374Water Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
SCWO$2.44+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001654954-24-006425
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001654954-24-010673
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 25 previous paragraphs and 48 current paragraphs.
4 unchanged; 7 reworded; 36 added; 14 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 1 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (36)
Current report
Cautionary Note Regarding Forward Looking Statements
Current report
This Quarterly Report on Form 10-Q (the “Form 10-Q”) contains certain statements related to future results of 374Water, Inc. (the “Company,” “374Water,” “we,” “our,” or “us”) that are considered “forward-looking statements'' within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events, future financial performance, including statements relating to our ability to continue as a going concern, our strategies, expectations, competitive environment and regulation, our design, development and commercialization goals of our AirSCWO technology, projected timing for demonstration of our various AirSCWO systems, the assessment of market opportunities, our planned focus areas, our assessment of the regulatory landscape and its impact on demand for our products, expansion of our research and development and laboratory facility and its anticipated benefits, our ability to execute on our strategic plan, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements may be identified by the use of words like "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "project," "consider," "predict," "potential," "feel," or other comparable terminology. The Company has based these forward-looking statements on its current expectations, assumptions, estimates, beliefs, and projections. While the Company believes these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which involve factors or circumstances that are beyond the Company's control. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties, including, but not limited to:
Current report
You should read the following discussion in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 29, 2024 (“2023 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed under the caption “Risk Factors” and elsewhere in this Form 10-Q. See also “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-Q.
Current report
374Water is a global cleantech company providing innovative solutions addressing wastewater treatment and waste management issues within the municipal, federal and industrial markets. 374Water’s AirSCWO technology is designed to efficiently destroy and mineralize a broad spectrum of organic non-hazardous and hazardous organic wastes producing safe dischargeable water streams, safe mineral effluent, safe vent gas, and recoverable heat energy. 374Water’s AirSCWO technology has the potential to assist its customers to meet discharge requirements, reduce or eliminate disposal costs, remove bottlenecks, and reduce litigation and other risks. 374Water continues to be a leader in innovative waste treatment solutions, dedicated to creating a greener future and eradicating harmful pollutants.
Current report
We continue making progress towards commercializing our AirSCWO system to provide the market with advanced clean and sustainable organic waste destruction technologies and solutions. We have deployed an AirSCWO system to the City of Orlando, Florida where we intend to demonstrate AirSCWO’s efficacy in destroying a variety of waste streams at a commercial scale. While the principal focus will be on treating the City of Orlando’s biosolids waste, we also intend to complete previously announced forever chemicals (e.g., “per-and polyfluoroalkyl substances” or “PFAS”) destruction demonstrations for federal agencies. These PFAS waste streams include recalcitrant organic wastes such as spent Granulated Activated Carbon (GAC), spent Ion Exchange (IX) resins, and Aqueous Film Forming Foam (AFFF).
Current report
Critical Accounting Estimates
Current report
We continue making progress towards commercializing our AirSCWO systems to provide the market with advanced clean and sustainable organic waste destruction technologies and solutions. We have deployed an AirSCWO system to the City of Orlando, Florida where we intend to demonstrate AirSCWO’s efficacy in destroying a variety of waste streams at a commercial scale. While the principal focus will be on treating the City of Orlando’s biosolids waste, we also intend to complete previously announced PFAS destruction demonstrations for federal agencies. These PFAS waste streams include recalcitrant organic wastes such as spent Granulated Activated Carbon (GAC), spent Ion Exchange (IX) resins, and Aqueous Film Forming Foam (AFFF).
Current report
Our cost of goods sold decreased to $43,543 during the three months ending June 30, 2024, as compared to $45,257 in the same period of 2023, primarily because costs associated with our sold system have started to decline as we reach the end of our fabrication and testing.
Current report
Our general and administrative expenses increased to $1,051,998 during the three months ending June 30, 2024, as compared to $676,333 in the same period of 2023, primarily because of an increase in stock issued for services and an increase in travel expenses as we build out our executive team.
Current report
Our compensation and related expenses increased to $777,825 during the three months ending June 30, 2024, as compared to $733,121 in the same period of 2023. The increase is primarily due to increased hiring as we build our executive team with two new executive hires during the three months ended June 30, 2024.
Current report
Our professional fees significantly increased to $615,987 during the three months ending June 30, 2024, as compared to $92,285 in the same period of 2023, primarily attributed to an increase in legal fees related to a legal settlement and general legal expenses incurred in the first half of 2024 related to our previously disclosed change in executive leadership.
Current report
Our net loss increased to $2,932,320 during the three months ending June 30, 2024, as compared to $1,650,577 in the same period of 2023, primarily due to increased expenses for the reasons described above. 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.
Current report
Six Months Ended June 30, 2024, as Compared to the Six Months Ended June 30, 2023
Current report
Our cost of goods sold decreased to $660,841 during the six months ending June 30, 2024, as compared to $765,403 in the same period of 2023, primarily because costs associated with our sold system have started to decline as we reach the end of our fabrication and testing.
Current report
Our general and administrative expenses increased to $1,511,725 during the six months ending June 30, 2024, as compared to $1,261,995 in the same period of 2023, primarily because of an increase in stock issued for services and an increase in travel and general administrative expenses as we build our executive team and other personnel offset by a decrease in stock-based compensation and marketing expenses.
Current report
Our compensation and related expenses decreased slightly to $1,429,429 during the six months ending June 30, 2024, as compared to $1,451,881 in the same period of 2023, primarily because of a decrease in payroll and fringe benefit expenses due to a decrease in headcount, offset by an increase in our compensation and related expenses in a deliberate step in our strategic growth plan to ensure we have sufficient personnel and executive team to support our expected growth and path towards commercializing our AirSCWO systems.
Current report
Our professional fees increased to $868,692 during the six months ending June 30, 2024, as compared to $191,857 in the same period of 2023, primarily attributed to an increase in legal fees related to a legal settlement and a increase in general legal expenses incurred in the first half of 2024 related to our previously disclosed change in executive leadership.
Current report
Our research and development expenses increased to $1,101,715 during the six months ending June 30, 2024, as compared to $627,869 in the same period of 2023, primarily due to an increase in engineering expenses and in expenses stemming from our continued efforts to commercialize our systems.
Current report
Our net loss increased to $4,956,785 during the six months ending June 30, 2024, as compared to $3,290,920 in the same period of 2023, primarily due to increased expenses for the reasons described above. 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.
Current report
Liquidity and Capital Resources
Current report
At June 30, 2024, the Company had working capital of $7,273,354. At June 30, 2024, the Company had an accumulated deficit of $20,910,289. For the six months ended June 30, 2024, the Company had a net loss of $4,956,785 and used $4,934,044 of net cash in operations for the period. Further, we expect to continue to incur substantial losses until we are able to successfully commercialize and market our AirSCWO systems, as to which there can be no assurance that this will occur.
Current report
Going Concern
Current report
In accordance with ASU No. 2014-15 Presentation of Financial Statements – Going Concern (subtopic 205-40), our management evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. Based on our evaluation of the aforementioned conditions, substantial doubt exists regarding our ability to continue as a going concern.
Current report
Presently, the Company will need additional debt or equity financing or a combination of both to continue its operations and meet its financial obligations for at least the next twelve months from the date these condensed consolidated financial statements were issued and beyond. We may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding. We expect to incur continuing losses and negative cash flows from operations for the foreseeable future.
Current report
We may decide to raise additional capital through a variety of sources in the short-term and in the long-term, including but not limited to:
Current report
Any additional debt or equity financing that we obtain may substantially dilute the ownership held by our existing stockholders. The economic dilution to our stockholders will be significant if our stock price does not materially increase, or if the effective price of any sale is below the price paid by a particular investor. The Company may be unable to access further equity or debt financing when needed or obtain additional financing under acceptable terms, if at all.
Current report
See “Risk Factors – Risks Related to Our Financial Position and Capital Requirements – We will require and may have difficulty or be unsuccessful in raising needed capital in the future to continue to operate as a going concern.”
Current report
During the six months ended June 30, 2024, there were no significant changes in our commercial commitments and contractual obligations as compared with the information presented in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 29, 2024.
Current report
Cash Flows
Current report
We used $4,934,044 of cash in operating activities for the six months ended June 30, 2024 compared to $4,877,039 of cash used in operating activities for the corresponding period in 2023 an increase of $57,005. The increase in cash used in operating activities was primarily due to the increase in our net loss of $1,665,865, offset by an increase in noncash expenses of $314,852 and increase in operating cash flows from operating assets and liabilities of $1,294,008. The cash used in operations was primarily to fund operations as well as our working capital requirements.
Current report
We used $402,220 of cash in investing activities for the six months ended June 30, 2024 compared to receiving $1,950,504 cash provided by financing activities for the corresponding period in 2023. The increase in cash used by investing activities for the six months ended June 30, 2024 compared with the corresponding period in 2023 was primarily due a $367,568 increase in purchases of property, equipment and equipment-in-process as we continue making progress towards commercializing our AirSCWO systems as well as a $ 21,726 increase in intangible assets from increased patent activity. In 2023, we received $1,963,430 in proceeds from the sale of investments, which were not received in 2024.
Current report
We used $25,658 of cash in financing activities for the six months ended June 30, 2024 compared to cash provided by financing activities of $13,478,959 for the six months ended June 30, 2023. Cash used in financing activities for the six months ended June 30, 2024 was primarily due to equity issuance costs incurred related to reactivating our ATM which were not offset by the capital raised. In 2023, we successfully raised $13,478,959 of net proceeds from the sale of our common stock via our ATM.
Current report
Shelf Registration Statement
Current report
In December 2022, we filed a shelf registration statement on Form S-3 with the SEC (the “2022 Registration Statement”) (File No. 333- 268942), which upon being declared effective in December 2022, allowed us to offer up to $200.0 million of securities from time to time in one or more public offerings, inclusive of up to $100.0 million of shares of our common stock which we may sell in at-the-market (ATM) equity offerings, subject to certain limitations and applicable law, pursuant to an Open Market Sale Agreement SM, dated December 21, 2022 with Jefferies LLC (the “Sales Agreement”), which is currently inactive. In addition, due to the SEC’s “baby shelf” rules, which prohibit companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company’s public float in a 12-month period, we may in the future only be able to issue a limited number of shares under our 2022 Registration Statement, which aggregate to no more than one-third of our public float.
Current report
During the six months ended June 30, 2024 and year end December 31, 2023, we raised approximately $0 and $13.4 million, respectively, of net proceeds through ATM offerings. Any material sales in the public market of our common stock under the 2021 Sales Agreement or otherwise under the 2022 Registration Statement could adversely affect prevailing market prices for our common stock.
Current report
The Company is evaluating strategies to obtain required additional funding for future operations.
Removed paragraphs (14)
Previous report
Forward Looking Statements
Previous report
Readers are cautioned that the statements in this Report that are not descriptions of historical facts may be “forward-looking statements” that are subject to risks and uncertainties. This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on the beliefs of our management, as well as on assumptions made by and information currently available to us as of the date of this Report. When used in this Report, the words “plan,” “will,” “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project” and similar expressions are intended to identify such forward-looking statements. Although we believe these statements are reasonable, actual actions, operations and results could differ materially from those indicated by such forward-looking statements as a result of the risk factors included in our 2023 Annual Report on Form 10-K filed with the SEC on March 29, 2024, or other factors. We must caution, however, that this list of factors may not be exhaustive and that these or other factors, many of which are outside of our control, could have a material adverse effect on us and our ability to achieve our objectives. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above.
Previous report
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
Previous report
Critical Accounting Policies
Previous report
374Water offers a technology that transforms wet wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., PFAS) into recoverable resources by focusing on waste as a valuable resource for water, energy, and minerals. We consider ourselves 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.
Previous report
We currently outsource manufacturing of the AirSCWOTM systems to our strategic partner in the US, Merrell Bros., Inc., that have the facilities and capability to rapidly ramp-up manufacturing volumes and also support system modifications and deployment as required per market and clients. We envision in the future applying an outsourced manufacturing model in a few territories,and may consider establishing our own manufacturing capability in geographies where this is needed to adequately grow our market share.
Previous report
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). 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.
Previous report
Our general and administrative expenses decreased to $459,727 during the three months ending March 31, 2024, as compared to $585,659 in the same period of 2023, primarily because of decreased stock-based compensation expense and a decrease in advertising and marketing expenses due to our onsite SCWO system demonstration in Kokomo, Indiana for employees, contractors and customers during the three months ended March 31, 2023.
Previous report
Our compensation and related expenses decreased to $651,604 during the three months ending March 31, 2024, as compared to $718,760 in the same period of 2023, primarily because of decreased payroll and fringe benefit expenses due to fluctuations in headcount and bonuses paid during the three months ended March 31, 2023 that were not provided during the three months ended March 31, 2024.
Previous report
Our professional fees increased to $252,705 during the three months ending March 31, 2024, as compared to $99,572 in the same period of 2023, primarily because of increased legal fees as a result of a litigation settlement and an increase in audit related fees.
Previous report
Liquidity, Capital Resources and Going Concern
Previous report
As of March 31, 2024, the Company had working capital of $11,715,381 and an accumulated deficit of $17,977,969. For the three months ended March 31, 2024, the Company incurred a net loss of $2,024,465 and used $2,508,653 of net cash in operations for the period. These conditions raise substantial doubt regarding our ability to continue as a going concern.
Previous report
While no assurance can be provided, management believes that these actions provide the opportunity for the Company to continue as a going concern and to grow its business and achieve profitability with access to additional capital funding. Ultimately, the success of the Company as a going concern is dependent upon the ability of the Company to continue executing its plan and obtaining capital that will enable the Company to complete its in-process AirSCWO units and begin manufacturing further units. If the Company is unable to obtain additional financing in sufficient amounts or under acceptable terms, the Company operating results could be adversely affected.
Previous report
Based upon the Company’s current business plan, we believe that our current cash balance and access to liquidity are sufficient for the Company to meet its financial obligations as they become due for at least the next 12 months from the date of the report.
Reworded paragraphs (7)
Previous wording
We have developed proprietary waste stream treatment systems based on Supercritical Water Oxidation (SCWO). The term used for the process is AirSCWOTM. 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. The AirSCWOTM 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. 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.
Current wording
We are in the process of developing a proprietary waste stream treatment system based on Supercritical Water Oxidation (AirSCWO) at a commercial scale. The term used for the process is AirSCWO. AirSCWO 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.
Previous wording
In preparing the condensed consolidated financial statements, we have made estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs, and expes, and the disclosure of contingent assets and liabilities as in our condensed consolidated financial statements. Actual results may differ from these estimates. A summary of our critical accounting estimates and policies is included in our 2023 Form 10-K under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." During the three months ended March 31, 2024, there have been no significant changes to these estimates and policies previously disclosed in our 2023 Form 10-K. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 of the condensed consolidated financial statements included in this Form 10-Q.
Current wording
In preparing the condensed consolidated financial statements, we have made estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs, and expenses, and the disclosure of contingent assets and liabilities as in our condensed consolidated financial statements. Actual results may differ from these estimates. A summary of our critical accounting estimates is included in our 2023 Form 10-K under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." During the three months ended June 30, 2024, there have been no significant changes to these estimates and policies previously disclosed in our 2023 Form 10-K. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 of the condensed consolidated financial statements included in this Form 10-Q.
Previous wording
The following table sets forth, for the periods presented, the consolidated statements of operations data, which is derived from the accompanying unaudited condensed consolidated financial statements:
Current wording
The following tables set forth, for the periods presented, the consolidated statements of operations data, which is derived from the accompanying unaudited condensed consolidated financial statements:
Previous wording
Our business has been focused on development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated $315,278 and $801,458 in revenue from manufacturing assembly services and from treatability services during the three months ending March 31, 2024 and March 31, 2023, respectively. During the three months ended March 31, 2024, we reached fewer milestones and thus incurred less direct contract costs. 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. This has had a direct impact on our change in revenue year-over-year.
Current wording
We generated $36,821 and $49,863 in revenue from our manufacturing assembly services relating to progress towards completion of our AirSCWO systems and treatability services during the three months ending June 30, 2024 and June 30, 2023, respectively. During the three months ended June 30, 2024, we reached fewer milestones and thus incurred less direct contract costs. 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. We have also begun focusing on deploying our owned AirSCWO system to the City of Orlando for demonstrations purposes.
Previous wording
Our research and development expenses increased to $535,147 during the three months ending March 31, 2024, as compared to $355,905 in the same period of 2023, primarily because of the increase in engineering expenses and our continued efforts to commercialize our systems.
Current wording
Our research and development expenses increased to $566,658 during the three months ending June 30, 2024, as compared to $271,964 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.
Previous wording
Since inception, we have financed our operations principally through the sale of debt and equity securities and operating cash flows. We have an at-the-market (ATM) equity offering under which we may issue up to $100 million of common stock, which is not currently active. However, we are in the process of activating the item. During the year end December 31, 2023, we raised approximately $13.4 million of net proceeds through this ATM.
Current wording
Since inception, we have financed our operations principally through the sale of debt and equity securities and operating cash flows.
Previous wording
These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Current wording
If the Company is unable to raise additional capital, there is a risk that the Company could be required to discontinue or significantly reduce the scope of its operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We generated revenue of $352,099 and $851,321 from manufacturing assembly services and from treatability services during the six months ending June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, we reached fewer milestones and thus incurred less direct contract costs. 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. We have also begun focusing on deploying our owned AirSCWO system to the City of Orlando for demonstrations purposes.