374Water Inc 10-Q for FY2023 Q3

374Water Inc. (SCWO)

10-Q 2023-11-09 For: 2023-09-30

Added on April 07, 2026

About this 10-Q

374Water Inc filed this 10-Q on November 9, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $12.29K; down 98.7% from $922.72K a year earlier
Net loss: $1.73M; compared with a net loss of $912.83K a year earlier

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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

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

		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

	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

	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

	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

	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

	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	$	—		—

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	$	—

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

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

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

	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

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	%

	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

	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		%

	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	%)

	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	%

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.

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	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)

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;

	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)

Date: November 9, 2023

By:	/s/ Israel Abitbol
	Chief Financial Officer (Principal Financial Officer)

(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)