10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period ended September 30, 2023

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 000-27866

374WATER INC.

(Exact name of Registrant as specified in its charter)

Delaware	88-0271109
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

701 W Main Street, Suite 410

Durham, NC 27701

(Address of principal executive offices)

(919) 888-8194

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001	SCWO	The Nasdaq Capital Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

☐	Large accelerated filer	☐	Accelerated filer
☐	Non-accelerated Filer	☒	Smaller reporting company
		☒	Emerging Growth Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 9, 2023, the issuer had 132,667,107 shares of common stock outstanding.

Index to Form 10-Q

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets at September 30, 2023 (Unaudited) and December 31, 2022	4
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited)	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited)	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	23
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
SIGNATURES		27

2

Cautionary Note Regarding Forward-Looking Information

This Form 10-Q contains certain statements related to future results of the Company that are considered “forward-looking statements’’ within the meaning of the Private Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties, including, but not limited to, changes in political and economic conditions; interest rate fluctuation; competitive pricing pressures within the Company’s market; equity and fixed income market fluctuation; technological changes; changes in law; changes in fiscal, monetary, regulatory, and tax policies; monetary fluctuations as well as other risks and uncertainties detailed elsewhere in this Form 10-Q or from time-to-time in the filings of the Company with the Securities and Exchange Commission. Such forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

3

PART I FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

374Water Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

September 30, 2023 (Unaudited) and December 31, 2022

	2023			2022
Assets
Current Assets:
Cash	$	12,802,091		$	4,046,937
Accounts receivable, net of allowance of $74 and $0		16,761			—
Unbilled accounts receivable		1,697,576			918,164
Inventory		1,910,123			1,660,710
Investments		—			1,944,464
Prepaid expenses		416,464			153,455
Total Current Assets		16,843,015			8,723,730
Long-Term Assets:
Equipment, net		182,099			143,079
Intangible asset, net		1,004,957			1,050,022
Total Long-Term Assets		1,187,056			1,193,101
Total Assets	$	18,030,071		$	9,916,831
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	382,027		$	1,449,582
Deferred revenue		183,060			200,109
Other liabilities		—			13,528
Total Current Liabilities		565,087			1,663,219
Total Liabilities		565,087			1,663,219
Stockholders’ Equity
Preferred stock: 50,000,000 authorized; par value $0.0001 per share, nil issued and outstanding at September 30, 2023 and December 31, 2022		—			—
Common stock: 200,000,000 common shares authorized, par value $0.0001 per share, 132,667,107 and 126,702,545 shares outstanding at September 30, 2023 and December 31, 2022, respectively		13,266			12,669
Additional paid-in capital		30,326,463			16,110,221
Accumulated (deficit)		(12,872,333	)		(7,849,982	)
Accumulated other comprehensive loss		(2,412	)		(19,296	)
Total Stockholders’ Equity		17,464,984			8,253,612
Total Liabilities and Stockholders’ Equity	$	18,030,071		$	9,916,831

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

374Water Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the three and nine months ended September 30, 2023 and 2022

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Revenue	$	12,290		$	922,718		$	863,611		$	2,226,477
Cost of Goods Sold		178,680			812,386			944,082			1,962,879
Gross Profit (Loss)		(166,390	)		110,332			(80,471	)		263,598
Operating Expenses
Research and development		317,573			118,253			945,443			726,602
Compensation and related expenses		739,181			435,297			2,191,061			1,135,979
Professional fees		117,543			82,752			309,398			375,313
General and administrative		541,697			387,018			1,803,691			1,027,287
Total Operating Expenses		1,715,994			1,023,320			5,249,593			3,265,181
Loss from Operations		(1,882,384	)		(912,988	)		(5,330,064	)		(3,001,583	)
Other Income (Expense)
Interest income		148,834			162			261,660			1,617
Other income		2,119			—			46,053			7
Total Other Income (Expense)		150,953			162			307,713			1,624
Net Loss before Income Taxes		(1,731,431	)		(912,826	)		(5,022,351	)		(2,999,959	)
Provision for Income Taxes		—			—			—			—
Net Loss	$	(1,731,431	)	$	(912,826	)	$	(5,022,351	)	$	(2,999,959	)
Other Comprehensive Loss
Change in foreign currency translation		(7,850	)		—			(2,412	)		(850	)
Change in unrealized loss on marketable securities		—			(3,122	)		—			(3,122	)
Total other comprehensive gain (loss)		(7,850	)		(3,122	)		(2,412	)		(3,972	)
Total Comprehensive Loss		(1,739,281	)		(915,948	)		(5,024,763	)		(3,003,931	)
Net Loss per Share - Basic and Diluted	$	(0.01	)	$	(0.01	)	$	(0.04	)	$	(0.02	)
Weighted Average Common Shares Outstanding - Basic and Diluted		132,145,497			126,680,895			129,578,743			126,621,412

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

374Water Inc. and Subsidiaries

Condensed Consolidated Changes in Stockholders’ Equity

For the nine months ended September 30, 2023 and 2022

(Unaudited)

For the three and nine months ended September 30, 2023

	Preferred Stock				Common Stock				Additional						Other			Total
	Number of				Number of				Paid in			Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Income			Equity
Balances, December 31, 2022		—	$	—		126,702,545	$	12,669	$	16,110,221		$	(7,849,982	)	$	(19,296	)	$	8,253,612
Issuance of shares of common stock		—		—		2,137,876		214		8,294,494			—			—			8,294,708
Stock-based compensation		—		—		—		—		214,924			—			—			214,924
Foreign currency gain (Loss)		—		—		—		—		—			—			824			824
Unrealized gain (loss) on investments		—		—		—		—		—			—			18,967			18,967
Net loss		—		—		—		—		—			(1,640,343	)		—			(1,640,343	)
Balances, March 31, 2023		—		—		128,840,421	$	12,883	$	24,619,639		$	(9,490,325	)	$	495		$	15,142,692
Issuance of shares of common stock		—		—		1,628,546		163		5,146,567			—			—			5,146,730
Issuance of restricted stock						20,000		2		71,198									71,200
Exercise of stock options						175,045		18		—									18
Exercise of warrants						15,000		1		37,499									37,500
Stock-based compensation		—		—		—		—		228,812			—			—			228,812
Foreign currency gain (Loss)		—		—		—		—		—			—			4,943			4,943
Net loss		—		—		—		—		—			(1,650,577	)		—			(1,650,577	)
Balances, June 30, 2023		—		—		130,679,012	$	13,067	$	30,103,715		$	(11,140,902	)	$	5,438		$	18,981,318
Exercise of stock options						1,988,095		199		99,801									100,000
ATM issuance										(30,069	)								(30,069	)
Stock-based compensation		—		—		—		—		153,016			—			—			153,016
Foreign currency gain (Loss)		—		—		—		—		—			—			(7,850	)		(7,850	)
Net loss		—		—		—		—		—			(1,731,431	)		—			(1,731,431	)
Balances, September 30, 2023		—		—		132,667,107	$	13,266	$	30,326,463		$	(12,872,333	)	$	(2,412	)	$	17,464,984

For the three and nine months ended September 30, 2022

	Preferred Stock						Common Stock				Additional						Other			Total
	Number of						Number of				Paid in			Accumulated			Comprehensive			Stockholders’
	Shares			Amount			Shares		Amount		Capital			Deficit			Income			Equity
Balances, December 31, 2021		27,272		$	3			125,317,746	$	12,531	$	15,474,566		$	(3,160,015	)	$	—		$	12,327,085
Conversion of preferred shares to common shares		(27,272	)		(3	)		1,363,149		136		(135	)		—			—			(2	)
Stock-based compensation		—			—			—		—		97,558			—			—			97,558
Net loss		—			—			—		—		—			(872,858	)		—			(872,858	)
Balances, March 31, 2022		—			—			126,680,895	$	12,667	$	15,571,989		$	(4,032,873	)		—		$	11,551,783
Stock-based compensation		—			—			—		—		138,912			—			—			138,912
Foreign currency gain (loss)		—			—			—		—		—			—			(771	)		(771	)
Unrealized gain (loss) on investments		—			—			—		—		—			—			(11,243	)		(11,243	)
Net loss		—			—			—		—		—			(1,214,275	)		—			(1,214,275	)
Balances, June 30, 2022		—			—			126,680,895	$	12,667	$	15,710,901		$	(5,247,148	)	$	(12,014	)	$	10,464,406
Stock-based compensation		—			—			—		—		183,524			—			—			183,524
Foreign currency gain (loss)		—			—			—		—		—			—			(78	)		(78	)
Unrealized gain (loss) on investments		—			—			—		—		—			—			8,121			8,121
Net loss		—			—			—		—		—			(912,826	)		—			(912,826	)
Balances, September 30, 2022		—			—			126,680,895	$	12,667	$	15,894,426		$	(6,159,975	)	$	(3,971	)	$	9,743,147

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

374Water Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2023 and 2022 (Unaudited)

	2023			2022
Cash Flows from Operating Activities
Net loss	$	(5,022,351	)	$	(2,999,959	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		63,582			50,052
Stock based compensation		667,950			419,995
Change in foreign currency translation		(2,083	)		—
Changes in operating assets and liabilities:
Accounts receivable		(16,761	)		(164,600	)
Unbilled accounts receivable		(779,412	)		—
Inventory		(249,413	)		—
Prepaid expenses		(263,009	)		(1,079,467	)
Accounts payable and accrued expenses		(1,067,555	)		980,679
Deferred revenue		(17,049	)		200,109
Other liabilities		(13,528	)		(5,002	)
Cash Provided by (Used In) Operating Activities		(6,699,629	)		(2,598,193	)
Cash Flows from Investing Activities
Purchase of marketable securities		—			(5,998,243	)
Purchase of equipment		(51,813	)		(125,011	)
Increase in intangible assets		(5,724	)		(1,745	)
Cash Provided by (Used In) Investing Activities		(57,537	)		(6,123,999	)
Cash Flows from Financing Activities
Proceeds from the sale of investments		1,963,431			—
Proceeds from the issuance of common stock		13,548,889			—
Cash Provided by Financing Activities		15,512,320			—
Net Increase in Cash		8,755,154			(8,723,192	)
Cash, Beginning of the Period		4,046,937			11,131,175
Cash, End of the Period	$	12,802,091		$	2,407,983
NON-CASH FINANCING ACTIVITIES
Conversion of preferred stock to common stock	$	—		$	133

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

374Water Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – Nature of Business and Presentation of Financial Statements

Description of the Company

374Water Inc. (the “Company”, “374Water”, “We”, or “Our”) is a Delaware corporation which was formed in September 2005 as PowerVerde, Inc. 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.

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, and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde.

Following the Merger, 374Water offers a technology that transforms certain 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. Our goal is to support 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.

Presentation of Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information. It is management’s opinion that the accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q and include all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Annual Report on Form 10-K of 374Water Inc. (“374 Water,” “we,” “us,” “our,” or the “Company”) as of and for the year ended December 31, 2022 filed with the SEC on March 16, 2023.

The results of operations for the nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the full year or for future periods. The condensed consolidated financial statements include the accounts of 374Water Inc., 374Water Systems Inc, and 374Water Sustainability Israel LTD, each a wholly-owned subsidiary of 374 Water. Intercompany balances and transactions have been eliminated in consolidation.

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Note 2 – Summary of Significant Accounting Policies

Cash and Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company held $12,354,391 and $1,182,412 in cash equivalents as of September 30, 2023 and December 31, 2022, respectively.

The Company held marketable securities as of September 30, 2023 as noted in the following table:

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	12,802,091		—	$	12,802,091	$	12,802,091		—		—
Level 2:
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—		—
Total	$	12,802,091	$	—	$	12,802,091	$	12,802,091	$	—		—

The Company held marketable securities as of December 31, 2022 as noted in the following table:

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	4,046,937		—	$	4,046,937	$	4,046,937		—		—
Level 2:
U.S. Treasury securities	$	1,963,432	$	18,968	$	1,944,464	$	—	$	1,944,464		—
Total	$	6,010,369	$	18,968	$	5,991,401	$	4,046,937	$	1,944,464		—

Accounting Standards Codification (ASC) Topic 820 “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 Inputs - Fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The following is a description of valuation methodologies used for assets and liabilities recorded at an amortized cost basis:

• Investment Securities Held-to-Maturity. Investment securities held-to-maturity (“HTM”) are recorded at their initial cost, and any discount or premium amortized over the remaining life of the security. The carrying value of the investment is adjusted for the amortized amount of any discount or premium at each reporting period.

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Accounts Receivable

Accounts receivables consist of balances due from sales, service revenues, unbilled accounts receivables which is for revenues earned but not yet billed, and other receivables relating to common stock subscription purchases where the stock has been transferred but the cash has not been received. The Company monitors accounts receivable and provides allowances when considered necessary. At September 30, 2023 and December 31, 2022, accounts receivable were considered to be fully collectible but in accordance with the allowance for credit losses, the Company recorded an allowance for bad debt based on a reserve of current and aged receivables. Accordingly, an allowance for doubtful accounts of $74 and $0 was recorded as of September 30, 2023 and December 31, 2022, respectively.

Accounts Receivable

Accounts receivables consist of balances due from sales and service revenues and accrued interest from the investment account.

Unbilled Accounts Receivable

Unbilled accounts receivables consist of balances due from sales and service revenue earned but not yet billed.

Accounts receivable allowance for credit losses

The activity related to the accounts receivable allowance for credit losses was as follows:

Name	Nine Months Ending at September 30, 2023		Year Ending at December 31, 2022
Beginning balance	$	—	$	—
Current period provision		74		—
Write-offs		—		—
Ending Balance	$	74	$	—

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The majority of our inventory is raw materials and work in progress. Net realizable value is the value of an asset that can be realized upon the sale of the asset, less a reasonable estimate of the costs associated with either the eventual sale or the disposal of the asset in question. 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. 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. Inventories are classified as current assets in accordance with recognized industry practice.

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Property and Equipment

Property and Equipment is recorded at cost. Depreciation is computed using the straight-line method and an estimated useful life of three years. Expenses for maintenance and repairs are charged to expense as incurred. Depreciation expense related to property and equipment was as follows:

	Period Ended September 30,
	2023		2022
Depreciation	$	12,793	$	1,374

Intangible Assets

Intangible assets are subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment.” Intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. As of September 30, 2023 and December 31, 2022, there was no impairment.

Long-Lived Assets

The Company reviews long-lived assets, including 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. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. 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 September 30, 2023 and December 31, 2022, there were no impairments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, and marketable securities. Deposits with financial institutions are insured, up to certain limits, by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s cash deposits often exceed the FDIC insurance limit; however, all deposits are maintained with high credit quality institutions and the Company has not experienced any losses in such accounts. The financial condition of financial institutions is periodically reassessed, and the Company believes the risk of any loss is minimal. The Company believes the risk of any loss on cash due to credit risk is minimal. Furthermore, we perform ongoing credit evaluations of our customers and generally do not require collateral.

Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. Our customer revenue for one customer made up 96% and 97% of revenue for the period ended September 30, 2023 and September 30, 2022, respectively. In 2023 and 2022, the Company purchased a substantial portion of manufacturing services from one third party vendor, Merrell Bros Fabrication, LLC.

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. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation using the input method.

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The Company’s performance obligations are satisfied over time and over the life of the contract. The Company’s revenue arrangements consist of a single performance obligation to transfer services. Revenue is recognized over time by measuring the progress toward complete satisfaction of the performance obligation using specific milestones. These milestones within the contract are assigned revenue recognition percentages, based on overall expected cost-plus margin estimates of those milestones compared to the total cost of the contract. 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. Due to a change in gross margin during the current period, the revenue recognition percentages were updated, reflecting a change in estimate. Contract costs include all direct material and labor and subcontractor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. General, selling, and administrative costs are charged to expense as incurred.

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. 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.

Revenues for the nine-month period ended September 30, 2023 in the amount of $833,294 were generated from the sale of an AirSCWO system and $30,317 was generated from our treatability study services.

Revenues for the nine-month period ended September 30, 2022 in the amount of $2,162,702 were generated from the sale of an AirSCWO system and $63,775 was generated from our treatability study services.

Stock-based Compensation

The Company has accounted 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). 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. 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.

Income Tax Policy

The Company accounts for income taxes using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

Accounting for Uncertainty in Income Taxes

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There were no uncertain tax positions as of September 30, 2023 and December 31, 2022.

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Research and Development Costs

The Company’s research and development costs are expensed in the period in which they are incurred. Such expenditures amounted to $945,443 and $726,602 for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with ASC Topic 260, “Earnings per Share” Basic weighted-average number of shares of common stock outstanding for the years ended September 30, 2023 and December 31, 2022 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. As of September 30, 2023, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive: options for 10,628,000 shares of common stock and 1,235,000 warrants. As of December 31, 2022, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive: options for 12,752,000 shares of common stock and 1,250,000 warrants.

Financial Instruments

The Company carries cash, accounts receivable, accounts payable and accrued expenses, at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values / useful lives of equipment and intangible assets due to their current nature.

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Foreign Currency Translation

All assets and liabilities of the Company’s locations whose accounts are denominated in foreign currency are translated into United States dollars at appropriate year-end current exchange rates. All income and expense accounts of those locations are translated at the monthly average exchange rate for each period. The foreign currency translation amounts for the period ended September 30, 2023 and the year ended December 31, 2022 are included in accumulated comprehensive income on the consolidated statement of changes in stockholders’ equity.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the fair value of equity-based compensation, revenue, fair value of intangible assets, useful lives of intangible assets, capital raise transactions, and valuation allowance against deferred tax assets.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has completed its assessment on the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption and noted that there is no impact at this time, and noted a small adjustment for the allowance for bad debt which was recorded on January 1, 2023. This has been regularly assessed and most recently updated as of September 30, 2023.

The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations.

Note 3 – Liquidity, Capital Resources and Going Concern

As of September 30, 2023, the Company had working capital of $16,277,928 compared to working capital of $7,060,511 at December 31, 2022. As of September 30, 2023, the Company had an accumulated deficit of $12,872,333. For the nine months ended September 30, 2023, the Company had a net loss of $5,022,351 and used $6,699,631 of net cash in operations for the period.

The Company believes it has sufficient cash-on-hand for the Company to meet its financial obligations as they come due at least the next 12 months from the date of the report.

Note 4 – Inventory

Inventory consists of:

Name	Balance at September 30, 2023		Balance at December 31, 2022
Raw materials	$	416,603	$	755,218
Work-in-process		1,493,520		905,492
Total	$	1,910,123	$	1,660,710

As of September 30, 2023 and December 31, 2022, the Company noted no inventory impairment and there were no inventory write downs recorded.

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Note 5 – Intangible Assets

Intangible assets are recorded at cost and consist of the License Agreement with Duke University. The Company issued Duke University a small number of shares of common stock estimated to have a fair value of $1,073,529 as consideration for granting the Company the license based on the Company’s common stock market price on the date the License Agreement was executed (see Note 9). Intangible assets are comprised of the following as of September 30, 2023 and December 31, 2022:

Name	Estimated Life	Balance at December 31, 2022		Additions		Amortization		Balance at September 30, 2023
License agreement	17 Years	$	964,965	$	—	$	47,305	$	917,660
Patents	20 Years		85,057		5,724		3,484		87,297
Total		$	1,050,022	$	5,724	$	50,789	$	1,004,957

Name	Estimated Life	Balance at December 31, 2021		Additions		Amortization		Balance at December 31, 2022
License agreement	17 Years	$	1,028,114	$	—	$	63,149	$	964,965
Patents	20 Years		34,742		52,292		1,977		85,057
Total		$	1,062,856	$	52,292	$	65,126	$	1,050,022

Amortization expense for the nine months ended September 30, 2023 and 2022, was $50,789 and $48,678, respectively.

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Estimated future amortization expense as of September 30, 2023:

	September 30, 2023
2023	$	17,041
2024		67,933
2025		67,933
2026		67,933
2027		67,933
Thereafter		716,184
Intangible assets, Net	$	1,004,957

Note 6 – Revenue 

The following is a summary of our revenues by type for the nine-month period ended September 30, 2023 and September 30, 2022:

Name	September 30, 2023		%			September 30, 2022		%
Equipment revenue	$	833,294		96	%	$	21,662,702		97	%
Service revenue		30,317		4	%		63,775	3		%
Total	$	863,611		100	%	$	2,226,477		100	%

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Deferred Revenue

The following is a summary of our deferred revenue activity for the period ended September 30, 2023 and year ended December 31, 2022:

Name	Balance at September 30, 2023			Balance at December 31, 2022
Deferred revenue at beginning of year	$	200,109		$	—
Billings deferred		21,190			1,467,189
Recognition of prior deferred revenue		(38,239	)		(1,267,080	)
Deferred revenue at end of year	$	183,060		$	200,109

Unbilled Accounts Receivable

The following is a summary of our unbilled accounts receivable activity for the period ended September 30, 2023 and the year ended December 31, 2022:

Name	Balance at September 30, 2023			Balance at December 31, 2022
Unbilled accounts receivable at beginning of year	$	918,164		$	—
Services performed but unbilled		839,391			918,164
Services billed		(59,979	)		—
Unbilled accounts receivable at end of period	$	1,697,576		$	918,164

Note 7 – Stockholders’ Equity

The Company is authorized to issue 50,000,000 preferred stock shares and 200,000,000 common stock shares both with a par value of $0.0001.

Preferred Stock

The Company is authorized, subject to limitations prescribed by Delaware law, to issue up to 50,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations or restrictions. The board of directors can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by the Company’s stockholders. The Company board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of the Company and may adversely affect the market price of the Company’s common stock and the voting and other rights of the holders of the Company’s common stock. As of September 30, 2023, there were no shares of preferred stock issued or outstanding.

Common Stock

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the directors’ election. There is no right to cumulative voting in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available for payment of dividends subject to the prior rights of holders of preferred stock and any contractual restrictions the Company has against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive rights and have no right to convert their common stock into any other securities. As of September 30, 2023, there were 132,667,107 shares of common stock issued and outstanding.

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In December 2022, the Company entered into an equity distribution agreement with an underwriter pursuant to which the Company may offer and sell shares of its common stock from time to time through the underwriter as its sales agent. Sales of common stock, if any, will be made at market prices by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company has no obligation to sell any shares of common stock under the open market sale agreement and may at any time suspend offers under the open market sale agreement, in whole or in part, or terminate the equity distribution agreement. 

During the nine months ended September 30, 2023, a total of 3,766,422 shares of common stock have been sold pursuant to the open market sale agreement resulting in a total of $13.41 million in proceeds, net of $0.23 million of commission fees and $0.14 million of accounting and legal fees. As of September 30, 2023, $86.56 million remained available under the Company’s at-the-market public facility, subject to various limitations.

Stock-based compensation

During the nine months ended September 30, 2023 and September 30, 2022, the Company recorded stock-based compensation of $667,950 and $419,995, respectively, related to common stock issued, restricted stock issued, or vested options to employees and various consultants of the Company. 

For the nine months ended September 30, 2023, $583,549 was charged as general and administrative expenses and $84,401 as research and development expenses in the accompanying condensed consolidated statements of operations. For the nine months ended September 30, 2022, $380,383 was charged as general and administrative expenses and $39,612 as research and development expenses in the accompanying condensed consolidated statements of operations.

Stock Options

Stock option activity for the nine months ended September 30, 2023 is summarized as follows:

	Shares			Weighted Average Exercise Price			Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2022		12,752,000		$	0.62		$	28,543,370		5.09
Granted		273,000			3.09			—		—
Exercised		—			—			—		—
Expired/forfeit		—			—			—		—
Options outstanding at March 31, 2023		13,025,000		$	0.67		$	52,705,860		4.93
Granted		640,000			3.25			—		—
Exercised		(175,045	)		(1.05	)		—		—
Expired/forfeit		(634,488	)		(1.36	)		—		—
Options outstanding at June 30, 2023		12,855,467		$	0.76		$	20,968,586		4.73
Granted		144,000			1.72			—		—
Exercised		(1,988,095	)		(0.16	)		—		—
Expired/forfeit		(383,372	)		(1.42	)		—		—
Options outstanding at September 30, 2023		10,628,000		$	0.86		$	4,049,090		4.77

Stock option activity for the nine months ended September 30, 2022 is summarized as follows:

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2021		12,300,000		$	0.37	$	30,504,000		5.62
Granted		360,000			3.33		—		—
Exercised		—			—		—		—
Expired/forfeit		—			—		—		—
Options outstanding at March 31, 2022		12,660,000		$	0.45	$	45,576,000		5.39
Granted		560,000			—		—		—
Exercised		—			—		—		—
Expired/forfeit		(40,000	)		4.10		—		—
Options outstanding at June 30, 2022		13,180,000		$	0.54	$	31,683,690		5.31
Granted		270,000			2.39		—		—
Exercised		—			—		—		—
Expired/forfeit		(58,000	)		3.35		—		—
Options outstanding at September 30, 2022		13,392,000		$	0.56	$	30,383,910		5.13

Total unrecognized compensation associated with these unvested options is approximately $2,369,014 which will be recognized based on the options associated vesting schedules.

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The fair value of these options granted were estimated on the date of grant, using the Black-Scholes option-pricing model with the following assumptions:

	September 30, 2023			September 30, 2022
Dividend yield		0.00	%		0.00	%
Expected life	5.45 – 6.53 Years			5.28 – 6.10 Years
Expected volatility	30.00–35.88		%	34.73–34.79		%
Risk-free interest rate	3.57–4.43		%	3.06-3.94		%

Stock Warrants

As of September 30, 2023, there were 1,235,000 warrants outstanding which relate to the Series 1 offering executed in December 2021, where investors were offered a warrant for every two common shares purchased during the offering at an exercise price of $2.50 per share. The intrinsic value of all outstanding warrants as of September 30, 2023 was $0 based on the market price of our common stock of $1.24 per share, which was the Company’s closing per share common stock price as reported on Nasdaq as of September 30, 2023.

During the three months ended September 30, 2023, there were no new warrants issued or exercised under existing warrants. As of September 30, 2023, there are 1,235,000 outstanding warrants.

 A summary of warrant activity during the nine months ended September 30, 2023, is as follows:

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2022		1,250,000		$	2.50	$	450,000		1.96
Issued		—			—		—		—
Exercised		—			—		—		—
Balance at March 31, 2023		1,250,000		$	2.50	$	2,775,000		1.72
Issued		—			—		—		—
Exercised		(15,000	)		2.50		—		—
Balance at June 30, 2023		1,235,000		$	2.50	$	—		1.47
Issued		—			—		—		—
Exercised		—			—		—		—
Balance at September 30, 2023		1,235,000		$	2.50	$	—		1.21

Note 8 - Related Party Transactions

In 2021, the Company entered into an agreement to fabricate and manufacture the AirSCWO systems with Merrell Bros. Holding Company. As part of the agreement, the Company appointed Terry Merrell to its board of directors. As of September 30, 2023, Merrell Bros. or their affiliates own stock in excess of 4% of the outstanding common stock. For the nine-month period ending September 30, 2023, the Company incurred $736,775 in related party expenses, all of which was related to non-recurring labor as well as costs associated with the manufacturing of the AirSCWO systems. As of September 30, 2023, there is an accrual of $131,923 in related party expenses, all of which are costs associated with the manufacturing of the AirSCWO systems.

Note 9 - Commitments

The patented technology underlying 374Water’s supercritical water oxidation (SCWO) units, which was developed principally through the efforts of Yaacov Nagar and Marc Deshusses at the facilities of Duke University, Durham, North Carolina (“Duke”), where Dr. Deshusses, the Company’s Head of Technology, is a professor. The SCWO technology is licensed to 374Water pursuant to a worldwide license agreement with Duke executed on April 16, 2021 (the “License Agreement”). In connection with the License Agreement, 374Water also executed an equity transfer Agreement with Duke pursuant to which Duke received a small number of common stock in the Company (See Notes 5 and 7). Under the terms of the License Agreement, the Company is required to make royalty payments based on a percentage of licensed product sales, as defined in the License Agreement which is triggered by the sale of licensed products. Further, the Company is also required to pay royalties on a percentage of sublicensing fees. The Company will reimburse Duke for any ongoing patent expenses incurred. During the nine-month period ending September 30, 2023, the Company has not incurred any expenses in connection with this License Agreement. The Company may terminate the license agreement anytime by providing Duke with 60 days’ written notice.

Note 10 - Legal Contingencies

From time to time, the Company may become subject to various legal proceedings, claims, and other contingent liabilities that may arise in the ordinary course of our business activities. These could be individual or in the aggregate materially affect our financial condition, future results of operations or cash flows. As a matter of course, we would be prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities.

On a quarterly basis, we review our litigation accrual liabilities as needed, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously established accrual liabilities when warranted by changes in circumstances, in each case based on the then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. As of September 30, 2023, the Company is not currently subject to any material legal proceedings.

Note 11 - Subsequent Events

On November 6, 2023, the Company appointed Brad Meyers as Chief Operating Officer (COO). The appointment of Mr. Meyers is considered a non-recognized subsequent event that occurred after the balance sheet date but before the issuance of these financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

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 2022 Annual Report on Form 10-K filed with the SEC on March 16, 2023, 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.

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.

Critical Accounting Policies

The condensed consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed consolidated financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

Accounting for Uncertainty in Income Taxes

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our condensed consolidated financial statements. Our evaluation was performed for the tax years ended December 31, 2020, 2021, and 2022 the tax years which remain subject to examination by major tax jurisdictions as of September 30, 2023.

We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the condensed consolidated financial statements as general and administrative expense.

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Revenue Recognition

Revenues for the nine months ended September 30, 2023 were generated from the sale of an AirSCWO system, and treatability study services, which were recognized over time by measuring the progress toward complete satisfaction of the performance obligation using specific milestones pursuant to its agreements with its clients.

Common Stock Purchase Warrants

The Company accounts for common stock purchase warrants in accordance with ASC Topic 815- 40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). Based on the provisions of ASC 815- 40, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). As of September 30, 2023, there were 1,235,000 outstanding warrants classified as equity.

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. This model requires management to estimate the expected volatility, expected dividends, and expected term as inputs to the valuation model.

Overview

374Water offers a technology that transforms certain 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. Our goal is to support a new era of waste management that supports a circular economy and enables organizations to achieve their environmental, 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.

We have developed proprietary waste stream treatment systems based on Supercritical Water Oxidation (SCWO). The term used for the process is AirSCWO. SCWO leverages the unique properties of water in its supercritical phase (above 374 ^oC and 221 Bar) to convert organic matter to energy and safe products that can be recovered and used. 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. We believe the AirSCWO systems will be 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.

We currently outsource manufacturing of the AirSCWO systems to our strategic partner in the US, Merrell Bros., Inc., who 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.

Our goal is to supply the systems 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.

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Results 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: 

	Three-Months Ended September 30
	2023			2022			$ Change			% Change
Revenue	$	12,290		$	922,718		$	(910,428	)		(99	%)
Cost of revenues		178,680			812,386			(633,706	)		(78	%)
Gross Profit (Loss)		(166,390	)		110,332			(276,722	)		(251	%)
Operating expenses:
Research and development		317,573			118,253			199,320			169	%
Compensation and related expenses		739,181			435,297			303,884			70	%
Professional fees		117,543			82,752			34,791			42	%
General and administrative		541,697			387,018			154,679			40	%
Total operating expenses		1,715,994			1,023,320			692,674			68	%
Loss from operations		(1,882,384	)		(912,988	)		(969,396	)		106	%
Other income (expenses), net		150,953			162			150,791			93,081	%
Loss before income taxes		(1,731,431	)		(912,826	)		(818,605	)		(90	%)
Provision for (benefit from) income taxes		—			—			—			0	%
Net loss	$	(1,731,431	)	$	(912,826	)	$	(818,605	)		(90	%)

Three Months Ended September 30, 2023, as Compared to the Three Months Ended September 30, 2022

Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated $12,290 and $922,718 in revenue from manufacturing assembly services and from consulting and advisory services during the three months ending September 30, 2023 and September 30, 2022. The decrease in this recent quarter was attributed to the fact that we reached fewer revenue milestones, thus resulting in lower recognized revenue. As the completion of the unit nears, the Company updated the estimated costs to provide that unit during the reporting period. An increase in our budgeted costs of the unit adversely impacted our estimated revenue generated in Q3. The Company has gained momentum on many promising leads which have been produced through early Treatability Studies but has not closed on the sale of any units to this point in the year. This has had a direct impact on our change in revenue year-over–year.  

Our general and administrative expenses increased to $541,697 during the three months ending September 30, 2023, as compared to $387,018 in the same period of 2022, primarily because of increased stock-based compensation and marketing expenses. The increase in marketing expense was 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. While this increase may appear as a higher expense, it is calculated 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.

Our compensation and related expenses increased to $739,181 during the three months ending September 30, 2023, as compared to $435,297 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. 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. 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.

Our professional fees increased to $117,543 during the three months ending September 30, 2023, as compared to $82,752 in the same period of 2022, primarily attributed to heightened legal and consulting engagements. First, our General Counsel has temporarily assumed the role of Interim CEO, necessitating the hiring of outside legal counsel to manage our ongoing legal requirements. Second, we have increased our consultant engagements, specifically by bringing in a consulted Head of Manufacturing to assist with the commissioning of our system. Both of these strategic decisions are aimed at navigating regulatory and legal complexities and optimizing our manufacturing capabilities. This investment in specialized expertise aligns with our long-term business objectives and is expected to produce enduring benefits.

Our research and development expenses increased to $317,573 during the three months ending September 30, 2023, as compared to $118,253 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. This technology is designed to convert waste steam and gases 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. 

22

	Nine-Months Ended September 30,
	2023		2022		$ Change		% Change
Revenue	$	863,611	$	2,226,477	$	(1,362,866)		(61	%)
Cost of revenues		944,082		1,962,879		(1,018,797)		(52	%)
Gross Profit (Loss)		(80,471)		263,598		(344,069)		(131	%)
Operating expenses:
Research and development		945,443		726,602		218,841		30	%
Compensation and related expenses		2,191,061		1,135,979		1,055,082		93	%
Professional fees		309,398		375,313		(65,915)		(18	%)
General and administrative		1,803,691		1,027,287		776,404		76	%
Total operating expenses		5,249,593		3,265,181		1,984,412		61	%
Loss from operations		(5,330,064)		(3,001,583)		(2,328,48)		78	%
Other income (expenses), net		307,713		1,624		306,089		18,848	%
Loss before income taxes		(5,022,35)		(2,999,959)		(2,022,392)		67	%
Provision for (benefit from) income taxes		—		—		—		—	%
Net loss	$	(5,022,351)	$	(2,999,959)	$	(2,022,392)		67	%

Nine months ended September 30, 2023, as Compared to the Nine months ended September 30, 2022

Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated $863,611 and $2,226,477 in revenue from manufacturing assembly services and from consulting and advisory services during the nine months ending September 30, 2023 and September 30, 2022, respectively. During the nine months ending September 30, 2023, we reached fewer milestones, thus resulting in lower recognized revenue. Costs associated with our sold unit have started to come down as we have reached the end cycle of our fabrication and testing, which have had a direct correlation to the lesser revenue recognized this year. As the completion of the unit nears, the Company updated the estimated costs to provide that unit during the reporting period. An increase in our budgeted costs of the unit adversely impacted our estimated revenue generated in Q3. The Company has gained momentum on many promising leads which have been produced through early Treatability Studies but has not closed on the sale of any units to this point in the year. This has had a direct impact on our change in revenue year-over–year.

Our general and administrative expenses increased to $1,803,691 during the nine months ending September 30, 2023, as compared to $1,027,287 in the same period of 2022, primarily because of increased stock-based compensation and marketing expenses. The increase in marketing expense 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. While this increase may appear as a higher expense, it is calculated 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.

Our compensation and related expenses increased to $2,191,061 during the nine months ending September 30, 2023, as compared to $1,135,979 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. 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. 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.

Our professional fees slightly decreased to $309,398 during the nine months ending September 30, 2023, as compared to $375,313 in the same period of 2022, primarily attributed to the increase in the 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.

Our research and development expenses increased to $945,443 during the nine months ending September 30, 2023, as compared to $726,602 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. This technology is designed to convert waste steam and gases 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.

Liquidity and Capital Resources

We have an at-the-market 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.

We have financed our operations since inception principally through the sale of equity securities and sales of product and services. As of September 30, 2023, we had working capital of $16,277,928 compared to working capital of $7,060,511 at December 31, 2022. 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. 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. 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company, under the supervision and with the participation of its management, including the Interim Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

23

Management’s Annual Report on Internal Control Over Financial Reporting

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of September 30, 2023. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of September 30, 2023.

No Attestation Report

This quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this quarterly report.

Changes in Internal Control Over Financial Reporting

The Company implemented a new enterprise resource planning (“ERP”) system beginning in July 2023. The adoption of the ERP has allowed for the organization to enhance the controls surrounding the financial reporting by automating previously manual tasks.

On September 1, 2023, the Company appointed an Interim Chief Executive Officer, Jeff Quick, following Kobe Nagar’s transition to become the Company’s Technology Principal. Following the transition, Jeff Quick assumed all CEO responsibilities including reviews over financial reporting.

Except for instances described above, there have been no other changes in our internal control over financial reporting during the first nine months of 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

24

PART II OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable

25

Item 6. Exhibits.

(a) Exhibits

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL INSTANCE DOCUMENT
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

26

SIGNATURES

In accordance with Section 13(a) or 15(d) of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	374WATER INC
Dated: November 9, 2023	By:	/s/ Jeffrey M. Quick
		Jeffrey M. Quick
		Interim Chief Executive Officer
		(Principal Executive Officer)
Dated: November 9, 2023	By:	/s/ Israel Abitbol
		Israel Abitbol
		Chief Financial Officer (Principal Financial Officer)

27

Exhibit Index

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL INSTANCE DOCUMENT
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

28

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, Jeffrey M. Quick, certify that:

1.	I have reviewed this Form 10-Q of 374Water Inc. for the quarterly period ending September 30, 2023;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 9, 2023
By:	/s/ Jeffrey M. Quick
	Interim Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

 EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, Israel Abitbol, certify that:

1.	I have reviewed this Form 10-Q of 374Water Inc. for the quarterly period ending September 30, 2023;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 9, 2023
By:	/s/ Israel Abitbol
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q of 374Water Inc. (the “Company”) for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jeffrey M. Quick, Interim Chief Executive Officer, of the Company certify pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002 that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023
By:	/s/ Jeffrey M. Quick
	Interim Chief Executive Officer (Principal Executive Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q of 374Water Inc. (the “Company”) for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Israel Abitbol, Chief Financial Officer, of the Company certify pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002 that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023
By:	/s/ Israel Abitbol
	Chief Financial Officer (Principal Financial Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	9 Months Ended
	Sep. 30, 2023	Nov. 09, 2023
Cover [Abstract]
Entity Registrant Name	374WATER INC.
Entity Central Index Key	0000933972
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2023
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2023
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding		132,667,107
Entity File Number	000-27866
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	88-0271109
Entity Address Address Line 1	701 W Main Street
Entity Address Address Line 2	Suite 410
Entity Address City Or Town	Durham
Entity Address State Or Province	NC
Entity Address Postal Zip Code	27701
City Area Code	919
Local Phone Number	888-8194
Security 12b Title	Common Stock, par value $0.0001
Trading Symbol	SCWO
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes

XML

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Current Assets:
Cash	$ 12,802,091	$ 4,046,937
Accounts receivable, net of allowance of $74 and $0	16,761	0
Unbilled accounts receivable	1,697,576	918,164
Inventory	1,910,123	1,660,710
Investments	0	1,944,464
Prepaid expenses	416,464	153,455
Total Current Assets	16,843,015	8,723,730
Long-Term Assets:
Equipment, net	182,099	143,079
Intangible asset, net	1,004,957	1,050,022
Total Long-Term Assets	1,187,056	1,193,101
Total Assets	18,030,071	9,916,831
Current Liabilities:
Accounts payable and accrued expenses	382,027	1,449,582
Deferred revenue	183,060	200,109
Other liabilities	0	13,528
Total Current Liabilities	565,087	1,663,219
Total Liabilities	565,087	1,663,219
Stockholders' Equity
Preferred stock: 50,000,000 authorized; par value $0.0001 per share, nil issued and outstanding at September 30, 2023 and December 31, 2022	0	0
Common stock: 200,000,000 common shares authorized, par value $0.0001 per share, 132,667,107 and 126,702,545 shares outstanding at September 30, 2023 and December 31, 2022, respectively	13,266	12,669
Additional paid-in capital	30,326,463	16,110,221
Accumulated (deficit)	(12,872,333)	(7,849,982)
Accumulated other comprehensive loss	(2,412)	(19,296)
Total Stockholders' Equity	17,464,984	8,253,612
Total Liabilities and Stockholders' Equity	$ 18,030,071	$ 9,916,831

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Condensed Consolidated Balance Sheets
Allowance for doubtful accounts receivable	$ 74	$ 0
Preferred Stock, Shares Authorized	50,000,000	50,000,000
Preferred Stock Par Value	$ 0.0001	$ 0.0001
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Shares Authorized	200,000,000	200,000,000
Common Stock, Par Value	$ 0.0001	$ 0.0001
Common Stock, Shares issued	132,667,107	126,702,545
Common Stock, Shares Outstanding	132,667,107	126,702,545

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Condensed Consolidated Statements of Operations (Unaudited)
Revenue	$ 12,290	$ 922,718	$ 863,611	$ 2,226,477
Cost of Goods Sold	178,680	812,386	944,082	1,962,879
Gross Profit (Loss)	(166,390)	110,332	(80,471)	263,598
Operating Expenses
Research and development	317,573	118,253	945,443	726,602
Compensation and related expenses	739,181	435,297	2,191,061	1,135,979
Professional fees	117,543	82,752	309,398	375,313
General and administrative	541,697	387,018	1,803,691	1,027,287
Total Operating Expenses	1,715,994	1,023,320	5,249,593	3,265,181
Loss from Operations	(1,882,384)	(912,988)	(5,330,064)	(3,001,583)
Other Income (Expense)
Interest income	148,834	162	261,660	1,617
Other income	2,119	0	46,053	7
Total Other Income (Expense)	150,953	162	307,713	1,624
Net Loss before Income Taxes	(1,731,431)	(912,826)	(5,022,351)	(2,999,959)
Provision for Income Taxes	0	0	0	0
Net Loss	(1,731,431)	(912,826)	(5,022,351)	(2,999,959)
Other Comprehensive Loss
Change in foreign currency translation	(7,850)	0	(2,412)	(850)
Change in unrealized loss on marketable securities	0	(3,122)	0	(3,122)
Total other comprehensive gain (loss)	(7,850)	(3,122)	(2,412)	(3,972)
Total Comprehensive Loss	$ (1,739,281)	$ (915,948)	$ (5,024,763)	$ (3,003,931)
Net Loss per Share - Basic and Diluted	$ (0.01)	$ (0.01)	$ (0.04)	$ (0.02)
Weighted Average Common Shares Outstanding - Basic and Diluted	132,145,497	126,680,895	129,578,743	126,621,412

XML

Condensed Consolidated Changes in Stockholders' Equity (Unaudited) - USD ($)	Total	Preferred Stock [Member]	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)	Other Comprehensive Income
Balance, shares at Dec. 31, 2021		27,272	125,317,746
Balance, amount at Dec. 31, 2021	$ 12,327,085	$ 3	$ 12,531	$ 15,474,566	$ (3,160,015)	$ 0
Conversion of preferred shares to common shares, shares		(27,272)	1,363,149
Conversion of preferred shares to common shares, amount	(2)	$ (3)	$ 136	(135)	0	0
Stock-based compensation	97,558	0	0	97,558	0	0
Net loss	(872,858)	0	$ 0	0	(872,858)	0
Balance, shares at Mar. 31, 2022			126,680,895
Balance, amount at Mar. 31, 2022	11,551,783	$ 0	$ 12,667	15,571,989	(4,032,873)	0
Balance, shares at Dec. 31, 2021		27,272	125,317,746
Balance, amount at Dec. 31, 2021	12,327,085	$ 3	$ 12,531	15,474,566	(3,160,015)	0
Balance, shares at Sep. 30, 2022			126,680,895
Balance, amount at Sep. 30, 2022	9,743,147		$ 12,667	15,894,426	(6,159,975)	(3,971)
Balance, shares at Mar. 31, 2022			126,680,895
Balance, amount at Mar. 31, 2022	11,551,783	0	$ 12,667	15,571,989	(4,032,873)	0
Stock-based compensation	138,912	0	0	138,912	0	0
Net loss	(1,214,275)	0	0	0	(1,214,275)	0
Foreign currency gain (loss)	(771)	0	0	0	0	(771)
Unrealized gain (loss) on investments	(11,243)	0	$ 0	0	0	(11,243)
Balance, shares at Jun. 30, 2022			126,680,895
Balance, amount at Jun. 30, 2022	10,464,406	0	$ 12,667	15,710,901	(5,247,148)	(12,014)
Stock-based compensation	183,524	0	0	183,524	0	0
Net loss	(912,826)	0	0	0	(912,826)	0
Foreign currency gain (loss)	(78)	0	0	0	0	(78)
Unrealized gain (loss) on investments	8,121	0	$ 0	0	0	8,121
Balance, shares at Sep. 30, 2022			126,680,895
Balance, amount at Sep. 30, 2022	9,743,147		$ 12,667	15,894,426	(6,159,975)	(3,971)
Balance, shares at Dec. 31, 2022			126,702,545
Balance, amount at Dec. 31, 2022	8,253,612	0	$ 12,669	16,110,221	(7,849,982)	(19,296)
Stock-based compensation	214,924	0	0	214,924	0	0
Net loss	(1,640,343)	0	0	0	(1,640,343)	0
Foreign currency gain (loss)	824	0	0	0	0	824
Unrealized gain (loss) on investments	18,967	0	$ 0	0	0	18,967
Issuance of shares of common stock, shares			2,137,876
Issuance of shares of common stock, amount	8,294,708	0	$ 214	8,294,494	0	0
Balance, shares at Mar. 31, 2023			128,840,421
Balance, amount at Mar. 31, 2023	15,142,692	0	$ 12,883	24,619,639	(9,490,325)	495
Balance, shares at Dec. 31, 2022			126,702,545
Balance, amount at Dec. 31, 2022	8,253,612	0	$ 12,669	16,110,221	(7,849,982)	(19,296)
Net loss	(5,022,351)
Balance, shares at Sep. 30, 2023			132,667,107
Balance, amount at Sep. 30, 2023	17,464,984	0	$ 13,266	30,326,463	(12,872,333)	(2,412)
Balance, shares at Mar. 31, 2023			128,840,421
Balance, amount at Mar. 31, 2023	15,142,692	0	$ 12,883	24,619,639	(9,490,325)	495
Stock-based compensation	228,812	0	0	228,812	0	0
Net loss	(1,650,577)	0	0	0	(1,650,577)	0
Foreign currency gain (loss)	4,943	0	$ 0	0	0	4,943
Issuance of shares of common stock, shares			1,628,546
Issuance of shares of common stock, amount	5,146,730	0	$ 163	5,146,567	0	0
Issuance of restricted stock, shares			20,000
Issuance of restricted stock, amount	71,200		$ 2	71,198
Exercise of stock options, shares			175,045
Exercise of stock options, amount	18		$ 18	0
Exercise of warrants, shares			15,000
Exercise of warrants, amount	37,500		$ 1	37,499
Balance, shares at Jun. 30, 2023			130,679,012
Balance, amount at Jun. 30, 2023	18,981,318	0	$ 13,067	30,103,715	(11,140,902)	5,438
Stock-based compensation	153,016	0	0	153,016	0	0
Net loss	(1,731,431)	0	0	0	(1,731,431)	0
Foreign currency gain (loss)	(7,850)	0	$ 0	0	0	(7,850)
Exercise of stock options, shares			1,988,095
Exercise of stock options, amount	100,000		$ 199	99,801
ATM issuance	(30,069)			(30,069)
Balance, shares at Sep. 30, 2023			132,667,107
Balance, amount at Sep. 30, 2023	$ 17,464,984	$ 0	$ 13,266	$ 30,326,463	$ (12,872,333)	$ (2,412)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash Flows from Operating Activities
Net loss	$ (5,022,351)	$ (2,999,959)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	63,582	50,052
Stock based compensation	667,950	419,995
Change in foreign currency translation	(2,083)	0
Changes in operating assets and liabilities:
Accounts receivable	(16,761)	(164,600)
Unbilled accounts receivable	(779,412)
Inventory	(249,413)	0
Prepaid expenses	(263,009)	(1,079,467)
Accounts payable and accrued expenses	(1,067,555)	980,679
Deferred revenue	(17,049)	200,109
Other liabilities	(13,528)	(5,002)
Cash Provided by (Used In) Operating Activities	(6,699,629)	(2,598,193)
Cash Flows from Investing Activities
Purchase of marketable securities	0	(5,998,243)
Purchase of equipment	(51,813)	(125,011)
Increase in intangible assets	(5,724)	(1,745)
Cash Provided by (Used In) Investing Activities	(57,537)	(6,123,999)
Cash Flows from Financing Activities
Proceeds from the sale of investments	1,963,431	0
Proceeds from the issuance of common stock	13,548,889	0
Cash Provided by Financing Activities	15,512,320	0
Net Increase in Cash	8,755,154	(8,723,192)
Cash, Beginning of the Period	4,046,937	11,131,175
Cash, End of the Period	12,802,091	2,407,983
NON-CASH FINANCING ACTIVITIES
Conversion of preferred stock to common stock	$ 0	$ 133

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Nature of Business and Presentation of Financial Statements

9 Months Ended

Sep. 30, 2023

Nature of Business and Presentation of Financial Statements

Nature of Business and Presentation of Financial Statements

Note 1 – Nature of Business and Presentation of Financial Statements

Description of the Company

374Water Inc. (the “Company”, “374Water”, “We”, or “Our”) is a Delaware corporation which was formed in September 2005 as PowerVerde, Inc. 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.

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, and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde.

Following the Merger, 374Water offers a technology that transforms certain 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. Our goal is to support 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.

Presentation of Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information. It is management’s opinion that the accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q and include all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Annual Report on Form 10-K of 374Water Inc. (“374 Water,” “we,” “us,” “our,” or the “Company”) as of and for the year ended December 31, 2022 filed with the SEC on March 16, 2023.

The results of operations for the nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the full year or for future periods. The condensed consolidated financial statements include the accounts of 374Water Inc., 374Water Systems Inc, and 374Water Sustainability Israel LTD, each a wholly-owned subsidiary of 374 Water. Intercompany balances and transactions have been eliminated in consolidation.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

Cash and Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company held $12,354,391 and $1,182,412 in cash equivalents as of September 30, 2023 and December 31, 2022, respectively.

The Company held marketable securities as of September 30, 2023 as noted in the following table:

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	12,802,091		—	$	12,802,091	$	12,802,091		—		—
Level 2:
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—		—
Total	$	12,802,091	$	—	$	12,802,091	$	12,802,091	$	—		—

The Company held marketable securities as of December 31, 2022 as noted in the following table:

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	4,046,937		—	$	4,046,937	$	4,046,937		—		—
Level 2:
U.S. Treasury securities	$	1,963,432	$	18,968	$	1,944,464	$	—	$	1,944,464		—
Total	$	6,010,369	$	18,968	$	5,991,401	$	4,046,937	$	1,944,464		—

Accounting Standards Codification (ASC) Topic 820 “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 Inputs - Fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The following is a description of valuation methodologies used for assets and liabilities recorded at an amortized cost basis:

• Investment Securities Held-to-Maturity. Investment securities held-to-maturity (“HTM”) are recorded at their initial cost, and any discount or premium amortized over the remaining life of the security. The carrying value of the investment is adjusted for the amortized amount of any discount or premium at each reporting period.

Accounts Receivable

Accounts receivables consist of balances due from sales, service revenues, unbilled accounts receivables which is for revenues earned but not yet billed, and other receivables relating to common stock subscription purchases where the stock has been transferred but the cash has not been received. The Company monitors accounts receivable and provides allowances when considered necessary. At September 30, 2023 and December 31, 2022, accounts receivable were considered to be fully collectible but in accordance with the allowance for credit losses, the Company recorded an allowance for bad debt based on a reserve of current and aged receivables. Accordingly, an allowance for doubtful accounts of $74 and $0 was recorded as of September 30, 2023 and December 31, 2022, respectively.

Accounts Receivable

Accounts receivables consist of balances due from sales and service revenues and accrued interest from the investment account.

Unbilled Accounts Receivable

Unbilled accounts receivables consist of balances due from sales and service revenue earned but not yet billed.

Accounts receivable allowance for credit losses

The activity related to the accounts receivable allowance for credit losses was as follows:

Name	Nine Months Ending at September 30, 2023		Year Ending at December 31, 2022
Beginning balance	$	—	$	—
Current period provision		74		—
Write-offs		—		—
Ending Balance	$	74	$	—

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The majority of our inventory is raw materials and work in progress. Net realizable value is the value of an asset that can be realized upon the sale of the asset, less a reasonable estimate of the costs associated with either the eventual sale or the disposal of the asset in question. 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. 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. Inventories are classified as current assets in accordance with recognized industry practice.

Property and Equipment

Property and Equipment is recorded at cost. Depreciation is computed using the straight-line method and an estimated useful life of three years. Expenses for maintenance and repairs are charged to expense as incurred. Depreciation expense related to property and equipment was as follows:

	Period Ended September 30,
	2023		2022
Depreciation	$	12,793	$	1,374

Intangible Assets

Intangible assets are subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment.” Intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. As of September 30, 2023 and December 31, 2022, there was no impairment.

Long-Lived Assets

The Company reviews long-lived assets, including 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. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. 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 September 30, 2023 and December 31, 2022, there were no impairments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, and marketable securities. Deposits with financial institutions are insured, up to certain limits, by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s cash deposits often exceed the FDIC insurance limit; however, all deposits are maintained with high credit quality institutions and the Company has not experienced any losses in such accounts. The financial condition of financial institutions is periodically reassessed, and the Company believes the risk of any loss is minimal. The Company believes the risk of any loss on cash due to credit risk is minimal. Furthermore, we perform ongoing credit evaluations of our customers and generally do not require collateral.

Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. Our customer revenue for one customer made up 96% and 97% of revenue for the period ended September 30, 2023 and September 30, 2022, respectively. In 2023 and 2022, the Company purchased a substantial portion of manufacturing services from one third party vendor, Merrell Bros Fabrication, LLC.

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. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation using the input method.

The Company’s performance obligations are satisfied over time and over the life of the contract. The Company’s revenue arrangements consist of a single performance obligation to transfer services. Revenue is recognized over time by measuring the progress toward complete satisfaction of the performance obligation using specific milestones. These milestones within the contract are assigned revenue recognition percentages, based on overall expected cost-plus margin estimates of those milestones compared to the total cost of the contract. 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. Due to a change in gross margin during the current period, the revenue recognition percentages were updated, reflecting a change in estimate. Contract costs include all direct material and labor and subcontractor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. General, selling, and administrative costs are charged to expense as incurred.

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. 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.

Revenues for the nine-month period ended September 30, 2023 in the amount of $833,294 were generated from the sale of an AirSCWO system and $30,317 was generated from our treatability study services.

Revenues for the nine-month period ended September 30, 2022 in the amount of $2,162,702 were generated from the sale of an AirSCWO system and $63,775 was generated from our treatability study services.

Stock-based Compensation

The Company has accounted 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). 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. 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.

Income Tax Policy

The Company accounts for income taxes using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

Accounting for Uncertainty in Income Taxes

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There were no uncertain tax positions as of September 30, 2023 and December 31, 2022.

Research and Development Costs

The Company’s research and development costs are expensed in the period in which they are incurred. Such expenditures amounted to $945,443 and $726,602 for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with ASC Topic 260, “Earnings per Share” Basic weighted-average number of shares of common stock outstanding for the years ended September 30, 2023 and December 31, 2022 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. As of September 30, 2023, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive: options for 10,628,000 shares of common stock and 1,235,000 warrants. As of December 31, 2022, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive: options for 12,752,000 shares of common stock and 1,250,000 warrants.

Financial Instruments

The Company carries cash, accounts receivable, accounts payable and accrued expenses, at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values / useful lives of equipment and intangible assets due to their current nature.

Foreign Currency Translation

All assets and liabilities of the Company’s locations whose accounts are denominated in foreign currency are translated into United States dollars at appropriate year-end current exchange rates. All income and expense accounts of those locations are translated at the monthly average exchange rate for each period. The foreign currency translation amounts for the period ended September 30, 2023 and the year ended December 31, 2022 are included in accumulated comprehensive income on the consolidated statement of changes in stockholders’ equity.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the fair value of equity-based compensation, revenue, fair value of intangible assets, useful lives of intangible assets, capital raise transactions, and valuation allowance against deferred tax assets.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has completed its assessment on the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption and noted that there is no impact at this time, and noted a small adjustment for the allowance for bad debt which was recorded on January 1, 2023. This has been regularly assessed and most recently updated as of September 30, 2023.

The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations.

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Liquidity Capital Resources and Going Concern

9 Months Ended

Sep. 30, 2023

Liquidity Capital Resources and Going Concern

Liquidity, Capital Resources and Going Concern

Note 3 – Liquidity, Capital Resources and Going Concern

As of September 30, 2023, the Company had working capital of $16,277,928 compared to working capital of $7,060,511 at December 31, 2022. As of September 30, 2023, the Company had an accumulated deficit of $12,872,333. For the nine months ended September 30, 2023, the Company had a net loss of $5,022,351 and used $6,699,631 of net cash in operations for the period.

The Company believes it has sufficient cash-on-hand for the Company to meet its financial obligations as they come due at least the next 12 months from the date of the report.

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Inventory

9 Months Ended

Sep. 30, 2023

Inventory

Inventory

Note 4 – Inventory

Inventory consists of:

Name	Balance at September 30, 2023		Balance at December 31, 2022
Raw materials	$	416,603	$	755,218
Work-in-process		1,493,520		905,492
Total	$	1,910,123	$	1,660,710

As of September 30, 2023 and December 31, 2022, the Company noted no inventory impairment and there were no inventory write downs recorded.

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Intangible Assets

9 Months Ended

Sep. 30, 2023

Intangible Assets

Intangible Assets

Note 5 – Intangible Assets

Intangible assets are recorded at cost and consist of the License Agreement with Duke University. The Company issued Duke University a small number of shares of common stock estimated to have a fair value of $1,073,529 as consideration for granting the Company the license based on the Company’s common stock market price on the date the License Agreement was executed (see Note 9). Intangible assets are comprised of the following as of September 30, 2023 and December 31, 2022:

Name	Estimated Life	Balance at December 31, 2022		Additions		Amortization		Balance at September 30, 2023
License agreement	17 Years	$	964,965	$	—	$	47,305	$	917,660
Patents	20 Years		85,057		5,724		3,484		87,297
Total		$	1,050,022	$	5,724	$	50,789	$	1,004,957

Name	Estimated Life	Balance at December 31, 2021		Additions		Amortization		Balance at December 31, 2022
License agreement	17 Years	$	1,028,114	$	—	$	63,149	$	964,965
Patents	20 Years		34,742		52,292		1,977		85,057
Total		$	1,062,856	$	52,292	$	65,126	$	1,050,022

Amortization expense for the nine months ended September 30, 2023 and 2022, was $50,789 and $48,678, respectively.

Estimated future amortization expense as of September 30, 2023:

	September 30, 2023
2023	$	17,041
2024		67,933
2025		67,933
2026		67,933
2027		67,933
Thereafter		716,184
Intangible assets, Net	$	1,004,957

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Revenue

9 Months Ended

Sep. 30, 2023

Revenue

Revenue

Note 6 – Revenue 

The following is a summary of our revenues by type for the nine-month period ended September 30, 2023 and September 30, 2022:

Name	September 30, 2023		%			September 30, 2022		%
Equipment revenue	$	833,294		96	%	$	21,662,702		97	%
Service revenue		30,317		4	%		63,775	3		%
Total	$	863,611		100	%	$	2,226,477		100	%

16

Deferred Revenue

The following is a summary of our deferred revenue activity for the period ended September 30, 2023 and year ended December 31, 2022:

Name	Balance at September 30, 2023			Balance at December 31, 2022
Deferred revenue at beginning of year	$	200,109		$	—
Billings deferred		21,190			1,467,189
Recognition of prior deferred revenue		(38,239	)		(1,267,080	)
Deferred revenue at end of year	$	183,060		$	200,109

Unbilled Accounts Receivable

The following is a summary of our unbilled accounts receivable activity for the period ended September 30, 2023 and the year ended December 31, 2022:

Name	Balance at September 30, 2023			Balance at December 31, 2022
Unbilled accounts receivable at beginning of year	$	918,164		$	—
Services performed but unbilled		839,391			918,164
Services billed		(59,979	)		—
Unbilled accounts receivable at end of period	$	1,697,576		$	918,164

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Stockholder Equity

9 Months Ended

Sep. 30, 2023

Stockholder Equity

Stockholder' Equity

Note 7 – Stockholders’ Equity

The Company is authorized to issue 50,000,000 preferred stock shares and 200,000,000 common stock shares both with a par value of $0.0001.

Preferred Stock

The Company is authorized, subject to limitations prescribed by Delaware law, to issue up to 50,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations or restrictions. The board of directors can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by the Company’s stockholders. The Company board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of the Company and may adversely affect the market price of the Company’s common stock and the voting and other rights of the holders of the Company’s common stock. As of September 30, 2023, there were no shares of preferred stock issued or outstanding.

Common Stock

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the directors’ election. There is no right to cumulative voting in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available for payment of dividends subject to the prior rights of holders of preferred stock and any contractual restrictions the Company has against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive rights and have no right to convert their common stock into any other securities. As of September 30, 2023, there were 132,667,107 shares of common stock issued and outstanding.

In December 2022, the Company entered into an equity distribution agreement with an underwriter pursuant to which the Company may offer and sell shares of its common stock from time to time through the underwriter as its sales agent. Sales of common stock, if any, will be made at market prices by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company has no obligation to sell any shares of common stock under the open market sale agreement and may at any time suspend offers under the open market sale agreement, in whole or in part, or terminate the equity distribution agreement. 

During the nine months ended September 30, 2023, a total of 3,766,422 shares of common stock have been sold pursuant to the open market sale agreement resulting in a total of $13.41 million in proceeds, net of $0.23 million of commission fees and $0.14 million of accounting and legal fees. As of September 30, 2023, $86.56 million remained available under the Company’s at-the-market public facility, subject to various limitations.

Stock-based compensation

During the nine months ended September 30, 2023 and September 30, 2022, the Company recorded stock-based compensation of $667,950 and $419,995, respectively, related to common stock issued, restricted stock issued, or vested options to employees and various consultants of the Company. 

For the nine months ended September 30, 2023, $583,549 was charged as general and administrative expenses and $84,401 as research and development expenses in the accompanying condensed consolidated statements of operations. For the nine months ended September 30, 2022, $380,383 was charged as general and administrative expenses and $39,612 as research and development expenses in the accompanying condensed consolidated statements of operations.

Stock Options

Stock option activity for the nine months ended September 30, 2023 is summarized as follows:

	Shares			Weighted Average Exercise Price			Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2022		12,752,000		$	0.62		$	28,543,370		5.09
Granted		273,000			3.09			—		—
Exercised		—			—			—		—
Expired/forfeit		—			—			—		—
Options outstanding at March 31, 2023		13,025,000		$	0.67		$	52,705,860		4.93
Granted		640,000			3.25			—		—
Exercised		(175,045	)		(1.05	)		—		—
Expired/forfeit		(634,488	)		(1.36	)		—		—
Options outstanding at June 30, 2023		12,855,467		$	0.76		$	20,968,586		4.73
Granted		144,000			1.72			—		—
Exercised		(1,988,095	)		(0.16	)		—		—
Expired/forfeit		(383,372	)		(1.42	)		—		—
Options outstanding at September 30, 2023		10,628,000		$	0.86		$	4,049,090		4.77

Stock option activity for the nine months ended September 30, 2022 is summarized as follows:

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2021		12,300,000		$	0.37	$	30,504,000		5.62
Granted		360,000			3.33		—		—
Exercised		—			—		—		—
Expired/forfeit		—			—		—		—
Options outstanding at March 31, 2022		12,660,000		$	0.45	$	45,576,000		5.39
Granted		560,000			—		—		—
Exercised		—			—		—		—
Expired/forfeit		(40,000	)		4.10		—		—
Options outstanding at June 30, 2022		13,180,000		$	0.54	$	31,683,690		5.31
Granted		270,000			2.39		—		—
Exercised		—			—		—		—
Expired/forfeit		(58,000	)		3.35		—		—
Options outstanding at September 30, 2022		13,392,000		$	0.56	$	30,383,910		5.13

Total unrecognized compensation associated with these unvested options is approximately $2,369,014 which will be recognized based on the options associated vesting schedules.

The fair value of these options granted were estimated on the date of grant, using the Black-Scholes option-pricing model with the following assumptions:

	September 30, 2023			September 30, 2022
Dividend yield		0.00	%		0.00	%
Expected life	5.45 – 6.53 Years			5.28 – 6.10 Years
Expected volatility	30.00–35.88		%	34.73–34.79		%
Risk-free interest rate	3.57–4.43		%	3.06-3.94		%

Stock Warrants

As of September 30, 2023, there were 1,235,000 warrants outstanding which relate to the Series 1 offering executed in December 2021, where investors were offered a warrant for every two common shares purchased during the offering at an exercise price of $2.50 per share. The intrinsic value of all outstanding warrants as of September 30, 2023 was $0 based on the market price of our common stock of $1.24 per share, which was the Company’s closing per share common stock price as reported on Nasdaq as of September 30, 2023.

During the three months ended September 30, 2023, there were no new warrants issued or exercised under existing warrants. As of September 30, 2023, there are 1,235,000 outstanding warrants.

 A summary of warrant activity during the nine months ended September 30, 2023, is as follows:

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2022		1,250,000		$	2.50	$	450,000		1.96
Issued		—			—		—		—
Exercised		—			—		—		—
Balance at March 31, 2023		1,250,000		$	2.50	$	2,775,000		1.72
Issued		—			—		—		—
Exercised		(15,000	)		2.50		—		—
Balance at June 30, 2023		1,235,000		$	2.50	$	—		1.47
Issued		—			—		—		—
Exercised		—			—		—		—
Balance at September 30, 2023		1,235,000		$	2.50	$	—		1.21

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Related Party Transactions

9 Months Ended

Sep. 30, 2023

Related Party Transactions

Related Party Transactions

Note 8 - Related Party Transactions

In 2021, the Company entered into an agreement to fabricate and manufacture the AirSCWO systems with Merrell Bros. Holding Company. As part of the agreement, the Company appointed Terry Merrell to its board of directors. As of September 30, 2023, Merrell Bros. or their affiliates own stock in excess of 4% of the outstanding common stock. For the nine-month period ending September 30, 2023, the Company incurred $736,775 in related party expenses, all of which was related to non-recurring labor as well as costs associated with the manufacturing of the AirSCWO systems. As of September 30, 2023, there is an accrual of $131,923 in related party expenses, all of which are costs associated with the manufacturing of the AirSCWO systems.

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Commitments

9 Months Ended

Sep. 30, 2023

Commitments

Commitments

Note 9 - Commitments

The patented technology underlying 374Water’s supercritical water oxidation (SCWO) units, which was developed principally through the efforts of Yaacov Nagar and Marc Deshusses at the facilities of Duke University, Durham, North Carolina (“Duke”), where Dr. Deshusses, the Company’s Head of Technology, is a professor. The SCWO technology is licensed to 374Water pursuant to a worldwide license agreement with Duke executed on April 16, 2021 (the “License Agreement”). In connection with the License Agreement, 374Water also executed an equity transfer Agreement with Duke pursuant to which Duke received a small number of common stock in the Company (See Notes 5 and 7). Under the terms of the License Agreement, the Company is required to make royalty payments based on a percentage of licensed product sales, as defined in the License Agreement which is triggered by the sale of licensed products. Further, the Company is also required to pay royalties on a percentage of sublicensing fees. The Company will reimburse Duke for any ongoing patent expenses incurred. During the nine-month period ending September 30, 2023, the Company has not incurred any expenses in connection with this License Agreement. The Company may terminate the license agreement anytime by providing Duke with 60 days’ written notice.

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Legal Contingencies

9 Months Ended

Sep. 30, 2023

Legal Contingencies

Legal Contingencies

Note 10 - Legal Contingencies

From time to time, the Company may become subject to various legal proceedings, claims, and other contingent liabilities that may arise in the ordinary course of our business activities. These could be individual or in the aggregate materially affect our financial condition, future results of operations or cash flows. As a matter of course, we would be prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities.

On a quarterly basis, we review our litigation accrual liabilities as needed, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously established accrual liabilities when warranted by changes in circumstances, in each case based on the then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. As of September 30, 2023, the Company is not currently subject to any material legal proceedings.

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Subsequent Events

9 Months Ended

Sep. 30, 2023

Subsequent Events

Subsequent Events

Note 11 - Subsequent Events

On November 6, 2023, the Company appointed Brad Meyers as Chief Operating Officer (COO). The appointment of Mr. Meyers is considered a non-recognized subsequent event that occurred after the balance sheet date but before the issuance of these financial statements.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Cash and Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company held $12,354,391 and $1,182,412 in cash equivalents as of September 30, 2023 and December 31, 2022, respectively.

The Company held marketable securities as of September 30, 2023 as noted in the following table:

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	12,802,091		—	$	12,802,091	$	12,802,091		—		—
Level 2:
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—		—
Total	$	12,802,091	$	—	$	12,802,091	$	12,802,091	$	—		—

The Company held marketable securities as of December 31, 2022 as noted in the following table:

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	4,046,937		—	$	4,046,937	$	4,046,937		—		—
Level 2:
U.S. Treasury securities	$	1,963,432	$	18,968	$	1,944,464	$	—	$	1,944,464		—
Total	$	6,010,369	$	18,968	$	5,991,401	$	4,046,937	$	1,944,464		—

Accounting Standards Codification (ASC) Topic 820 “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 Inputs - Fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The following is a description of valuation methodologies used for assets and liabilities recorded at an amortized cost basis:

• Investment Securities Held-to-Maturity. Investment securities held-to-maturity (“HTM”) are recorded at their initial cost, and any discount or premium amortized over the remaining life of the security. The carrying value of the investment is adjusted for the amortized amount of any discount or premium at each reporting period.

Accounts Receivable

Accounts receivables consist of balances due from sales, service revenues, unbilled accounts receivables which is for revenues earned but not yet billed, and other receivables relating to common stock subscription purchases where the stock has been transferred but the cash has not been received. The Company monitors accounts receivable and provides allowances when considered necessary. At September 30, 2023 and December 31, 2022, accounts receivable were considered to be fully collectible but in accordance with the allowance for credit losses, the Company recorded an allowance for bad debt based on a reserve of current and aged receivables. Accordingly, an allowance for doubtful accounts of $74 and $0 was recorded as of September 30, 2023 and December 31, 2022, respectively.

Accounts Receivable

Accounts receivables consist of balances due from sales and service revenues and accrued interest from the investment account.

Unbilled Accounts Receivable

Unbilled accounts receivables consist of balances due from sales and service revenue earned but not yet billed.

Accounts receivable allowance for credit losses

The activity related to the accounts receivable allowance for credit losses was as follows:

Name	Nine Months Ending at September 30, 2023		Year Ending at December 31, 2022
Beginning balance	$	—	$	—
Current period provision		74		—
Write-offs		—		—
Ending Balance	$	74	$	—

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The majority of our inventory is raw materials and work in progress. Net realizable value is the value of an asset that can be realized upon the sale of the asset, less a reasonable estimate of the costs associated with either the eventual sale or the disposal of the asset in question. 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. 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. Inventories are classified as current assets in accordance with recognized industry practice.

Property and Equipment

Property and Equipment is recorded at cost. Depreciation is computed using the straight-line method and an estimated useful life of three years. Expenses for maintenance and repairs are charged to expense as incurred. Depreciation expense related to property and equipment was as follows:

	Period Ended September 30,
	2023		2022
Depreciation	$	12,793	$	1,374

Intangible Assets

Intangible assets are subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment.” Intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. As of September 30, 2023 and December 31, 2022, there was no impairment.

Long-lived Assets

The Company reviews long-lived assets, including 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. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. 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 September 30, 2023 and December 31, 2022, there were no impairments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, and marketable securities. Deposits with financial institutions are insured, up to certain limits, by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s cash deposits often exceed the FDIC insurance limit; however, all deposits are maintained with high credit quality institutions and the Company has not experienced any losses in such accounts. The financial condition of financial institutions is periodically reassessed, and the Company believes the risk of any loss is minimal. The Company believes the risk of any loss on cash due to credit risk is minimal. Furthermore, we perform ongoing credit evaluations of our customers and generally do not require collateral.

Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. Our customer revenue for one customer made up 96% and 97% of revenue for the period ended September 30, 2023 and September 30, 2022, respectively. In 2023 and 2022, the Company purchased a substantial portion of manufacturing services from one third party vendor, Merrell Bros Fabrication, LLC.

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. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation using the input method.

The Company’s performance obligations are satisfied over time and over the life of the contract. The Company’s revenue arrangements consist of a single performance obligation to transfer services. Revenue is recognized over time by measuring the progress toward complete satisfaction of the performance obligation using specific milestones. These milestones within the contract are assigned revenue recognition percentages, based on overall expected cost-plus margin estimates of those milestones compared to the total cost of the contract. 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. Due to a change in gross margin during the current period, the revenue recognition percentages were updated, reflecting a change in estimate. Contract costs include all direct material and labor and subcontractor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. General, selling, and administrative costs are charged to expense as incurred.

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. 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.

Revenues for the nine-month period ended September 30, 2023 in the amount of $833,294 were generated from the sale of an AirSCWO system and $30,317 was generated from our treatability study services.

Revenues for the nine-month period ended September 30, 2022 in the amount of $2,162,702 were generated from the sale of an AirSCWO system and $63,775 was generated from our treatability study services.

Stock-based Compensation

The Company has accounted 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). 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. 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.

Income Tax Policy

The Company accounts for income taxes using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

Accounting for Uncertainty in Income Taxes

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There were no uncertain tax positions as of September 30, 2023 and December 31, 2022.

Research And Development Costs

The Company’s research and development costs are expensed in the period in which they are incurred. Such expenditures amounted to $945,443 and $726,602 for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with ASC Topic 260, “Earnings per Share” Basic weighted-average number of shares of common stock outstanding for the years ended September 30, 2023 and December 31, 2022 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. As of September 30, 2023, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive: options for 10,628,000 shares of common stock and 1,235,000 warrants. As of December 31, 2022, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive: options for 12,752,000 shares of common stock and 1,250,000 warrants.

Financial Instruments

The Company carries cash, accounts receivable, accounts payable and accrued expenses, at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values / useful lives of equipment and intangible assets due to their current nature.

Foreign Currency Translation

All assets and liabilities of the Company’s locations whose accounts are denominated in foreign currency are translated into United States dollars at appropriate year-end current exchange rates. All income and expense accounts of those locations are translated at the monthly average exchange rate for each period. The foreign currency translation amounts for the period ended September 30, 2023 and the year ended December 31, 2022 are included in accumulated comprehensive income on the consolidated statement of changes in stockholders’ equity.

Use Of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the fair value of equity-based compensation, revenue, fair value of intangible assets, useful lives of intangible assets, capital raise transactions, and valuation allowance against deferred tax assets.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has completed its assessment on the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption and noted that there is no impact at this time, and noted a small adjustment for the allowance for bad debt which was recorded on January 1, 2023. This has been regularly assessed and most recently updated as of September 30, 2023.

The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Schedule of company held marketable securities

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	12,802,091		—	$	12,802,091	$	12,802,091		—		—
Level 2:
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—		—
Total	$	12,802,091	$	—	$	12,802,091	$	12,802,091	$	—		—

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	4,046,937		—	$	4,046,937	$	4,046,937		—		—
Level 2:
U.S. Treasury securities	$	1,963,432	$	18,968	$	1,944,464	$	—	$	1,944,464		—
Total	$	6,010,369	$	18,968	$	5,991,401	$	4,046,937	$	1,944,464		—

Schedule of accounts receivable allowance for credit losses

Name	Nine Months Ending at September 30, 2023		Year Ending at December 31, 2022
Beginning balance	$	—	$	—
Current period provision		74		—
Write-offs		—		—
Ending Balance	$	74	$	—

Schedule of depreciation in property and equipment

	Period Ended September 30,
	2023		2022
Depreciation	$	12,793	$	1,374

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Inventory (Tables)

9 Months Ended

Sep. 30, 2023

Inventory

Schedule Of Inventory

Name	Balance at September 30, 2023		Balance at December 31, 2022
Raw materials	$	416,603	$	755,218
Work-in-process		1,493,520		905,492
Total	$	1,910,123	$	1,660,710

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2023

Intangible Assets

Schedule Of Intangible Assets

Name	Estimated Life	Balance at December 31, 2022		Additions		Amortization		Balance at September 30, 2023
License agreement	17 Years	$	964,965	$	—	$	47,305	$	917,660
Patents	20 Years		85,057		5,724		3,484		87,297
Total		$	1,050,022	$	5,724	$	50,789	$	1,004,957

Name	Estimated Life	Balance at December 31, 2021		Additions		Amortization		Balance at December 31, 2022
License agreement	17 Years	$	1,028,114	$	—	$	63,149	$	964,965
Patents	20 Years		34,742		52,292		1,977		85,057
Total		$	1,062,856	$	52,292	$	65,126	$	1,050,022

Schedule Of Future Amortization Expense

	September 30, 2023
2023	$	17,041
2024		67,933
2025		67,933
2026		67,933
2027		67,933
Thereafter		716,184
Intangible assets, Net	$	1,004,957

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Revenue (Tables)

9 Months Ended

Sep. 30, 2023

Revenue

Schedule Of revenue by type

Name	September 30, 2023		%			September 30, 2022		%
Equipment revenue	$	833,294		96	%	$	21,662,702		97	%
Service revenue		30,317		4	%		63,775	3		%
Total	$	863,611		100	%	$	2,226,477		100	%

Schedule Of unearned revenue activity

Name	Balance at September 30, 2023			Balance at December 31, 2022
Deferred revenue at beginning of year	$	200,109		$	—
Billings deferred		21,190			1,467,189
Recognition of prior deferred revenue		(38,239	)		(1,267,080	)
Deferred revenue at end of year	$	183,060		$	200,109

Schedule Of unbilled accounts receivable

Name	Balance at September 30, 2023			Balance at December 31, 2022
Unbilled accounts receivable at beginning of year	$	918,164		$	—
Services performed but unbilled		839,391			918,164
Services billed		(59,979	)		—
Unbilled accounts receivable at end of period	$	1,697,576		$	918,164

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Stockholder Equity (Tables)

9 Months Ended

Sep. 30, 2023

Stockholder Equity

Schedule Of Stock Option Activity

	Shares			Weighted Average Exercise Price			Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2022		12,752,000		$	0.62		$	28,543,370		5.09
Granted		273,000			3.09			—		—
Exercised		—			—			—		—
Expired/forfeit		—			—			—		—
Options outstanding at March 31, 2023		13,025,000		$	0.67		$	52,705,860		4.93
Granted		640,000			3.25			—		—
Exercised		(175,045	)		(1.05	)		—		—
Expired/forfeit		(634,488	)		(1.36	)		—		—
Options outstanding at June 30, 2023		12,855,467		$	0.76		$	20,968,586		4.73
Granted		144,000			1.72			—		—
Exercised		(1,988,095	)		(0.16	)		—		—
Expired/forfeit		(383,372	)		(1.42	)		—		—
Options outstanding at September 30, 2023		10,628,000		$	0.86		$	4,049,090		4.77

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2021		12,300,000		$	0.37	$	30,504,000		5.62
Granted		360,000			3.33		—		—
Exercised		—			—		—		—
Expired/forfeit		—			—		—		—
Options outstanding at March 31, 2022		12,660,000		$	0.45	$	45,576,000		5.39
Granted		560,000			—		—		—
Exercised		—			—		—		—
Expired/forfeit		(40,000	)		4.10		—		—
Options outstanding at June 30, 2022		13,180,000		$	0.54	$	31,683,690		5.31
Granted		270,000			2.39		—		—
Exercised		—			—		—		—
Expired/forfeit		(58,000	)		3.35		—		—
Options outstanding at September 30, 2022		13,392,000		$	0.56	$	30,383,910		5.13

Schedule Of Warrant Activity

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2022		1,250,000		$	2.50	$	450,000		1.96
Issued		—			—		—		—
Exercised		—			—		—		—
Balance at March 31, 2023		1,250,000		$	2.50	$	2,775,000		1.72
Issued		—			—		—		—
Exercised		(15,000	)		2.50		—		—
Balance at June 30, 2023		1,235,000		$	2.50	$	—		1.47
Issued		—			—		—		—
Exercised		—			—		—		—
Balance at September 30, 2023		1,235,000		$	2.50	$	—		1.21

Schedule Of Stock Option Granted

	September 30, 2023			September 30, 2022
Dividend yield		0.00	%		0.00	%
Expected life	5.45 – 6.53 Years			5.28 – 6.10 Years
Expected volatility	30.00–35.88		%	34.73–34.79		%
Risk-free interest rate	3.57–4.43		%	3.06-3.94		%

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Summary of Significant Accounting Policies (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Adjusted cost	$ 12,802,091	$ 6,010,369
Unrealized losses	0	18,968
Fair value	12,802,091	5,991,401
Cash and cash equivalents	12,802,091	4,046,937
Current marketable securities	0	1,944,464
Non-current marketable securities	0	0
Cash
Adjusted cost	12,802,091	4,046,937
Unrealized losses	0	0
Fair value	12,802,091	4,046,937
Cash and cash equivalents	12,802,091	4,046,937
Current marketable securities	0	0
Non-current marketable securities	0	0
U.S. Treasury Securities | Level 2
Adjusted cost	0	1,963,432
Unrealized losses	0	18,968
Fair value	0	1,944,464
Cash and cash equivalents	0	0
Current marketable securities	0	1,944,464
Non-current marketable securities	$ 0	$ 0

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Summary of Significant Accounting Policies (Details 1) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Summary of Significant Accounting Policies
Beginning balance	$ 0	$ 0
Current period provision	74	0
Write-offs	0	0
Ending Balance	$ 74	$ 0

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Summary of Significant Accounting Policies (Details 2) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Summary of Significant Accounting Policies
Depreciation	$ 12,793	$ 1,374

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Cash	$ 12,354,391		$ 12,354,391		$ 1,182,412
Allowance for doubtful accounts	74		74		$ 0
Revenues from sale of treatability services			30,317	$ 63,775
Revenues from sales			833,294	2,162,702
Research And Development Cost	$ 317,573	$ 118,253	$ 945,443	$ 726,602
Warrants [Member]
Antidilutive Excluded from Computation of Earnings Per Share, Amount			1,235,000		1,250,000
Options [Member]
Antidilutive Excluded from Computation of Earnings Per Share, Amount			10,628,000		12,752,000

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Liquidity Capital Resources and Going Concern (Details Narrative) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Dec. 31, 2022
Liquidity Capital Resources and Going Concern
Accumulated Deficit	$ (12,872,333)						$ (12,872,333)	$ (7,849,982)
Net Income (loss)	1,731,431	$ 1,650,577	$ 1,640,343	$ 912,826	$ 1,214,275	$ 872,858	5,022,351
Net Cash Used In Operations							6,699,631
Working Capital	$ 16,277,928						$ 16,277,928	$ 7,060,511

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Inventory (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Inventory
Raw materials	$ 416,603	$ 755,218
Work-in-process	1,493,520	905,492
Total	$ 1,910,123	$ 1,660,710

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Intangible Assets (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Intangible Assets, Net, Beginning balance	$ 1,050,022	$ 1,062,856	$ 1,062,856
Additions	5,724		52,292
Amortization	50,789	48,678	65,126
Intangible Assets, Net, Ending balance	1,004,957		1,050,022
License Agreement [Member]
Intangible Assets, Net, Beginning balance	964,965	1,028,114	1,028,114
Additions			0
Amortization	$ 47,305		$ 63,149
Estimated Life	17 years		17 years
Intangible Assets, Net, Ending balance	$ 917,660		$ 964,965
Patents [Member]
Intangible Assets, Net, Beginning balance	85,057	$ 34,742	34,742
Additions	5,724		52,292
Amortization	$ 3,484		$ 1,977
Estimated Life	20 years		20 years
Intangible Assets, Net, Ending balance	$ 87,297		$ 85,057

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Intangible Assets (Details 1) - USD ($)	Sep. 30, 2023	Dec. 31, 2022	Dec. 31, 2021
Intangible Assets
2023	$ 17,041
2024	67,933
2025	67,933
2026	67,933
2027	67,933
Thereafter	716,184
Intangible Assets, Net	$ 1,004,957	$ 1,050,022	$ 1,062,856

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Intangible Assets (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Amortization expense	$ 50,789	$ 48,678	$ 65,126
Duke University [Member]
Common shares issued, fair value	$ 1,073,529

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Revenue (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue	$ 12,290	$ 922,718	$ 863,611	$ 2,226,477
Revenue percentage			100.00%	97.00%
Equipment revenue [Member]
Revenue			$ 833,294	$ 21,662,702
Revenue percentage			96.00%	100.00%
Service revenue [Member]
Revenue			$ 30,317	$ 63,775
Revenue percentage			4.00%	3.00%

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Revenue (Details 1) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Revenue
Deferred revenue at beginning of year	$ 200,109	$ 0
Billings deferred	21,190	1,467,189
Recognition of prior unearned revenue	(38,239)	(1,267,080)
Deferred revenue at end of year	$ 183,060	$ 200,109

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Revenue (Details 2) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Revenue
Unbilled accounts receivable at beginning of year	$ 918,164	$ 0
Services performed but unbilled	839,391	918,164
Services billed	(59,979)	0
Unbilled accounts receivable at end of year	$ 1,697,576	$ 918,164

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Stockholder Equity (Details) - USD ($)	3 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022
Granted	0	0	0
Weighted Average Exercise Price, beginning balance	$ 2.50	$ 2.50	$ 2.50
Weighted Average Exercise Price, ending balance		$ 2.50	$ 2.50
Aggregate Intrinsic Value, beginning balance	$ 0	$ 2,775,000	$ 450,000
Aggregate Intrinsic Value, ending balance	$ 0	$ 0	$ 2,775,000
Options [Member]
Options Outstanding, beginning balance	12,855,467	13,025,000	12,752,000	13,180,000	12,660,000	12,300,000
Granted	144,000	640,000	273,000	270,000	560,000	360,000
Exercised	(1,988,095)	(175,045)	0	0	0	0
Expired/forfeited	(383,372)	(634,488)	0	(58,000)	(40,000)	0
Options Outstanding, ending balance	10,628,000	12,855,467	13,025,000	13,392,000	13,180,000	12,660,000
Weighted Average Exercise Price, beginning balance	$ 0.76	$ 0.67	$ 0.62	$ 0.54	$ 0.45	$ 0.37
Weighted Average Exercise Price, Granted	1.72	3.25	3.09	2.39	0	3.33
Weighted Average Exercise Price, Exercised	(0.16)	(1.05)	0	0	0	0
Weighted Average Exercise Price, Expired/forfeit	1.42	1.36	0	3.35	4.10	0
Weighted Average Exercise Price, ending balance	$ 0.86	$ 0.76	$ 0.67	$ 0.56	$ 0.54	$ 0.45
Aggregate Intrinsic Value, beginning balance	$ 20,968,586	$ 52,705,860	$ 28,543,370	$ 31,683,690	$ 45,576,000	$ 30,504,000
Aggregate Intrinsic Value, ending balance	$ 4,049,090	$ 20,968,586	$ 52,705,860	$ 30,383,910	$ 31,683,690	$ 45,576,000
Weighted Average Remaining Contractual Life (years) Beginning	4 years 8 months 23 days	4 years 11 months 4 days	5 years 1 month 2 days	5 years 3 months 22 days	5 years 4 months 20 days	5 years 7 months 13 days
Weighted Average Remaining Contractual Life (years) Ending	4 years 9 months 7 days	4 years 8 months 23 days	4 years 11 months 5 days	5 years 1 month 17 days	5 years 3 months 21 days	5 years 4 months 21 days

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Stockholder Equity (Details 1) - Options [Member]	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Dividend Yield	0.00%	0.00%
Minimum [Member]
Expected Life	5 years 5 months 12 days	5 years 3 months 10 days
Expected Volatility	30.00%	34.73%
Risk-free Interest Rate	3.57%	3.06%
Maximum [Member]
Expected Life	6 years 6 months 10 days	6 years 1 month 6 days
Expected Volatility	35.88%	34.79%
Risk-free Interest Rate	4.43%	3.94%

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Stockholder Equity (Details 2) - USD ($)	3 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023
Stockholder Equity
Balance At Beginning balance	1,235,000	1,250,000	1,250,000
Shares Issued	0	0	0
Shares Exercised	0	(15,000)	0
Balance At Ending balance	1,235,000	1,235,000	1,250,000
Weighted Average Exercise Price, beginning balance	$ 2.50	$ 2.50	$ 2.50
Weighted Average Exercise Price Issued	0	0	0
Weighted Average Exercise Price Exercised	0	2.50	0
Weighted Average Exercise Price, ending balance	$ 2.50	$ 2.50	$ 2.50
Aggregate Intrinsic Value, beginning balance	$ 0	$ 2,775,000	$ 450,000
Aggregate Intrinsic Value, ending balance	$ 0	$ 0	$ 2,775,000
Weighted Average Remaining Contractual Life(years), beginning balance	1 year 5 months 19 days	1 year 8 months 19 days	1 year 11 months 15 days
Weighted Average Remaining Contractual Life(years), ending balance	1 year 2 months 15 days	1 year 5 months 19 days	1 year 8 months 19 days

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Stockholder Equity (Details Narrative) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Unrecognized Compensation Expense, Unvested Options	$ 2,369,014						$ 2,369,014
Warrants Outstanding Series 1	1,235,000						1,235,000
Preferred Stock Shares Authorized	50,000,000						50,000,000		50,000,000
Shares of common stock exercised under existing warrants							0
Common Stock Shares Authorized	200,000,000						200,000,000		200,000,000
Preferred Stock, Shares Issued	0						0		0
Warrants Outstanding	1,235,000	1,235,000	1,250,000				1,235,000		1,250,000
Warrant exercise Price	$ 2.50						$ 2.50
Market Price of common stock	1.24						1.24
Preferred Stock, Par Value	0.0001						0.0001		$ 0.0001
Common Stock Value Per Share	$ 0.0001						$ 0.0001		$ 0.0001
Common Stock, Shares issue	132,667,107						132,667,107		126,702,545
Stock-based Compensation	$ 153,016	$ 228,812	$ 214,924	$ 183,524	$ 138,912	$ 97,558
Common Stock, Shares Outstanding	132,667,107						132,667,107		126,702,545
Research And Development	$ 317,573			118,253			$ 945,443	$ 726,602
General And Administrative	541,697			$ 387,018			1,803,691	1,027,287
Blank check preferred stock issued									50,000,000
Consultant [Member]
Stock-based Compensation							667,950	419,995
Research And Development							84,401	39,612
General And Administrative							$ 583,549	$ 380,383
Equity Distribution Agreement [Member]
Sale of common stock shares							3,766,422
Gross Process From Private Placement Of Stocks							$ 13,410,000
Commission fees							230,000
Legal fees							140,000
Market public facility	$ 86,560,000						$ 86,560,000

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Related Party Transactions (Details Narrative)	9 Months Ended
	Sep. 30, 2023 USD ($)
Related Party Transactions
Related Party Transaction, Expenses from Transactions with Related Party	$ 736,775
Related Party Cost	$ 131,923
Stock In Excess Percentage Of Outstanding Share	4.00%