatment systems fail or do not operate properly, or if there is a spill, untreated or partially treated wastewater could discharge onto property or into nearby streams and rivers, causing various damages and injuries, including environmental damage.
Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business.
If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
If we do not obtain required licenses, we could encounter delays in product development or find that the development, manufacture or sale of products requiring these licenses could be prevented in the U.S. or abroad. We face other risks in our expected international sales. We expect to derive a portion of our revenues ultimately from international sales.
If we do not obtain required licenses, we could encounter delays in product development or find that the development, manufacture or sale of products requiring these licenses could be prevented in the U.S. or abroad.
Our principal direct competitors in the SCWO field are General Atomic (US) and SCFI (Ireland). Several other technologies are in competition with SCWO, depending on the market sector including: anaerobic digestion, landfilling, drying and incineration, lagoon and spray-fields, lime stabilization, and others.
We compete with direct competitors in the SCWO Field. Additionally, several other technologies are in competition with SCWO, depending on the market sector, including but not limited to: anaerobic digestion, landfilling, drying and incineration, lagoon and spray-fields, and lime stabilization.
There can be no assurance that (i) any patents that we apply for will be issued, (ii) we will ever obtain the rights to any patents covering the technology on which our current systems are based, (iii) any patents issued will not be challenged, invalidated, or circumvented, (iv) we will have the financial resources to enforce any such patents or (v) any patent rights granted will provide any competitive advantage.
There can be no assurance that (i) any patents that we apply for will be issued, (ii) we will ever obtain the rights to any patents covering the technology on which our current systems are based, (iii) any patents issued will not be challenged, invalidated, or circumvented, (iv) we will have the financial resources to enforce any such patents, (v) our confidentiality and invention agreements will be honored or that we will be able to protect our rights to our non-patented trade secrets and know-how effectively, (vi) our competitors will not independently develop equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets and know-how, and (vi) any patent rights granted will provide any competitive advantage.
Our success depends, in large part, on our ability to hire and retain highly qualified people and if we are unable to do so, our business and operations may be impaired or disrupted. Specifically, the Company’s Board of Directors is actively conducting a search for a permanent chief executive officer.
Our success depends, in large part, on our ability to hire and retain highly qualified people and if we are unable to do so, our business and operations may be impaired or disrupted.
Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure investors that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers. We may be adversely affected by the effects of inflation.
Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. 16 Table of Contents We may be adversely affected by the effects of inflation.
A delay or non-existent launch of our technology or an insufficient investment (or overspend on such expenditure) could have a material adverse effect on our business, results of operations and financial position. 23 Table of Contents Risks Related to Our Intellectual Property We have limited protection over our trade secrets and know-how.
A delay or non-existent launch of our technology or an insufficient investment (or overspend on such expenditure) could have a material adverse effect on our business, results of operations and financial position. 22 Table of Contents Risks Related to Our Intellectual Property We may have difficulty in protecting our intellectual property and may incur substantial costs to defend ourselves in patent infringement litigation.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and could cause our stock price to decline. We do not intend to pay dividends on our common stock for the foreseeable future.
If investors consider our Common Stock less attractive as a result of our election to use the scaled-back disclosure permitted for smaller reporting companies, there may be a less active trading market for our Common Stock and our share price may be more volatile. 27 Table of Contents We do not intend to pay dividends on our common stock for the foreseeable future.
Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties.
We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims.
Despite testing defects or errors may arise in our existing or new products, which could result in loss of revenue, market share, failure to achieve market acceptance, diversion of development resources, injury to our reputation, and increased service and maintenance cost. Defects or errors in our products and solutions might discourage customers from purchasing future products.
Products as complex as those we offer, frequently develop or contain undetected defects or errors. Defects or errors may arise in our existing or new products, which could result in loss of revenue, market share, failure to achieve market acceptance, diversion of development resources, injury to our reputation, and increased service and maintenance costs.
Our systems have been, and are expected to continue to be, the target of malware and other cyberattacks. Although we have invested in measures to reduce these risks, we cannot assure that these measures will be successful in preventing compromise and/or disruption of our information technology systems and related data.
Our systems have been, and are expected to continue to be, the target of malware and other cyberattacks. The measures we have undertaken to reduce these risks may not be successful in preventing compromise and/or disruption of our information technology systems and related data. As a technology company, our business depends on our ability to protect our propriety intellectual property.
Our ability to treat hazardous wastes on a commercially viable basis is unproven, which could have a detrimental effect on our ability to generate or sustain revenues. The technologies we use to treat sludge, biosolids and wastewater, have never been utilized on a full-scale commercial basis. Our AirSCWO™ technology remains in a research and development status.
The technologies we use to treat sludge, biosolids and wastewater, have never been utilized on a full-scale commercial basis. Our AirSCWO technology and systems remain in a research and development status.
Our suppliers may fail to deliver materials and parts according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these materials and parts effectively. Our products contain materials and parts purchased globally from hundreds of suppliers, including single-source direct suppliers, which exposes us to potential component shortages or delays.
Our products contain materials and parts purchased globally from hundreds of suppliers, including single-source direct suppliers, which exposes us to potential component shortages or delays.
Terms of subsequent financing, if any, may adversely impact your investment. · Undetected problems in our products could impair our financial results and give rise to potential product liability claims. · Our research and development expenses may increase in the future.
Terms of subsequent financing, if any, may adversely impact your investment. · Our research and development expenses may increase in the future.
The trading market for our common stock, to some extent, may at some point depend on the research and reports that securities or industry analysts publish about our business. We do not have any control over these analysts.
The trading market for our common stock may, depend on the research and reports that securities or industry analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts elect to cover us and downgrade our shares or lower their opinion of our shares, our share price would likely decline.
Therefore, the commercial value of our systems is uncertain. There can be no assurance that we will ever generate significant revenues or become profitable.
We have yet to generate material revenues from our business and we have so far deployed our AirSCWO technology only in the City of Orlando, Florida. Therefore, the commercial value of our systems is uncertain. There can be no assurance that we will ever generate significant revenues or become profitable.
As a public reporting company, we incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act and rules subsequently implemented by the SEC, have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
The Sarbanes-Oxley Act and rules subsequently implemented by the SEC, have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives.
As we scale production of our AirSCWO™ systems, we will also need to accurately forecast, purchase, warehouse and transport components at high volumes to our manufacturing facilities.
There is no assurance that we will be able to secure additional or alternate sources for our components quickly or at all. 25 Table of Contents As we scale production of our AirSCWO systems, we will also need to accurately forecast, purchase, warehouse and transport components at high volumes to our manufacturing facilities.
There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends.
There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends. If securities or industry analysts do not publish research about our business, or publish negative reports about our business, our share price and trading volume could decline.
These include provisions that: · Permit us to issue blank check preferred stock as more fully described under “Description of Our Capital Stock Anti-Takeover Effects of Various Provisions of Delaware Law and Our Amended and Restated Articles of Incorporation and Bylaws”; · Require stockholders to follow certain advance notice and disclosure requirements in order to propose business or nominate directors at an annual or special meeting; and · Limit our ability to enter into business combination transactions with certain stockholders.
These include, but are not limited to, provisions that: · Only our board of directors may fill board vacancies; · Permit us to issue blank check preferred stock; · Prevent stockholders from calling special meetings; · Maintain a plurality voting standard for our board of directors; · Does not include an opt out of Delaware anti-takeover law; · Require stockholders to follow certain advance notice and disclosure requirements in order to propose business or nominate directors at an annual or special meeting; and · Limit our ability to enter into business combination transactions with certain stockholders.
Failure by these employees and consultants to comply with their commitments or obligations to any university may result in disputes over our intellectual property or technology. The resolution of any dispute that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, which could adversely impact our business.
Failure by these employees and consultants to comply with their commitments or obligations to any university may result in disputes over our intellectual property or technology.
Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, loss of rights, or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.
Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, loss of rights, or adverse changes to our offerings or business practices. Any of these results could adversely affect our business.
Our ability to generate revenue will depend in part on government contracts. We expect to derive a significant portion of our future revenues directly or indirectly from government agencies. The funding of government programs could be reduced or eliminated due to numerous factors, including geopolitical events and macroeconomic conditions that are beyond our control.
Our ability to generate revenue will depend in part on government contracts which expose us to the uncertainties of governmental budgetary and funding constraints and local, national and international political conditions and events. We expect to derive a significant portion of our future revenues directly or indirectly from government agencies.
Our officers may also have conflicts of interest as a result of their relationships with other companies. Our products may have defects, which could damage our reputation, decrease market acceptance of our products, cause us to lose customers and revenue and result in costly litigation or liability .
Our products may have defects, which could damage our reputation, decrease market acceptance of our products, cause us to lose customers and revenue and result in costly litigation or liability. Our products may contain defects for many reasons, including defective design or manufacture, defective material or software interoperability issues.
We have entered into license agreements with third parties for certain licensed technologies that are not currently utilized in the systems we market but may be in the future. In addition, we may in the future elect to license third-party intellectual property to further our business objectives and/or as needed for freedom to operate our systems.
In addition, we may in the future elect to license third-party intellectual property to further our business objectives and/or as needed for freedom to operate our systems. We do not and will not own the patents or patent applications that are a subject of these licenses.
We will need to raise substantial additional funds in order to execute our business plan. Without such additional funds, we may have to cease operations or scale back our activities. Our ultimate success may depend on our ability to raise additional capital.
If we cannot secure financing at all, we may have to cease operations or scale back our activities. Our ultimate success may depend on our ability to raise additional capital.
If we do not have sufficient insurance coverage or the cost of obtaining the appropriate insurance coverage is costly, this could have a material adverse effect on our business, results of operations and financial position. Natural disasters and other catastrophic events beyond our control could adversely affect our business operations and financial performance.
If we do not have sufficient insurance coverage or the cost of obtaining the appropriate insurance coverage is costly, this could have a material adverse effect on our business, results of operations and financial position. Moreover, in the past companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation.
Such occurrences could have a material adverse effect on us and could also have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable damage. 21 Table of Contents Risks Related to Our Financial Position and Capital Requirements Our financial results depend on successful project execution and may be adversely affected by cost overruns, failure to meet customer schedules or other execution issues.
Such occurrences could have a material adverse effect on us and could also have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable damage.
In addition, if we need to raise more equity capital from the sale of common stock, institutional or other investors may negotiate terms possibly less favorable to us, and thereby adversely impact your investment. 22 Table of Contents Undetected problems in our products could impair our financial results and give rise to potential product liability claims.
In addition, if we need to raise more equity capital from the sale of common stock, institutional or other investors may negotiate terms possibly less favorable to us, and thereby cause our stock price to fall. Our research and development expenses may increase in the future.
Further, on some occasions, our share price may be, or may be purported to be, subject to “short squeeze” activity.
Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. Further, on some occasions, our share price may be, or may be purported to be, subject to “short squeeze” activity.
We may not have sufficient resources to enforce our intellectual property rights or to defend our patent rights against a challenge.
We may not have sufficient resources to enforce our intellectual property rights or to defend our patent rights against a challenge. The failure to obtain patents and/or protect our intellectual property rights could have a material and adverse effect on our business, results of operations and financial condition.
We have been and expect to continue to be highly dependent on third parties to supply and manufacture components of our technology.
Failure by third parties to supply or manufacture components of our products or to deploy our systems timely or properly could adversely affect our business, financial condition and results of operations. We have been and expect to continue to be dependent on third parties to supply and manufacture components of our technology.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. 34 Table of Contents Our cybersecurity risk management program includes the following: · risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; · a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; · the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls; · cybersecurity awareness training of our employees, incident response personnel, and senior management; and · a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.
Biggest changeOur cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. 30 Table of Contents Our cybersecurity risk management program includes the following: · risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; · a security team led and supervised by our information technology manager, which is principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; · the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security control, as well as processes to oversee and identify any cybersecurity risks associated with our use of third-party service providers; · cybersecurity awareness training of our employees, incident response personnel, and senior management; and · a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.
Cybersecurity Governance Our Board considers cybersecurity risks as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program and receives updates on the cybersecurity risk management program from management at least annually.
Our Board considers cybersecurity risks as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program and receives updates on the cybersecurity risk management program from management at least annually.
As part of our alignment with these frameworks we our in the process of implementing a Cybersecurity Incident Response Plan that outlines actions to be taken after identifying a suspected information security breach and the people responsible for managing those actions. Additionally, this plan will outline communication responsibilities during incidents of all severity levels. ITEM 2. PROPERTIES. None.
As part of our alignment with these frameworks we are in the process of implementing a Cybersecurity Incident Response Plan that outlines actions to be taken after identifying a suspected information security breach and the people responsible for managing those actions. Additionally, this plan will outline communication responsibilities during incidents of all severity levels.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. Cybersecurity Governance Our Chief Administrative Officer (“CAO”) is primarily responsible for assessing and managing our material risks from cybersecurity threats.
In addition, we have continued its efforts to migrate its platforms to cloud-based computing, which is designed to further strengthen its security posture.
In addition, we have continued its efforts to migrate its platforms to cloud-based computing, which is designed to further strengthen its security posture. We also hired a information technology manager to oversee and identify any risks from cybersecurity threats associated with our use of third-party service providers.
Added
Our CAO leads our security team and coordinates with our Chief Executive Officer, Chief Financial Officer and Information Technology Manager to fully integrate our cybersecurity risk management programs with our overall enterprise risk management program. Our Information Technology Manager CAO is responsible for overseeing and managing all potential and actual incidents that are identified by our security team.
Added
Our security team regularly updates our systems with updates, anti-virus signatures, policies and security best practices. At least annually, our CAO reports to the Audit Committee of the Board updates to the Company’s cybersecurity risk management program and any material cyber incidents. Our Sr Information Technology Manager has extensive expertise and experience on cybersecurity matters, including identification, remediation, and management..

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−1 removed2 unchanged
Biggest changeIn December 2021, 374Water closed on a private placement of 2,500,000 shares of Common Stock (the “Common Shares”) with a par value of $.0001 and at an exercise price of $2.00 yielding $5,000,000. The private placement proceeds were raised to assist in the Company’s efforts towards meeting Nasdaq uplisting requirements.
Biggest changeAll of the Preferred Stock was sold pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. 32 Table of Contents In December 2021, 374Water closed on a private placement of 2,500,000 shares of Common Stock (the “Common Shares”) with a par value of $0.0001 and at an exercise price of $2.00 yielding $5,000,000.
The Private Placement proceeds were used for working capital, primarily for development, manufacture and commercialization of 374Water Inc.’s AirSCWO Nix systems. The Preferred Stock has a stated value of $15 per share, is convertible into common stock at $.30 per share and has voting rights based on the underlying shares of common stock.
The Private Placement proceeds were used for working capital, primarily for development, manufacture and commercialization of 374Water Inc.’s AirSCWO Nix systems. The Preferred Stock has a stated value of $15 per share, is convertible into common stock at $0.30 per share and has voting rights based on the underlying shares of common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is traded on The Nasdaq Capital Market under the symbol “SCWO”. As of March 29, 2024, there were 132,667,107 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is traded on The Nasdaq Capital Market under the symbol “SCWO”. As of March 27, 2025, there were 368 holders of record of our common stock.
Period Beginning Period Ending High Low January 1, 2022 March 31, 2022 $ 4.90 $ 2.67 April 1, 2022 June 30, 2022 $ 4.09 $ 2.18 July 1, 2022 September 30, 2022 $ 4.00 $ 1.80 October 1, 2022 December 31, 2022 $ 3.72 $ 2.50 January 1, 2023 March 31, 2023 $ 4.74 $ 2.59 April 1, 2023 June 30, 2023 $ 4.94 $ 2.27 July 1, 2023 September 30, 2023 $ 2.25 $ 1.23 October 1, 2023 December 31, 2023 $ 1.81 $ 1.01 Dividends We have never declared or paid any cash dividends on our common stock, nor do we intend to declare or pay any cash dividends on our common stock in the foreseeable future.
Period Beginning Period Ending High Low January 1, 2023 March 31, 2023 $ 4.74 $ 2.59 April 1, 2023 June 30, 2023 $ 4.94 $ 2.27 July 1, 2023 September 30, 2023 $ 2.25 $ 1.23 October 1, 2023 December 31, 2023 $ 1.81 $ 1.01 January 1, 2024 March 31, 2024 $ 1.50 $ 1.06 April 1, 2024 June 30, 2024 $ 1.62 $ 1.08 July 1, 2024 September 30, 2024 $ 1.75 $ 0.96 October 1, 2024 December 31, 2024 $ 1.94 $ 0.67 Dividends We have never declared or paid any cash dividends on our common stock, nor do we intend to declare or pay any cash dividends on our common stock in the foreseeable future.
Except as otherwise noted below, no placement agent fees or commissions were paid on these offerings, and net proceeds were used for working capital. 36 Table of Contents In connection with the Merger with PowerVerde in April 2021, 374Water closed on a private placement of 436,783 shares of Series D Convertible Preferred Stock (the “Preferred Stock”) with a par value of $.0001, yielding gross proceeds of $6,551,745 (the “Private Placement”) and the settlement of a $50,000 liability for Preferred Stock shares.
In connection with the Merger with PowerVerde in April 2021, 374Water closed on a private placement of 436,783 shares of Series D Convertible Preferred Stock (the “Preferred Stock”) with a par value of $0.0001, yielding gross proceeds of $6,551,745 (the “Private Placement”) and the settlement of a $50,000 liability for Preferred Stock shares.
The sales set forth below were made pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
The sales set forth below were made pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. Except as otherwise noted below, no placement agent fees or commissions were paid on these offerings, and net proceeds were used for working capital.
Upon liquidation of the Company, the Preferred Stockholders have liquidation preference before any assets can be distributed to common stockholders. All of the Preferred Stock was sold pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
Upon liquidation of the Company, the Preferred Stockholders have liquidation preference before any assets can be distributed to common stockholders.
Issuer Purchases of Equity Securities As of December 31, 2023, the Company did not have any purchases of equity securities from stockholders. ITEM 6. SELECTED FINANCIAL DATA. Not required for smaller reporting companies.
The private placement proceeds were raised to assist in the Company’s efforts towards meeting Nasdaq uplisting requirements. Issuer Purchases of Equity Securities As of December 31, 2024, the Company did not have any purchases of equity securities from stockholders. ITEM 6. [RESERVED]
Removed
During the year end December 31, 2023, we raised approximately $13.4 million of net proceeds at-the-market (ATM) equity offering under which we may issue up to $100 million of common stock, which is currently effective and under which we commenced selling shares at the end of January 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

27 edited+39 added−26 removed8 unchanged
Biggest changeResults of Operations The following table sets forth, for the periods presented, the consolidated statements of operations data, which is derived from the accompanying consolidated financial statements: Year Ended December 31, 2023 2022 $ Change % Change Revenue $ 743,952 $ 3,015,521 $ (2,271,569 ) -75 % Cost of revenues (1,852,208 ) (2,679,020 ) 826,812 -31 % Gross Margin (1,108,256 ) 336,501 (1,444,757 ) -429 % Operating expenses: Research and development 1,496,129 1,113,500 382,629 34 % Compensation and related expenses 2,854,494 1,644,861 1,209,633 74 % Professional fees 508,795 768,548 (259,753 ) -34 % General and administrative 2,675,202 1,565,723 1,109,479 71 % Total operating expenses 7,534,620 5,092,632 2,441,988 48 % Loss) from operations (8,642,876 ) (4,756,131 ) (3,886,745 ) 82 % Other income , net 539,354 66,164 473,190 715 % Loss) before income taxes (8,103,522 ) (4,689,967 ) (3,413,555 ) 73 % Provision for (benefit from) income taxes — — — 0 % Net loss $ (8,103,522 ) $ (4,689,967 ) $ (3,413,555 ) 73 % Year Ended December 31, 2023, as Compared to the Year Ended December 31, 2022 Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems.
Biggest changeResults of Operations The following table sets forth, for the periods presented, the consolidated statements of operations data, which is derived from the accompanying consolidated financial statements: Year Ended December 31, 2024 2023 $ Change % Change Revenues $ 445,445 $ 743,952 $ (298,507 ) -40 % Cost of revenues (1,358,152 ) (1,852,208 ) 494,056 -27 % Gross deficit (912,707 ) (1,108,256 ) 195,549 -18 % Operating expenses: Research and development 2,143,471 1,496,129 647,342 43 % Compensation and related expenses 3,685,007 2,854,494 830,513 29 % Professional fees 2,231,005 508,795 1,722,210 338 % General and administrative 3,831,068 2,675,202 1,155,866 43 % Total operating expenses 11,890,551 7,534,620 4,355,931 58 % Loss from operations (12,803,258 ) (8,642,876 ) (4,160,382 ) 48 % Other income, net 369,144 539,354 (170,210 ) -32 % Loss before income taxes (12,434,114 ) (8,103,522 ) (4,330,592 ) 53 % Provision for income taxes — — — 0 % Net loss $ (12,434,114 ) $ (8,103,522 ) $ (4,330,592 ) 53 % 36 Table of Contents Year Ended December 31, 2024, as Compared to the Year Ended December 31, 2023 Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems.
The Company has gained momentum on many promising leads which have been produced through early treatability studies but has not resulted in the sale of any AirSCWO units to this point. This has had a direct impact on our change in revenue year-over-year.
The Company has gained momentum on many promising leads which have been produced through early treatability studies but has not resulted in the sale of any additional AirSCWO units to this point. This has had a direct impact on our change in revenue year-over-year.
Recoverability of assets held and used is measured by a comparison of the carrying amount to the future undiscounted expected net cash flows to be generated by the asset. As of December 31, 2023 and 2022, there were no impairments. Inventory Inventories are stated at the lower of cost or net realizable value.
Recoverability of assets held and used is measured by a comparison of the carrying amount to the future undiscounted expected net cash flows to be generated by the asset. As of December 31, 2024 and 2023, there were no impairments. Inventory Inventories are stated at the lower of cost or net realizable value.
We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the consolidated financial statements. 37 Table of Contents Long-Lived Assets The Company reviews long-lived assets, including property and equipment and intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the consolidated financial statements. Long-Lived Assets The Company reviews long-lived assets, including property and equipment and intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
There can be no assurance that these funds will be sufficient to finance our plan of operations and commercialize our systems or that we will be able to raise any necessary additional funds on a commercially reasonable basis or at all.
There can be no assurance that any additional funds raised will be sufficient to finance our plan of operations and commercialize our systems or that we will be able to raise any necessary additional funds on a commercially reasonable basis or at all.
Equipment sale related contract revenues are recognized in the proportion that contract costs incurred bear to total estimated costs. This method is used because management considers the input method to be the best available measure of progress on these contracts.
Equipment sale related contract revenues are recognized in proportion to the contract costs incurred compared to the total estimated costs to complete. This method is used because management considers the input method to be the best available measure of progress on these contracts.
When quantities on hand exceed estimated sales forecasts, we perform an analysis to determine if a write-down for such excess inventories is required. Once inventory has been written down, it creates a new cost basis for inventory that is not subsequently written up. Inventories are classified as current assets in accordance with recognized industry practice.
When quantities on hand exceed estimated sales or usage forecasts, we perform an analysis to determine if a write-down for such excess inventories is required. Once inventory has been written down, it creates a new cost basis for inventory. Inventories are classified as current assets in accordance with recognized industry practice.
We utilize third-party suppliers to produce our products. Costs associated with fabrication, and other costs associated with the manufacturing of products, are recorded as inventory. We periodically evaluate the carrying value of our inventories in relation to estimated forecasts of product demand, which takes into consideration the life cycle of product releases.
Costs associated with fabrication, and other costs associated with the manufacturing of products, are recorded as inventory. We periodically evaluate the carrying value of our inventories in relation to estimated forecasts of product demand, which takes into consideration the life cycle of product releases.
Costs associated with our sold unit have started to decline as we reach the end of our fabrication and testing, which have had a direct correlation to the reduced revenue recognized this year.
Costs associated with our sold unit have started to decline as we reach the end of our fabrication and testing, which have had a direct correlation to the reduced revenue recognized this year under our percentage of completion revenue recognition method.
Our other income increased to $539,354 during the year ended December 31, 2023, as compared to $66,164 in the same period of 2022, which is a result of the interest income we earned on our interest-bearing cash accounts that we opened in June 2023. We had previously held any excess funds in an investment account.
Our other income decreased to $369,144 during the year ended December 31, 2024, as compared to $539,354 in the same period of 2023, which is a result of the interest income we earned on our interest-bearing cash accounts that we opened in June 2023. We had previously held any excess funds in an investment account.
We generated $743,952 and $3,015,521 in revenue from manufacturing assembly services and from treatability study services during the years ended December 31, 2023, and 2022, respectively. During 2023, we reached fewer milestones and thus incurred less direct contract costs.
We generated $445,445 and $743,952 in revenue from manufacturing assembly services and from treatability study services during the years ended December 31, 2024, and 2023, respectively. During 2024, we reached fewer milestones and thus incurred less direct contract costs.
The Company generates revenue from the sale of equipment (AirSCWO units) and services, specifically the completion of treatability studies. In the case of equipment revenues, the Company’s performance obligations are satisfied over time over the life of the contract which are typically fixed price contracts.
The Company generates revenue from the sale of equipment (AirSCWO systems) and services, specifically the completion of treatability studies and demonstration services of various types of waste streams. In the case of revenues from AirSCWO systems, the Company’s performance obligations are satisfied over time over the life of the contract, which is currently a long-term fixed price contract.
Revenue Recognition The Company follows the revenue standards of Codification (ASC) Topic 606: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Based on our evaluation, we estimated an inventory allowance of $50,000 and $0 at December 31, 2024 and December 31, 2023, respectively. 33 Table of Contents Revenue Recognition The Company follows the revenue standards of Codification (ASC) Topic 606: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
During the year ended December 31, 2023, cash provided by investing activities was $1,851,717, an increase of $4,012,008, as compared to cash used in investing activities of $2,160,291 during the year ended December 31, 2022.
During the year ended December 31, 2024, cash used by investing activities was $653,544, an increase of $2,505,261, as compared to cash provided by investing activities of $1,851,717 during the year ended December 31, 2023.
During the year ended December 31, 2023, cash used in operations was $9,034,987, an increase of $4,086,319 as compared to $4,948,996 during the year ended December 31, 2022.
During the year ended December 31, 2024, cash used in operations was $10,589,735, an increase of $1,554,748 as compared to $9,034,987 during the year ended December 31, 2023.
During the year end December 31, 2023, we raised approximately $13.4 million of net proceeds through this ATM. We have financed our operations since inception principally through the sale of debt and equity securities and revenues. As of December 31, 2023, we had working capital of $13,528,176 compared to working capital of $7,060,511 as of December 31, 2022.
We have financed our operations since inception principally through the sale of debt and equity securities and revenues. As of December 31, 2024, we had working capital of $11,760,131 compared to working capital of $13,528,176 as of December 31, 2023.
The revenue standard does not provide guidance on the accounting for onerous contracts or onerous performance obligations. US GAAP contains other applicable guidance on the accounting for onerous contracts, and those requirements should be used to identify and measure onerous contracts. 38 Table of Contents Our equipment manufacturing contract is a fixed price contract.
GAAP contains other applicable guidance on the accounting for onerous contracts, and those requirements should be used to identify and measure onerous contracts. The Company’s outstanding equipment manufacturing contract on our sold unit is a fixed price contract (“Equipment Sale Contract”).
Cash Flows The following table presents our cash flows for the periods presented: Year Ended December 31, 2023 2022 $ Change Cash used in operating activities $ (9,034,987 ) $ (4,948,668 ) $ (4,086,319 ) Cash provided by (used in) investing activities 1,851,717 (2,160,291 ) 4,012,008 Cash used in financing activities 13,578,938 25,049 13,553,889 Effect of exchange rates on cash 2,799 (328 ) 3,127 Net cash increase (decrease) 6,398,467 (7,084,238 ) 13,482,705 As of December 31, 2023, cash on hand was $10,445,404, an increase of $6,398,467, or 158%, as compared to $4,046,937 as of December 31, 2022.
Cash Flows The following table presents our cash flows for the periods presented: Year Ended December 31, 2024 2023 $ Change Cash used in operating activities $ (10,589,735 ) $ (9,034,987 ) $ (1,554,748 ) Cash provided by (used in) investing activities (653,544 ) 1,851,717 (2,505,261 ) Cash provided by financing activities 11,449,519 13,578,938 (2,129,419 ) Effect of exchange rates on cash — 2,799 (2,799 ) Net cash increase (decrease) 206,240 6,398,467 (6,192,227 ) 38 Table of Contents As of December 31, 2024, cash on hand was $10,651,644, an increase of $206,240, or 2%, as compared to $10,445,404 as of December 31, 2023.
We have an at-the-market (ATM) equity offering under which we may issue up to $100 million of common stock, which is currently effective and under which we commenced selling shares at the end of January 2023, and which will remain available to us in the future.
Substantial net losses are expected until we are able to generate sufficient cash flows from the sale of our AirSCWO systems, treatability studies and Waste Destruction Services, as to which there can be no assurance. 37 Table of Contents Liquidity and Capital Resources We have an at-the-market (ATM) equity offering under which we may issue up to $100 million of common stock, which is currently effective and under which we commenced selling shares at the end of January 2023, and which will remain available to us in the future.
This increase in working capital is due primarily to the at-the-market common stock offering that raised additional capital. We believe that these funds will satisfy our working capital needs for the next 12 months from the report date.
We do not believe that these funds will satisfy our working capital needs for the next 12 months from the report date and we will need to raise additional capital to implement our business plan.
Our compensation and related expenses increased to $2,854,494 during the year ended December 31, 2023, as compared to $1,644,861 in the same period of 2022. This is a deliberate step in our strategic growth plan to ensure we have sufficient personnel to support our upcoming growth and sales pipeline.
Our compensation and related expenses increased to $3,685,007 during the year ended December 31, 2024, as compared to $2,854,494 in the same period of 2023.
Services revenues are recognized when all five revenue recognition criteria have been completed which is generally when we deliver a completed report to the customer. We also record as revenue all amounts billed to customers for shipping and handling costs and record the actual shipping costs as a component of cost of revenues.
Services revenues, from treatability studies, are recognized when all five revenue recognition criteria have been completed which is generally when the Company has delivered a completed treatability study report to the customer.
Stock-Based Compensation We account for stock-based compensation based on ASC Topic 718-Stock Compensation which requires expensing of stock options and other share-based payments based on the fair value of each stock option awarded. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the stock options.
Our research and development expenses increased to $1,496,129 during the year ended December 31, 2023, as compared to $1,113,500 in the same period of 2022, primarily attributed to our development of the HEC-Prime engine. The solution consists of five pistons and turbines that collect the high-pressure mix gas (steam) to rotate and spin a shaft connected to a generator unit.
Our research and development expenses increased to $2,143,471 during the year ended December 31, 2024, as compared to $1,496,129 in the same period of 2023, primarily due to the increase in engineering expenses and expenses stemming from our continued efforts to commercialize our systems.
Our general and administrative expenses increased to $2,675,202 during the year ended December 31, 2023, as compared to $1,565,723 in the same period of 2022, primarily because of increased personnel to facilitate the commercialization of our systems which has led to increased insurance costs, stock-based compensation expense for option grants to our hired employees, restricted stock grants to certain key executives, travel expenses and marketing and advertising expenses.
Further, we incurred additional professional fees for executive search services related to the finding and hiring of certain executives we have hired in 2024. Our general and administrative expenses increased to $3,831,068 during the year ended December 31, 2024, as compared to $2,675,202 in the same period of 2023.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required for smaller reporting companies.
The decrease in cash provided by financing activities was due to more capital being raised in 2023 via our ATM compared to the cash raised in 2024 through our ATM and director offering completed in November 2024. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required for smaller reporting companies.
The increase in cash provided by investing activities is due to proceeds received from our held to maturity investment of $1,963,432 and a decline in purchases of long-lived assets of $85,144 in 2023 compared to 2022. Cash used in investing activities during the year ended December 31, 2022 primarily related to the purchase of the investment of $1,963,432.
In 2023, we received $1,963,432 in proceeds from the sale of investments, which were not received in 2024. During the year ended December 31, 2024, cash provided by financing activities was $11,449,519, a decrease of $2,129,419 compared to the same period in 2023.
Removed
Reimbursements received from customers for out-of-pocket expenses are recorded as revenues, with related costs recorded as cost of revenues. We present revenues net of any taxes collected from customers and remitted to government authorities. Onerous Contracts Onerous contracts are those where the costs to fulfill a contract exceed the consideration expected to be received under the contract.
Added
Changes in our overall expected cost estimates are recognized as a cumulative adjustment for the inception-to-date effective of such change. If these changes in estimates result in a possible loss being incurred on the contract, we accrue for such a loss in the period such an outcome becomes probable.
Removed
This model requires management to estimate the expected volatility, expected dividends, and expected term as inputs to the valuation model. Overview 374Water Inc. (the “Company”, “374Water”, “We”, or “Our”) is a Delaware corporation which was incorporated on September 8, 2005.
Added
During 2024, we deployed our Demo System to the City of Orlando’s Iron Bridge Regional Water Reclamation Facility pursuant to a contract executed in March 2024 as part of a full-scale demonstration (the “Demo Contract”). Pursuant to the Demo Contract, the Company is responsible for system design, installation, commissioning and the start-up of the AirSCWO system at the facility.
Removed
The Company was initially formed to develop, commercialize, and market a series of unique electric generating power systems designed to produce electrical power with zero emissions or waste byproducts, based on a patented pressure-driven expander motor and related organic rankine cycle technology. On April 16, 2021, 374Water Inc.
Added
Further, the Company will operate and maintain the AirSCWO system for a period of approximately three months and is required to treat no less than 193 metric tons of waste water during the three-month period. Lastly, the Company will decommission, disassemble and demobilize the AirSCWO system after the contract period.
Removed
(f/k/a PowerVerde, Inc.) entered into an Agreement and Plan of Merger (the “Merger”) with 374Water, Inc., a privately held company based in Durham, North Carolina, (“374Water Private Company”) and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde.
Added
The Company will receive $812,000 as consideration, of which $574,000 is subject to achieving the 193 metric ton performance requirement over the three-month period of operations and maintenance. In accordance with ASC 606-10-25-21, we have concluded that the Demo Contract includes one performance obligation as the various services required to be performed by the Company are interdependent and highly interrelated.
Removed
As a result of the Merger, the former 374Water Private Company shareholders own 65.8% of our issued and outstanding common stock and 53.8% of our issued and outstanding voting stock (which includes the preferred stock on an as converted basis).
Added
Therefore, the various services are not separate and distinct. We will recognize revenue on this Demo Contract over the three-month period of operations and maintenance which is the point in time that the City of Orlando receives the benefit simultaneous to Company’s performance. We will invoice the City of Orlando in accordance with the contract terms.
Removed
Subsequent to the Merger, 374Water is focused on being a cleantech and social impact company providing a disruptive technology that addresses imminent environmental pollution challenges. We are focused on a new era of sustainable waste stream management that promotes circular economy initiatives and enables organizations to achieve sustainability goals and create green impact.
Added
Invoices are due within thirty days of receipt.
Removed
Our vision is a world without waste and our mission is to preserve a clean and healthy environment that sustains life. We have developed proprietary waste stream treatment systems based on Supercritical Water Oxidation (SCWO). The term used for the process is AirSCWO.
Added
The City of Orlando has the right to cancel the Demo Contract for convenience with a twenty-day written notice but is responsible for paying the Company all amounts owed and outstanding for work performed prior to the effective termination date and costs and expenses incurred by the Company to uninstall, remove, relocate and deliver the AirSCWO system up to a limit of $68,000. 34 Table of Contents Contract costs include all direct material, labor and subcontractor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation.
Removed
SCWO leverages the unique properties of water in its supercritical phase (above 374 o C and 221 Bar) to convert organic matter to energy and safe products that can be recovered and used.
Added
As of December 31, 2024, we have capitalized $136,651 of costs incurred to date to fulfill the Demo contract which are presented as contract assets. We will expense these costs over the three-month demonstration period. General, selling, and administrative costs are charged to expenses as incurred.
Removed
The AirSCWO systems are essentially waste stream agnostic and able to treat a variety of complex, hazardous and non-hazardous waste streams, opening up opportunities for multiple applications in diverse market verticals on an international scale.
Added
Onerous Contracts Onerous contracts are those where the costs to fulfill a contract exceed the consideration expected to be received under the contract. The revenue standard does not provide guidance on the accounting for onerous contracts or onerous performance obligations.
Removed
Most pertinently, the technology is shifting the landscape in addressing environmental challenges that, until now, have been considered unsurmountable (due to science/engineering or cost barriers), one good example being the global PFAS crisis.
Added
At December 31, 2024 and 2023, the Company evaluated the total costs incurred on this Equipment Sale Contract to date and the estimated costs it anticipates incurring to complete the contract.
Removed
We currently work with Merrell Bros., our strategic partner, to manufacture our AirSCWO systems at Merrell Bros. facilities under a manufacturing and service agreement that will be contractually ending on July 7, 2024.
Added
Based on this analysis, we accrued a total accrued loss provision of $1,000,000 and $500,000 at December 31, 2024 and 2023, respectively, which has been presented on the accompanying consolidated balance sheets and is recorded within cost of revenues on the accompanying consolidated statements of operations.
Removed
Under a Supplemental M&S Agreement, our relationship and the manufacturing services provided by Merrell Bros. will continue on an as needed basis based on statements of work to be agreed upon by both parties to fulfill future and current manufacturing orders.
Added
Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC Topic 718 – “Stock Compensation” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants).
Removed
We have identified a 50,000 square foot location that would allow us to integrate our manufacturing operations with our water treatment laboratory and provide sufficient space for growth and we anticipate being fully operational on or before July 7, 2024 at this or a similar facility. 39 Table of Contents The systems will be supplied to multiple market verticals, and our revenue model includes both capital equipment sales and long-term service agreements based on throughput and capacity (Waste Purchase Agreements).
Added
The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.
Removed
Our market penetration strategy is combined of direct client and channel partner sales routes, depending on the specific market and territory. In some cases, the systems may be white labeled and sold as part of a broader solution package.
Added
Prior to January 1, 2024, the Company had elected to estimate options granted for which the requisite service period would not be rendered, due to the option being forfeited or expiring. The forfeiture rate estimate was based on the percentage of cumulative forfeitures to the total award grants.
Removed
This technology is designed to convert waste steam and gasses into renewable energy, aligning with our sustainability goals and market differentiation strategy. This R&D investment is a critical component of our long-term vision and is expected to yield returns in the form of both environmental impact and revenue generation.
Added
During the year ended December 31, 2023, the Company compared its actual forfeiture rate to its estimated forfeiture rate and made a cumulative adjustment of approximately $55,000 in the year ended December 31, 2023 to reduce its forfeiture rate estimate to approximately 5% of the total stock-based compensation recognized during the year.
Removed
As we aim to expand our business and take advantage of new opportunities, it’s essential to have a talented and capable workforce in place. By investing in human resources, we can build a skilled team that can handle increased demands, provide excellent customer service, and drive innovation within the company.
Added
Effective January 1, 2024, the Company made a change in its accounting policy to recognize forfeitures on service-based stock award instruments as they occur.
Removed
This proactive approach to scaling our personnel aligns with our long-term vision and positions us for success as we move forward. Given the current market conditions, we are reevaluating our overall strategy to better preserve our resources.
Added
Due to the lack of history available to adequately estimate its forfeiture rate and the fact that the majority of its serviced based options include a one-year cliff vesting and monthly vesting after, the Company believes recognizing forfeitures as they occur will result in more accurate financial reporting.
Removed
Our professional fees decreased to $508,795 during the year ended December 31, 2023, as compared to $768,548 in the same period of 2022, primarily attributed to increased headcount within our organization. As we expand our team and hire more skilled professionals, we are able to handle various tasks and projects internally, which reduces our reliance on third-party services.
Added
The change in this accounting policy did not have a significant impact on the current or prior period financial statements. 35 Table of Contents Overview 374Water Inc. is a global industrial technology and services company providing innovative solutions addressing global organic waste destruction/treatment and waste management issues within the Municipal, Federal, and Industrial markets. 374Water offers our proprietary AirSCWO system, which is designed to efficiently destroy and mineralize a broad spectrum of non-hazardous and hazardous organic wastes producing safe dischargeable water streams, safe mineral effluent, safe vent gas, and recoverable heat energy.
Removed
The increase in marketing and advertising expenses is a strategic move aimed at growing our sales pipeline. By investing more in marketing initiatives, we are able to reach a wider audience and attract potential customers to our products and services. These additional marketing efforts help create brand awareness, generate leads, and nurture prospects through the sales funnel.
Added
Importantly, our AirSCWO system eliminates recalcitrant organic wastes without creating waste byproducts. Our AirSCWO system effectively converts solid and liquid wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., “per-and polyfluoroalkyl substances” or “PFAS”) into recoverable resources including water, minerals, and heat energy, by focusing on waste as a valuable resource.
Removed
This is an investment in our company’s growth and long-term success. Given the current market conditions, we are reevaluating our overall strategy to better preserve our resources. Lastly, we have accrued $135,000 for a legal claim we are in the process of settling with the issuance of an equity instrument.
Added
In fiscal year 2024, 374Water outlined a new strategic plan and tactical roadmap.
Removed
Our net loss increased to $8,103,522 during the year ended December 31, 2023, as compared to $4,689,967 in the same period of 2022. Substantial net losses are expected until we are able to successfully commercialize and market our 374Water systems, as to which there can be no assurance.
Added
Throughout the year, we executed our plan reaching critical milestones which we believe position the Company’s business outlook well for fiscal year 2025. 2024 achievements include (i) ruggedizing and optimizing our AirSCWO system to effectively and continuously process a variety of organic waste streams; (ii) deploying our first commercial scale AirSCWO system to the City of Orlando’s Iron Bridge Water Reclamation Facility; (iii) completing various federal and industrial waste destruction demonstrations; (iv) growing our backlog and pipeline in the municipal, federal and industrial markets; (v) relocating our laboratory facility to a significantly larger state-of-the-art Biosafety Level 1 Laboratory to meet increasing lab-scale waste destruction demand and expedite the advancement of our AirSCWO technology; (vi) relocating our manufacturing operations; and strengthening our leadership team and organization. 374Water has a robust plan to scale revenue, operations, and capitalize our business.
Removed
The increase in net loss is attributable to the increased expenses discussed above. 40 Table of Contents Liquidity and Capital Resources In April 2021, in connection with the Merger, we raised approximately $6.6 million from the sale of Series D Preferred Stock and converted all of its convertible debt notes and accrued interest to shares of common stock.
Added
During 2025, we expect to complete our commercial-scale demonstration under our contract with the City of Orlando; mobilize an AS system to Detroit, MI in partnership with the Defense Innovation Unit to demonstrate AirSCWO’s waste destruction effectiveness for specific U.S.
Removed
On December 17, 2021, the Company raised approximately $5 million from the sales of common stock.
Added
Department of Defense applications; deploy an AirSCWO system to the Orange County Sanitation District in Fountain Valley, CA; mobilize an AirSCWO system to St.
Removed
The increase in cash used in operating activities was mainly driven by greater operating expenses, due to an increase in personnel to achieve our business plan, resulting in an increase in our net loss of $3,413,555 during the year ended December 31, 2023 compared to the same period in 2022.
Added
Cloud, MN, as part of a Legislative-Citizen Commission on Minnesota Resources (LCCMR) initiative to demonstrate its effectiveness destroying Minnesota waste; further scale our manufacturing capacity to meet client demand for AirSCWO systems of various sizes; continue to improve our AirSCWO technology; and begin accepting third-party waste streams for our initial WDS hub(s) at partner a TSDF.
Removed
Further, our cash used in operating assets and liabilities increased by $1,076,647 during the year ended December 31, 2023 compared to the same period in 2022. Offset by an increase in our non-cash charges for depreciation and amortization, stock-based compensation, and restricted stock issued for services of $403,883.
Added
The increase is primarily due to increased hiring as we build our executive team with four new executive hires, salary increases to certain key employees in 2024, and an accrual of bonuses for the executive team.
Removed
During the year ended December 31, 2023, cash provided by financing activities was $13,578,938, an increase of $13,553,889 compared to the same period in 2022. The increase is due to cash proceeds from the sale of our common stock through an at-the-market offering of $13,441,438 and an increase in proceeds received from the exercise of options and warrants of $112,451.
Added
Our professional fees increased to $2,231,005 during the year ended December 31, 2024, as compared to $508,795 in the same period of 2023, primarily attributed to an increase in legal fees related to a legal settlement, a legal complaint filed by our former chief executive officer for which we have accrued an estimated legal settlement of $335,000, and general legal expenses incurred in 2024 related to our previously disclosed change in executive leadership.
Added
The increase is primarily because of an increase stock-based compensation, travel, and other general and administrative expenses as we continue to build out our executive team. We also incurred relocation related expenses as we moved to our short-term leased manufacturing facility in Florida.

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Other SCWO 10-K year-over-year comparisons