SCWO 10-K & 10-Q changes, risk factors and insider trading
374Water Inc. · Nasdaq · Motors & Generators · CIK 933972 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have experienced management turnover, including turnover of our top executives, which creates uncertainties and could have an adverse effect on our business.”
Removed heading “Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management.”
Removed heading “We may not regain compliance with the continued listing requirements of The Nasdaq Capital Market.”
Largest changes
“As of the date of this Annual Report, the aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was approximately $39,144,000, which was calculated based on 11,184,116 outstanding shares of the Company’s common stock held by non-affiliates at a price of $3.50 per share, the closing price of our common stock on March 25, 2026, as reported on Nasdaq. …”see in full comparison
Presently, we do not have sufficient cash resources to meet our plans for the next twelve months from the issuance of the financial statements included herein. Our recurring losses from operations, negative cash flows and need for additional capital raise substantial doubt about our ability to continue as a going concern. We will require additional financing to fund our operations or we will have to significantly curtail or discontinue our operations to conserve our capital resources. Additional funds may not be available on acceptable terms, if at all, and such availability will depend on a number of factors, some of which are outside of our control, including general capital markets conditions and investors’ view of our prospects and valuation. In addition, our ability to raise capital in the public capital markets, including through our at-the-market (“ATM”) equitysee in full comparisonofferings,offering, may in the future be limited by, among other things, SEC rules and regulations impacting the eligibility of smaller companies to use Form S-3 for primary offerings of securities.In general, under the “baby shelf” rules if our public float is less than $75 million at the time we file our annual report of Form 10-K to update our Form S-3 and our public float remains less than $75 million, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive months pursuant to the baby shelf rules. Alternative public and private transaction structures may require additional time and cost, may impose operational restrictions on us, and may not be available on attractive terms. Further, investors’ perception of our ability to continue as a going concern may make it more difficult for us to obtain financing, or necessitate that we obtain financing on terms that are more favorable to investors, and could result in the loss of confidence by investors, suppliers and employees. Our continued operations are contingent on our ability to raise additional capital or deploy or otherwise monetize our technology. If we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital needs, we will have to substantially curtail or discontinue our operations, resulting in delays in the development and deployment of our technology and in generating revenue.
“In February 2025, President Trump issued executive orders announcing sweeping tariffs on products originating from Canada, Mexico and China. Effective February 4, 2025, all products of Chinese origin became subject to an additional 10% tariff pursuant to these executive orders, and effective March 4, all products of Chinese origin were subject to an additional 10% tariff, raising the tariff rate to 20%. …”see in full comparison
“In 2025, President Trump issued executive orders announcing sweeping tariffs on products originating from certain countries and jurisdictions, including Canada, Mexico and China and in some cases threatened to impose additional tariffs. In February 2026, the U.S. Supreme Court ruled that many of the tariffs recently imposed by the United States government exceeded its authority, thereby invalidating many, but not all, of such tariffs. Subsequent to the U.S. …”see in full comparison
“We have experienced management turnover, including turnover of our top executives, which creates uncertainties and could have an adverse effect on our business.”see in full comparison
“Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management.”see in full comparison
Full comparison: every changed paragraph (33)
Our limited operating history makes evaluating the business and future prospects difficult and may increase the risk of your investment. We have yet to generate material revenues from our business and we have so far deployed our AirSCWO technology only in the City of Orlando, Florida.business. Therefore, the commercial value of our systems is uncertain. There can be no assurance that we will ever generate significant revenues or become profitable. Further, we are subject to all the risks inherent in a new business, including, but not limited to: intense competition; lack of sufficient capital; loss of protection of proprietary technology and trade secrets; difficulties in commercializing our products, managing growth and hiring and retaining key employees; adverse changes in costs and general business and economic conditions; and the need to achieve product acceptance, to enter and develop new markets and to develop and maintain successful relationships with customers, third party suppliers and contractors.
We have experienced management turnover, including turnover of our top executives, which creates uncertainties and could have an adverse effect on our business.
Our success depends, in large part, on the continued services of our senior management team and on our ability to attract, motivate, develop, and retain a sufficient number of other highly qualified personnel. The loss of any one or more members of our senior management team, for any reason, could impair our ability to execute our business strategy and have a material adverse effect on our business, financial condition, and results of operations.
Recently, we have experienced significant changes in our executive leadership as part of our Company restructuring. Effective as of October 8, 2025, Christian Gannon stepped down as the Company’s President and Chief Executive Officer and Peter Mandel stepped down as the Company’s General Counsel. The Board of Directors (the “Board”) appointed Stephen J. Jones, a former director of the Company, as the Company’s Interim President and Chief Executive Officer effective as of October 8, 2025. On February 23, 2026, Danny Bogar was appointed as the Company’s President and Chief Executive Officer and Stephen Jones resigned as Interim President and Chief Executive Officer. On March 2, 2026, the Company appointed Adrienne Anderson as its Interim Chief Financial Officer to replace Russell Kline, whose employment as the Company’s Chief Financial Officer was terminated effective as of March 2, 2026.
Although we have endeavored to implement these management transitions in a non-disruptive manner, such transitions can be inherently difficult to manage and may hamper our ability to meet our financial and operational goals. Such changes may also give rise to uncertainty among our customers, investors, vendors, employees and others concerning our future direction and performance. Any of the foregoing could result in significant disruptions to our operations and may adversely affect our financial condition, results of operations, cash flows and ability to execute on our business plans.
Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management.
Our success depends, in large part, on our ability to hire and retain highly qualified people and if we are unable to do so, our business and operations may be impaired or disrupted. Competition for highly qualified people is intense and there is no assurance that we will be successful in attracting or retaining replacements to fill vacant positions, successors to fill retirements or employees moving to new positions, or other highly qualified personnel.
If our management team is unable to execute on its business strategies, including as a result of changes in our executive leadership as part of our company restructuring, then our development, including the establishment of revenues and our sales and marketing activities would be materially and adversely affected. We have recently replaced our management team, including our Chief Executive Officer and Chief Financial Officer. As described in “Item 1. Business” above, our management team has a number of business strategies intended to grow our operations, increase our customer base and footprint across various markets, and develop a full-scale commercialization of our AirSCWO systems. However, we currently have no demonstrated operating history of such full-scale commercialization, and our ability to execute on such strategies successfully and on the timelines we expect (or at all) is subject to significant uncertainties and risks. As our new management team moves forward with its business strategies, unexpected setbacks, obstacles and challenges may occur, resulting in delays, changes in strategy, abandonment of certain projects and plans, and the creation of new strategies and plans that may look very different from our current business strategies. Even if we do not change or reverse our current business strategies, there is no guarantee that we will be able to scale our business on the timelines we expect or at all, or that we will be able to successfully compete with other providers in the market to capitalize on the demand that we have identified to exist. There is also no guarantee that we will be able to effectively manage the costs of maintaining the AirSCWO systems we provide to customers in a way that would allow us to turn a profit at some point in the future. Additionally, all of our management team’s business strategies require significant financing to execute, and there is no guarantee that we will have sufficient capital at any given time to do so.
Since our business is still in its nascent stages,young, there is nolimited historical basis upon which to evaluate our ability to successfully execute on our business strategies,strategies at scale, achieve our business goals and objectives, and recognize revenue and turn a profit over time. If we are not able to deliver the results we expect, or if our business strategies do not result in the successes we intend, our business, operations and financial condition will be materially and adversely impacted.
Furthermore, we may seek to augment or replace members of our management team. For example, we have recently hired a new Chief Executive Officer and Chief Financial Officer and have made other key senior management hires. In addition, we may lose key members of our management team, and we may not be able to attract new management talent with sufficient skill and experience.
GiveGiven the early-stageearly stage of our Company,Company and significant changes in executive team, we have limited full-time accounting and financial reporting personnel and other resources with which to address our internal controls and related procedures. We just recently hiredexperienced asignificant full-timechanges in our Chief Financial Officer.Officer position. On March 2, 2026, the Company appointed Adrienne Anderson as its Interim Chief Financial Officer to replace Russell Kline, whose employment as the Company’s Chief Financial Officer was terminated effective as of March 2, 2026. For the fiscal year ended December 31, 2024,2025, we and our independent registered public accounting firm have identified material weaknesses in our internal controls over financial reporting related due to our ongoing personnel limitations.limitations and changes. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. While weWe are still working to further expand our financial reporting personnel and relatedreplace personalour former CFO to supportstrengthen our Chief Financial Officer and internal controls processes,processes. However, there is no assurance that the actions we are taking or plan to take will give us the results we expect, that our remediation plan will be effective, or that our remediation plan will be completed on the timelines that we expect. See “Item 9A. Controls and Procedures” for further discussion about the material weakness and our remediation activities.
We may be required to obtain licenses to patents or other proprietary rights from third parties. If we do not obtain required licenses, we could encounter delays in product development or find that the development, manufacture or sale of products requiring these licenses could be prevented in the U.S.United States or abroad.
We have in the past and may in the future become involved in litigation matters, including class action lawsuits and lawsuits relating to intellectual propertyproperty, product liability, and productthe liability.termination of former executive officers. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, loss of rights, or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.
In 2025, President Trump issued executive orders announcing sweeping tariffs on products originating from certain countries and jurisdictions, including Canada, Mexico and China and in some cases threatened to impose additional tariffs. In February 2026, the U.S. Supreme Court ruled that many of the tariffs recently imposed by the United States government exceeded its authority, thereby invalidating many, but not all, of such tariffs. Subsequent to the U.S. Supreme Court’s ruling, the Trump administration raised potential alternative means through which the administration could impose tariffs and subsequently imposed a global tariff under a different law. The outlook on further trade policy actions, including trade agreements and potential retaliatory tariffs is unclear.
In February 2025, President Trump issued executive orders announcing sweeping tariffs on products originating from Canada, Mexico and China. Effective February 4, 2025, all products of Chinese origin became subject to an additional 10% tariff pursuant to these executive orders, and effective March 4, all products of Chinese origin were subject to an additional 10% tariff, raising the tariff rate to 20%. While most of the tariffs on Mexican- and Canadian-origin products have been delayed until April 2, 2025, certain tariffs are already effective and there is no guarantee that the tariffs will be further delayed or negated. Additionally, these tariffs are in addition to existing duties and other tariffs, including the existing and upcoming additional tariffs on steel and aluminum. Our products contain materials and parts purchased globally from hundreds of suppliers, including single-source direct suppliers, which exposes us to potential component shortages or delays.
In addition to the impacts to our business stemming from the tariffs imposed by the Trump administration, we may also be materially impacted by retaliatory tariffs and other penalties that may be imposed by such countries against the United States. For example, Canada has already retaliated, imposingimposed 25% tariffs on $30 billion worth ofspecific U.S.-origin productsproducts, immediately,including steel and there are plans to expand these tariffs with additional retaliatory tariffs, pending the current delay in the effectiveness of the tariffs against Canadian-origin products.aluminum. China has also retaliated with tariffs on certain U.S.-origin farm products and trade and investment restrictions on certain U.S. companies.
The potential imposition of increased tariffs are in addition to existing duties and other tariffs, including existing tariffs on steel and aluminum. Our products contain materials and parts purchased globally from hundreds of suppliers, including single-source direct suppliers, which exposes us to potential component shortages or delays.
Presently, we do not have sufficient cash resources to meet our plans for the next twelve months from the issuance of the financial statements included herein. Our recurring losses from operations, negative cash flows and need for additional capital raise substantial doubt about our ability to continue as a going concern. We will require additional financing to fund our operations or we will have to significantly curtail or discontinue our operations to conserve our capital resources. Additional funds may not be available on acceptable terms, if at all, and such availability will depend on a number of factors, some of which are outside of our control, including general capital markets conditions and investors’ view of our prospects and valuation. In addition, our ability to raise capital in the public capital markets, including through our at-the-market (“ATM”) equity offerings,offering, may in the future be limited by, among other things, SEC rules and regulations impacting the eligibility of smaller companies to use Form S-3 for primary offerings of securities. In general, under the “baby shelf” rules if our public float is less than $75 million at the time we file our annual report of Form 10-K to update our Form S-3 and our public float remains less than $75 million, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive months pursuant to the baby shelf rules. Alternative public and private transaction structures may require additional time and cost, may impose operational restrictions on us, and may not be available on attractive terms. Further, investors’ perception of our ability to continue as a going concern may make it more difficult for us to obtain financing, or necessitate that we obtain financing on terms that are more favorable to investors, and could result in the loss of confidence by investors, suppliers and employees. Our continued operations are contingent on our ability to raise additional capital or deploy or otherwise monetize our technology. If we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital needs, we will have to substantially curtail or discontinue our operations, resulting in delays in the development and deployment of our technology and in generating revenue.
As of the date of this Annual Report, the aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was approximately $39,144,000, which was calculated based on 11,184,116 outstanding shares of the Company’s common stock held by non-affiliates at a price of $3.50 per share, the closing price of our common stock on March 25, 2026, as reported on Nasdaq. Pursuant to General Instruction I.B.6 of Form S-3, or the “baby shelf” rules, in no event will we sell securities registered on our Form S-3 registration statement, including under our at-the-market equity offering, with a value of more than one-third of the aggregate market value of shares of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of shares of our common stock held by non-affiliates is less than $75 million. After giving effect to the approximate $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3 and deducting the shares sold within the preceding 12 months, as of the date of filing this Annual Report, approximately $3,700,000 shares of common stock remain available at this time for sale under our Form S-3, including through our at-the-market equity offering. and our public float remains less than $75 million, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive months pursuant to the baby shelf rules. Alternative public and private transaction structures may require additional time and cost, may impose operational restrictions on us, and may not be available on attractive terms. Further, investors’ perception of our ability to continue as a going concern may make it more difficult for us to obtain financing, or necessitate that we obtain financing on terms that are more favorable to investors, and could result in the loss of confidence by investors, suppliers and employees. Our continued operations are contingent on our ability to raise additional capital or deploy or otherwise monetize our technology. If we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital needs, we will have to substantially curtail or discontinue our operations, resulting in delays in the development and deployment of our technology and in generating revenue.
Our research and development expenses maywill increase in the future.
We do not know whether any of our current or future patent applications, if any, will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may not provide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applications for,for or may have received patents and may obtain additional and proprietary rights to, compounds or processes used by or competitive with ours. Both the patent application process and the process of managing patent disputes can be time-consuming and expensive. Competitors may be able to design around our patents or develop products which provide outcomes which are comparable or may even be superior to ours.
In the event a competitor infringes upon our intellectual property rights, enforcing those rights may be costly, uncertain, difficult and time consuming.time-consuming. Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time consuming and could divert our management’s attention. We may not have sufficient resources to enforce our intellectual property rights or to defend our patent rights against a challenge. The failure to obtain patents and/or protect our intellectual property rights could have a material and adverse effect on our business, results of operations and financial condition.
If the existing holders of our common stock, particularly our directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock. We have an at-the-marketATM equity offering pursuant to which, we can issue up to an aggregate of $100$50 million of common stock, subject to applicable lawlaw, limitation and our previous at-the-market equity offeringATM sales. Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline.
The market price of our common stock has been, and may continue to be, particularly volatile, and our shareholders may be unable to resell their shares at a profit. The market price of our common shares has significantly declined over the past twelvethree months,years , and may continue to fluctuate or decline in the future. Between January 1, 20222023 and December 31, 2024,2025, the closing price per share of our common shares has ranged from a high of $4.94$49.40 (on April 3, 2023) to a low of $0.67$1.76 (on December 30,29, 20242025). We believe that one of the reasons for the continual decline in our common stock market price is due to the significant supply that far exceeds demand, as a result of the large volume of sales of our common stock by a single significant stockholder of the Company. Sales by such significant stockholder are out of our control, and there is no assurance that such stockholder will not continue to engage in such sales.
If we cannot find ways to successfully manage our stock price, our business and financial condition may be negatively impacted. We may not be able to attract new investors and other stakeholders, and we may not be able to secure financing or otherwise acquire capital in the market (either on favorable terms or at all). If our share price is volatile, we may also become the target of securities litigation, which could result in substantial costs and divert our management’s attention and resources from our business. Since our stock price has been trading below $1.00 per share, we are also subject to delisting from the Nasdaq stock exchange if we cannot improve our stock price and regain full compliance with the Nasdaq listing standards.
We may not regain compliance with the continued listing requirements of The Nasdaq Capital Market.
As previously reported on our Current Report on Form 8-K filed on January 15, 2025, the Company received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock has been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been given 180 calendar days, or until July 14, 2025, to regain compliance with the Minimum Bid Price Requirement. If at any time before July 14, 2025, the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Staff will provide written confirmation that the Company has achieved compliance.
The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement, including initiating a reverse stock split. However, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with other Nasdaq Listing Rules.
Further, as previously reported on our Current Report on Form 8-K filed on March 13, 2025, the Company notified the Staff of Nasdaq that the Company no longer complies with Nasdaq’s independent director requirement (“Independent Director Requirement”) as set forth in Nasdaq Listing Rule 5605(b)(1), which requires a majority of the Company’s Board of Directors (the “Board”) to be comprised of Independent Directors as defined in Nasdaq Listing Rule 5605(a)(2). On that same date, the Company received a letter from Nasdaq confirming the foregoing (the “Letter”).
Consistent with Nasdaq Listing Rule 5605(b)(1)(A), the Letter provides that the Company is eligible for a cure period in which to regain compliance with Nasdaq Listing Rule 5605(b)(1). This cure period will expire at the earlier of the Company’s next annual meeting of stockholders or March 9, 2026; or if the Company’s next annual meeting is held before September 8, 2025, then the Company must evidence compliance no later than September 8, 2025.
The Company intends to elect an additional Independent Director to the Board as soon as practicable and prior to the expiration of this cure period. However, there can be no assurance that the Company will successfully regain compliance with Nasdaq Listing Rule 5605(b)(1) within the applicable cure period.
The Minimum Bid Price Requirement and Independent Director Requirement deficiencies have no immediate effect on the listing or trading of the Company’s common stock, which will continue to be listed and traded on The Nasdaq Capital Market under the symbol “SCWO,” subject to the Company’s compliance with the other Nasdaq listing requirements.
Management's Discussion & Analysis (MD&A)
New heading “Change in Accounting Estimate”
Largest changes
“Sales of common stock under the 2025 Sales Agreement, if any, will be made at market prices by any method permitted by law deemed to be an ATM 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 2025 Sales Agreement, in whole or in part, or terminate the 2025 Sales Agreement.”see in full comparison
“Highlights from the year underscore the Company’s continued effort to increase capacity to address multiple significant markets, and include winning an award for and commencing the destruction of 1,000 gallons of Aqueous Film Forming Foam (“AFFF”) from the University of North Carolina at Chapel Hill Collaboratory; …”see in full comparison
“In fiscal year 2024, 374Water outlined a new strategic plan and tactical roadmap. Throughout the year, we executed our plan reaching critical milestones which we believe position the Company’s business outlook well for fiscal year 2025. …”see in full comparison
“374Water made significant commercial and technological progress throughout the 2025 fiscal year. We continue to make technological breakthroughs in processing solids and slurries, as well as liquid waste streams across three main market sectors – industrial, municipal, and federal. …”see in full comparison
“Contract costs include all direct material, labor and subcontractor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. As of December 31, 2024, we have capitalized $136,651 of costs incurred to date to fulfill the Demo contract which are presented as contract assets. We will expense these costs over the three-month demonstration period. General, selling, and administrative costs are charged to expenses as incurred.”see in full comparison
Full comparison: every changed paragraph (39)
Change in Accounting Estimate
Our equipment revenue contract with OC San is a fixed price contract that includes billings based on the achievement of deliverables or milestones. We have experienced delays in completing the equipment due to design changes and upgrades preventing us from meeting the next contractual milestone. Due to these delays, we have not been contractually able to bill for certain costs incurred related to the OC San contract. At December 31, 2025, we have incurred costs in excess of billings of approximately $1.9 million in connection with completing this contract. Pursuant to the contract terms with OC San, we will be able to invoice and resume billing once the manufactured equipment passes a factory acceptance test which is based on a continuous run time of the equipment and volume of materials processed. The equipment recently met the continuous run time requirement but was not yet able to process the volume required. At contract inception, the variable consideration included in the contract price was not deemed to be constrained. We had anticipated delivering the equipment to OC San during the year ended December 31, 2025. Due to the unexpected delays we have encountered in delivering the equipment, we reassessed the variable consideration at December 31, 2025. The changes in facts and circumstances have resulted in us fully constraining the variable consideration at December 31, 2025. This resulted in the reduction of unbilled accounts receivable and reduction in equipment revenue in the amount of approximately $1.9 million.
During 2024, we deployed our Demo System to the City of Orlando’s Iron Bridge Regional Water Reclamation Facility pursuant to a contract executed in March 2024 as part of a full-scale demonstration (the “Demo Contract”). Pursuant to the Demo Contract, the Company is responsible for system design, installation, commissioning and the start-up of the AirSCWO system at the facility. Further, the Company will operate and maintain the AirSCWO system for a period of approximately three months and is required to treat no less than 193 metric tons of waste water during the three-month period. Lastly, the Company will decommission, disassemble and demobilize the AirSCWO system after the contract period. The Company will receive $812,000 as consideration, of which $574,000 is subject to achieving the 193 metric ton performance requirement over the three-month period of operations and maintenance.
In accordance with ASC 606-10-25-21, we have concluded that the Demo Contract includes one performance obligation as the various services required to be performed by the Company are interdependent and highly interrelated. Therefore, the various services are not separate and distinct. We will recognize revenue on this Demo Contract over the three-month period of operations and maintenance which is the point in time that the City of Orlando receives the benefit simultaneous to Company’s performance.
We will invoice the City of Orlando in accordance with the contract terms. Invoices are due within thirty days of receipt. The City of Orlando has the right to cancel the Demo Contract for convenience with a twenty-day written notice but is responsible for paying the Company all amounts owed and outstanding for work performed prior to the effective termination date and costs and expenses incurred by the Company to uninstall, remove, relocate and deliver the AirSCWO system up to a limit of $68,000.
Contract costs include all direct material, labor and subcontractor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. As of December 31, 2024, we have capitalized $136,651 of costs incurred to date to fulfill the Demo contract which are presented as contract assets. We will expense these costs over the three-month demonstration period. General, selling, and administrative costs are charged to expenses as incurred.
At December 31, 2024 and 2023, the Company evaluated the total costs incurred on this Equipment Sale Contract to date and the estimated costs it anticipates incurring to complete the contract. Based on this analysis, we accrued a total accrued loss provision of $1,000,000 and $500,000 at December 31, 2024 and 2023, respectively, which has been presented on the accompanying consolidated balance sheets and is recorded within cost of revenues on the accompanying consolidated statements of operations.
Prior to January 1, 2024, the Company had elected to estimate options granted for which the requisite service period would not be rendered, due to the option being forfeited or expiring. The forfeiture rate estimate was based on the percentage of cumulative forfeitures to the total award grants. During the year ended December 31, 2023, the Company compared its actual forfeiture rate to its estimated forfeiture rate and made a cumulative adjustment of approximately $55,000 in the year ended December 31, 2023 to reduce its forfeiture rate estimate to approximately 5% of the total stock-based compensation recognized during the year.
Effective January 1, 2024, the Company made a change in its accounting policy to recognize forfeitures on service-based stock award instruments as they occur. Due to the lack of history available to adequately estimate its forfeiture rate and the fact that the majority of its serviced based options include a one-year cliff vesting and monthly vesting after, the Company believes recognizing forfeitures as they occur will result in more accurate financial reporting. The change in this accounting policy did not have a significant impact on the current or prior period financial statements.
374Water Inc. (the “Company”, “374Water”, “We”, or “Our”) is a global industrial technologycleantech and environmental services company providingdeveloping innovativesupercritical solutionswater addressingoxidation globaltechnology (“SCWO”) for the destruction of organic waste destruction/treatment and waste management issuesstreams within the Municipal,municipal, Federal,federal, and Industrialindustrial markets. 374Water offers our proprietary AirSCWO system,technology, which is designed to efficiently destroy and mineralize a broad spectrum of non-hazardous and hazardous organic wastes producing safe dischargeable water streams, safe mineral effluent, safe vent gas, and recoverable heat energy. Importantly, our AirSCWO system eliminatesis designed to eliminate recalcitrant organic wastes without creating waste byproducts.byproducts, as well as to simplify existing, complex waste processing and disposal practices. Our AirSCWO systemtechnology is designed to effectively convertsconvert solid and liquid wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, andincluding ‘forever chemicalschemicals’ (e.g., “per-and polyfluoroalkyl substances” or “PFAS”) into inert and recoverable resources including water, minerals, and heat energy, by focusing on waste as a valuable resource.energy.
374Water made significant commercial and technological progress throughout the 2025 fiscal year. We continue to make technological breakthroughs in processing solids and slurries, as well as liquid waste streams across three main market sectors – industrial, municipal, and federal. Throughout the year we established our Waste Destruction Services (“WDS”) hub at the City of Orlando’s Iron Bridge Water Reclamation Facility, deployed a commercial AirSCWO system to Detroit, MI, for a six week Department of Defense (“DoD”) Destruction Demonstration of six PFAS-impacted waste streams, deployed our mobile AirSCWO lab to Peterson AFB in Colorado, and tested waste streams from several clients, including major oil and gas companies, multi-national chemical and pharmaceutical companies, the United States DoD and defense contractors, and resource recovery companies, at our laboratory in the Research Triangle, North Carolina.
Highlights from the year underscore the Company’s continued effort to increase capacity to address multiple significant markets, and include winning an award for and commencing the destruction of 1,000 gallons of Aqueous Film Forming Foam (“AFFF”) from the University of North Carolina at Chapel Hill Collaboratory; completion of WDS field demonstrations of an AS system at Clean Earth’s Detroit, MI in partnership with the DoD , led by the Defense Innovation Unit (“DIU”) in collaboration with Environmental Security Technology Certification Program ("ESTCP”), to evaluate commercial-scale technology solutions to destroy per- and polyfluoroalkyl (“PFAS”) contaminated wastes; a collaboration agreement with Crystal Clean to locate 374Water’s AirSCWO technology at one of their RCRA-permitted facilities to destroy various PFAS waste streams; and an agreement with the city of Olathe, KS for the sale of an AirSCWO system and pre-treatment equipment with an associated service agreement for the treatment of PFAS-impacted wastewater and other waste streams.
As we begin 2026, we have already secured additional contracts for Waste Destruction Services, made technological advances to better address the demand and needs of customers and partners across market segments, and continue to capitalize our business to establish 374Water as a leader in developing waste destruction industry and the unique abilities of AirSCWO to unlock tremendous value.
During 2026, we expect to design and scale our AirSCWO systems to handle larger capacities of slurries and liquid wastes; build out our Waste Destruction Services hub at the City of Orlando’s Iron Bridge Water Reclamation Facility; begin to receive and destroy significant volumes of PFAS wastes to our WDS hub; deploy our team and technology to Orange County Sanitation District (“OC San”) in Fountain Valley, CA; deploy our mobile AirSCWO system to St. Cloud, MN, to demonstrate its effectiveness destroying PFAS-laden biosolids and other PFAS wastes; negotiate additional Treatment, Storage, and Disposal Facility (“TSDF”) partnerships to expand our WDS hubs; and grow our manufacturing, operations, and research and development (“R&D”) capacity as we lead the industry towards SCWO.
In fiscal year 2024, 374Water outlined a new strategic plan and tactical roadmap. Throughout the year, we executed our plan reaching critical milestones which we believe position the Company’s business outlook well for fiscal year 2025. 2024 achievements include (i) ruggedizing and optimizing our AirSCWO system to effectively and continuously process a variety of organic waste streams; (ii) deploying our first commercial scale AirSCWO system to the City of Orlando’s Iron Bridge Water Reclamation Facility; (iii) completing various federal and industrial waste destruction demonstrations; (iv) growing our backlog and pipeline in the municipal, federal and industrial markets; (v) relocating our laboratory facility to a significantly larger state-of-the-art Biosafety Level 1 Laboratory to meet increasing lab-scale waste destruction demand and expedite the advancement of our AirSCWO technology; (vi) relocating our manufacturing operations; and strengthening our leadership team and organization.
374Water has a robust plan to scale revenue, operations, and capitalize our business. During 2025, we expect to complete our commercial-scale demonstration under our contract with the City of Orlando; mobilize an AS system to Detroit, MI in partnership with the Defense Innovation Unit to demonstrate AirSCWO’s waste destruction effectiveness for specific U.S. Department of Defense applications; deploy an AirSCWO system to the Orange County Sanitation District in Fountain Valley, CA; mobilize an AirSCWO system to St. Cloud, MN, as part of a Legislative-Citizen Commission on Minnesota Resources (LCCMR) initiative to demonstrate its effectiveness destroying Minnesota waste; further scale our manufacturing capacity to meet client demand for AirSCWO systems of various sizes; continue to improve our AirSCWO technology; and begin accepting third-party waste streams for our initial WDS hub(s) at partner a TSDF.
Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated $215,037 and $445,445 in revenue from manufacturing assembly services and from full-scale demonstrations and treatability study services during the years ended December 31, 2025, and 2024, respectively. The approximate $230,000 decrease in revenues is primarily due to a decrease in equipment revenue of $1,881,000 offset by an increase in service revenues of approximately $1,651,000. The increase in service revenue is from the completion of two full-scale demonstrations and a mobile bench-scale demonstration, which generated approximately $1,331,000 of revenues, the completion of one month of demonstration and wastewater processing under our City of Orlando contract, which generated approximately $271,000 of revenues, and an increase in our bench scale treatability studies of $49,000. The decrease in equipment revenues is due to a change in accounting estimate or reassessment of variable consideration included in our contract with OC San. Due to the unexpected delays we have encountered in delivering the equipment, we reassessed the variable consideration at December 31, 2025. The changes in facts and circumstances have resulted in us fully constraining the variable consideration at December 31, 2025. This resulted in the reduction of unbilled accounts receivable and reduction in equipment revenue in approximately $1.9 million, resulting in negative equipment revenue of approximately $1,653,000 compared to approximately $228,000 of equipment revenue for the year ended December 31, 2024.
Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated $445,445 and $743,952 in revenue from manufacturing assembly services and from treatability study services during the years ended December 31, 2024, and 2023, respectively. During 2024, we reached fewer milestones and thus incurred less direct contract costs. Costs associated with our sold unit have started to decline as we reach the end of our fabrication and testing, which have had a direct correlation to the reduced revenue recognized this year under our percentage of completion revenue recognition method. The Company has gained momentum on many promising leads which have been produced through early treatability studies but has not resulted in the sale of any additional AirSCWO units to this point. This has had a direct impact on our change in revenue year-over-year.
Our researchcost andof development expensesrevenues increased to $2,143,471$2,566,421 during the year ended December 31, 2024,2025, as compared to $1,496,129$1,358,152 in the same period of 2023,2024, an increase of approximately $1,208,000, primarily due to the increase in engineeringour expensesservice revenues, material and expenseslabor stemmingcosts fromincurred to complete our continuedsold effortsAirSCWO tosystem, commercializeand an increase in our systems.accrued loss provision of $600,000.
Our compensationresearch and relateddevelopment expenses increased to $3,685,007$2,524,519 during the year ended December 31, 2024,2025, as compared to $2,854,494$2,143,471 in the same period of 2023.2024, Thean increase isof approximately $381,000, primarily due to increasedthe hiringincrease asin weengineering buildexpenses and expenses stemming from our executivecontinued team with four new executive hires, salary increasesefforts to certaincommercialize keyour employees in 2024, and an accrual of bonuses for the executive team.systems.
Our compensation and related expenses increased to $8,262,188 during the year ended December 31, 2025, as compared to $4,731,553 in the same period of 2024, an increase of approximately $3,531,000. The increase is primarily due to an increase in stock-based compensation of approximately $1,823,000. Remaining increase in payroll related expenses of $1,708,000 is due to a significant increase in operational headcount and our executive team during mid-late 2024 and 2025. We have recently experienced significant changes in our executive team which will likely lead to decreased payroll related expenses Our professional fees increased to $2,801,024 during the year ended December 31, 2025, as compared to $2,231,005 in the same period of 2024, an increase of approximately $570,000. The increase is primarily due to an increase in recruiting fees of $671,000 due to headcount increases in our operations department and the addition of new directors to our Board, offset by a decrease in legal, accounting, auditing and consulting fees of approximately $101,000.
Our general and administrative expenses increased to $5,207,949 during the year ended December 31, 2025, as compared to $2,784,522 in the same period of 2024, an increase of approximately $2,423,000. This increase is primarily because of an increase in depreciation expense of approximately $396,000 due to the capitalization of our owned unit in the fourth quarter of 2024, an increase in investor and public relations services of $483,000, an increase in travel and related expenses of approximately $607,000 due to our increased headcount and operational deployments, an increase in stock-based compensation to our board of directors and other service providers of $261,000 and an increase of approximately $676,000 in general administrative expenses due to our increased headcount and infrastructure.
Our other income decreased to $172,012 during the year ended December 31, 2025, as compared to $369,144 in the same period of 2024, a decrease of approximately $197,000, due to us earning less interest on cash held in interest bearing accounts.
Our professional fees increased to $2,231,005 during the year ended December 31, 2024, as compared to $508,795 in the same period of 2023, primarily attributed to an increase in legal fees related to a legal settlement, a legal complaint filed by our former chief executive officer for which we have accrued an estimated legal settlement of $335,000, and general legal expenses incurred in 2024 related to our previously disclosed change in executive leadership. Further, we incurred additional professional fees for executive search services related to the finding and hiring of certain executives we have hired in 2024.
Our general and administrative expenses increased to $3,831,068 during the year ended December 31, 2024, as compared to $2,675,202 in the same period of 2023. The increase is primarily because of an increase stock-based compensation, travel, and other general and administrative expenses as we continue to build out our executive team. We also incurred relocation related expenses as we moved to our short-term leased manufacturing facility in Florida.
Our other income decreased to $369,144 during the year ended December 31, 2024, as compared to $539,354 in the same period of 2023, which is a result of the interest income we earned on our interest-bearing cash accounts that we opened in June 2023. We had previously held any excess funds in an investment account. The amount of interest we earn is directly related to the amount of interest-bearing cash held in the accounts which decreased in 2024.
Our net loss increased to $12,434,114$20,975,052 during the year ended December 31, 2024,2025, as compared to $8,103,522$12,434,114 in the same period of 2023.2024, an increase of approximately $8,541,000. This increase in our net loss is primarily due to increased expenses for the reasons described above.above as well as decreased revenue due to the delay in delivery of our obligations under the OC San contract. Substantial net losses are expected until we are able to generate sufficient cash flows from the sale of our AirSCWO systems, treatability studies and Waste Destruction Services, as to which there can be no assurance.
In March 2026, we issued three separate convertible notes and received cash proceeds of $800,000. The convertible notes bear interest at 10%, mature three years from the issue date and are convertible into shares of common stock at a conversion rate of $5.00. Semi-annual interest payments are required on March 31, and September 30, each year commencing September 30, 2026. The convertible notes include common stock warrant coverage equal to the shares that the issued convertible notes are convertible into. Therefore, a total of 160,000 common stock warrants were issued to the convertible note holders. The warrants are exercisable immediately for a period of three years at an exercise price of $7.50 per warrant share.
On June 6, 2025, the Company entered into an ATM issuance sales agreement (the “Prior 2025 Sales Agreement”) with Lake Street Capital Markets, LLC (“Lake Street”) as sales agent, pursuant to which the Company could offer and sell, from time to time, shares of the Company’s common stock having an aggregate offering price of up to $15.1 million. The 2025 Sales Agreement replaced the prior sales agreement entered into between the Company and Jefferies LLC dated as of December 21, 2022 (the “2022 Sales Agreement”).
On December 23, 2025, the Company entered into a new ATM issuance sales agreement (the “2025 Sales Agreement”) with Lake Street as sales agent, pursuant to which the Company could offer and sell, from time to time, shares of the Company’s common stock having an aggregate offering price of up to $50 million. The 2025 Sales Agreement replaces the Prior 2025 Sales Agreement, and sales under the Prior 2025 Sales Agreement have terminated.
Sales of common stock under the 2025 Sales Agreement, if any, will be made at market prices by any method permitted by law deemed to be an ATM 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 2025 Sales Agreement, in whole or in part, or terminate the 2025 Sales Agreement.
During the year ended December 31, 2025, no shares were sold under the 2025 sales Agreement and a total of 2,279,180 shares of common stock were sold pursuant to the Prior 2025 Sales Agreement offering, resulting in gross proceeds of approximately $9,313,000 and net proceeds of approximately $8,909,000 after equity issuance costs of approximately $404,000 for accounting, legal, commissions and sale agent fees.
During the year ended December 31, 2024, a total of 5,051 shares of common stock were sold pursuant to the 2022 Sales Agreement resulting in gross proceeds of approximately $63,100, and net issuance costs of $3,100 after equity issuance costs of $65,500 for accounting, legal, commissions and fees which exceeded the gross proceeds received under the 2022 Sales Agreement.
As of the date of this Annual Report, the aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was approximately $39,144,000, which was calculated based on 11,184,116 outstanding shares of the Company’s common stock held by non-affiliates at a price of $3.50 per share, the closing price of our common stock on March 25, 2026, as reported on Nasdaq. Pursuant to General Instruction I.B.6 of Form S-3, or the “baby shelf” rules, in no event will we sell securities registered on our Form S-3 registration statement, including under our at-the-market equity offering, with a value of more than one-third of the aggregate market value of shares of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of shares of our common stock held by non-affiliates is less than $75 million. After giving effect to the approximate $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3 and deducting the shares sold within the preceding 12 months, as of the date of filing this Annual Report, approximately $3,700,000 shares of common stock remain available at this time for sale under our Form S-3, including through our at-the-market equity offering.
We have an at-the-market (ATM) equity offering under which we may issue up to $100 million of common stock, which is currently effective and under which we commenced selling shares at the end of January 2023, and which will remain available to us in the future. During the years end December 31, 2024 and 2023, we raised approximately $0 and $13,441,000 million of net proceeds through this ATM. During the year ended December 31, 2024, the costs of the ATM of approximately $65,500 exceeded the proceeds of approximately $62,400 resulting in net issuance costs of approximately $3,100.
We have financed our operations since inception principally through the sale of debt and equity securities and revenues. As of December 31, 2024,2025, we had working capital of $11,760,131$1,669,083 compared to working capital of $13,528,176$11,760,131 as of December 31, 2023.2024. This decrease in working capital is due primarily to the at-the-market offering and the direct offering resulting in less proceeds than the at-the-market common stock offering completed in 2023.2024 resulting in more gross proceeds than raised under the ATM offerings in 2025 plus a decrease in our cash balance to fund operations.
As of December 31, 2024,2025, cash on hand was $10,651,644,$3,198,682, ana increasedecrease of $206,240,$7,452,962, or 2%,70%, as compared to $10,445,404$10,651,644 as of December 31, 2023.2024. During the year ended December 31, 2024,2025, cash used in operations was $10,589,735,$14,326,205, an increase of $1,554,748approximately $3,736,000 as compared to $9,034,987$10,589,735 during the year ended December 31, 2023.2024. The increase in cash used in operating activities was primarily due to the decrease in cash used in operating assets and liabilities of $1,969,352 and increase in non-cash expenses of $806,492, offset by the increase in our net loss of $4,330,592approximately The$8,541,000, offset by non-cash expenses of $2,850,000 and operating cash usedinflows of $1,954,000 from changes in operationsassets wasand primarily to fund operations as well as our working capital requirements.liabilities.
During the year ended December 31, 2024,2025, cash used by investing activities was $653,544,$1,898,212, an increase of $2,505,261,approximately $1,245,000, as compared to cash providedused by investing activities of $1,851,717$653,544, during the year ended December 31, 2023.2024. The increase in cash used by investing activities for the year ended December 31, 20242025 compared with the corresponding period in 20232024 was primarily due to aan $448,952approximate $1,343,000 increase in purchases of property and equipment asrelated we continue making progress towards commercializing our AirSCWO systems and deployingto our owned unitDemo System used for full-scalewaste demonstrationsdeconstruction asservices welland asequipment-in-progress related to the building of an AS1, offset by a $92,877decrease increaseof in$99,000 of intangible assetsasset from increased patent activity. In 2023, we received $1,963,432 in proceeds from the sale of investments, which were not received in 2024.purchases.
During the year ended December 31, 2024,2025, cash provided by financing activities was $11,449,519,$8,771,455, a decrease of $2,129,419approximately $2,678,000 compared to the same period in 2023.2024. The decrease in cash provided by financing activities was due to more capital being raised in 20232024 via oura ATMdirect offering of common stock and warrants compared to the cashcapital raised inby 2024 through ourthe ATM and director offering completedofferings in November 2024.2025.
What changed in the latest 10-Q
Risk Factors
See Item 1A.— Risk Factors in the 2025 Form 10-K for a detailed discussion of risk factors affecting the Company. There have been no material changes in the risk factors disclosed in the 2025 Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Operating expenses”
New heading “Six Months Ended June 30, 2026, as Compared to the Six Months Ended June 30, 2025”
New heading “Operating expenses”
Largest changes
“Six Months Ended June 30, 2026, as Compared to the Six Months Ended June 30, 2025”see in full comparison
Our professional fees decreased tosee in full comparison$515,519$151,453 during the three months endedMarchJune31,30, 2026, as compared to$771,901$649,338 in the same period of 2025, a decrease of approximately$256,000,$498,000, primarily due to decreased legal fees asa result of a litigation settlement andtheresolutionCompanyoffocusesotheronlegalreducingmatters.expenses.
Our research and development expenses decreased tosee in full comparison$449,834$284,589 during the three months endedMarchJune31,30, 2026, as compared to$533,587$531,170 in the same period of 2025, a decrease of approximately$84,000,$247,000, primarily due to a decrease instock-based compensation of approximately $25,000research andadevelopmentdecreaseactivitiesin subcontractor labor related toas themanufacturingCompanyoffocusesouronsoldreducingAirSCWO6 unit.expenses.
Our business has been focused on the development and commercialization of our SCWO systems. During the three months endedsee in full comparisonMarchJune31,30, 2026 and 2025, we generated$551,155revenue of $2,262,040 and$543,100$594,967,in revenuerespectively, from equipment manufacturing andservices,services.respectively.ThisDuringincreasetheisthreeprimarilymonthsdueended,toMarch$2.031,million2026,ofwerevenuecompletedrecognized on ourfull-scaleOCdemonstrationSanwithcontractthethatCityhadofbeenOrlandopreviouslyresultingreversedinorapproximatelynot$482,000recognizedofdueservicetorevenue,variableapproximatelyconsideration$42,750constraintsfromthatdestructionwereserviceseliminatedandupon$26,000usfrommeetingtreatabilityastudies.factoryDuringacceptance test during the three months endedMarchJune31,30,2025,2026,weoffsetcompletedby afull-scale demonstration for a customer resultingdecrease in service revenues of$376,000,approximately$33,000 in treatability studies and approximately $134,000 in equipment revenue from manufacturing on our sold unit.$247,000.
Full comparison: every changed paragraph (26)
During the three and six months ended MarchJune 31,30, 2026, there have been no significant changes to these estimates and policies previously disclosed in our 2025 Form 10-K. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 of the unaudited condensed consolidated financial statements included in this Form 10-Q.
Three Months Ended MarchJune 31,30, 2026, as Compared to the Three Months Ended MarchJune 31,30, 2025
Our business has been focused on the development and commercialization of our SCWO systems. During the three months ended MarchJune 31,30, 2026 and 2025, we generated $551,155revenue of $2,262,040 and $543,100$594,967, in revenuerespectively, from equipment manufacturing and services,services. respectively.This Duringincrease theis threeprimarily monthsdue ended,to March$2.0 31,million 2026,of werevenue completedrecognized on our full-scaleOC demonstrationSan withcontract thethat Cityhad ofbeen Orlandopreviously resultingreversed inor approximatelynot $482,000recognized ofdue serviceto revenue,variable approximatelyconsideration $42,750constraints fromthat destructionwere serviceseliminated andupon $26,000us frommeeting treatabilitya studies.factory Duringacceptance test during the three months ended MarchJune 31,30, 2025,2026, weoffset completedby a full-scale demonstration for a customer resultingdecrease in service revenues of $376,000, approximately $33,000 in treatability studies and approximately $134,000 in equipment revenue from manufacturing on our sold unit.$247,000.
Operating expenses
Our general and administrative expenses increased to $1,441,899$1,337,470 during the three months ended MarchJune 31,30, 2026, as compared to $942,440$1,184,689 in the same period of 2025, an increase of approximately $499,000,$153,000, primarily due to expensing $184,000 of deferred offering costs previously capitalized on the balance sheet due to a shift in capital raise strategy through the issuance of convertible debt notes by the Company, $158,000$58,000 in franchise tax expense due to the increase in our authorized shares, and $147,000$276,000 of stock issued for services provided by the Board of Directors.Directors, offset by approximately $365,000 of reductions in all other general and administrative expenses as the Company focuses on reducing expenses.
Our compensation and related expenses increaseddecreased to $2,539,450$1,831,323 during the three months ended MarchJune 31,30, 2026, as compared to $1,675,865$1,996,387 in the same period of 2025, ana increasedecrease of approximately $864,000,$165,000, primarily due to ana increase in stock-based compensation expense of approximately $496,000 and an increasedecrease in payroll wages of $368,000and related expenses due to increaseddecreased headcount.headcount and a reduction of executive salaries.
Our professional fees decreased to $515,519$151,453 during the three months ended MarchJune 31,30, 2026, as compared to $771,901$649,338 in the same period of 2025, a decrease of approximately $256,000,$498,000, primarily due to decreased legal fees as a result of a litigation settlement and the resolutionCompany offocuses otheron legalreducing matters.expenses.
Our research and development expenses decreased to $449,834$284,589 during the three months ended MarchJune 31,30, 2026, as compared to $533,587$531,170 in the same period of 2025, a decrease of approximately $84,000,$247,000, primarily due to a decrease in stock-based compensation of approximately $25,000research and adevelopment decreaseactivities in subcontractor labor related toas the manufacturingCompany offocuses ouron soldreducing AirSCWO6 unit.expenses.
Other expenses, net increased to $1,074,373 during the three months ended June 30, 2026, as compared to other income, net of $57,502 in the same period of 2025, an increase in other expenses, net, of approximately $1,132,000. This increase is primarily due to a loss on debt extinguishment recognized of approximately $1,022,000 during the three months ended June 30, 2026 related to a modification of terms on outstanding convertible notes payable, as well as interest expense of approximately $90,000 recognized on the outstanding convertible notes payable.
Net Loss
Our net loss decreased to $2,696,235, during the three months ended June 30, 2026, as compared to our net loss of $4,580,448 in the same period of 2025, a decrease of approximately $1,884,000. This decrease is primarily attributable to the increase in revenues and decrease in operating expenses, offset by an increase in other expenses, as more fully described above.
Six Months Ended June 30, 2026, as Compared to the Six Months Ended June 30, 2025
Our business has been focused on the development and commercialization of our SCWO systems. During the six months ended June 30, 2026 and 2025, we generated $2,813,195 and $1,138,067 in revenue from equipment manufacturing and services, respectively. This increase is primarily due to $2.0 million of revenue recognized on our OC San contract that had been previously reversed or unrecognized due to variable consideration constraints that were eliminated upon us meeting a factory acceptance test during the three months ended June 30, 2026, offset by a decrease in service revenues of approximately $100,000.
Operating expenses
Our general and administrative expenses increased to $2,779,369 during the six months ended June 30, 2026, as compared to $2,127,129 in the same period of 2025, an increase of approximately $652,000, primarily due to the expensing of $184,000 of deferred offering costs previously capitalized on the balance sheet due to a shift in capital raise strategy through the issuance of convertible debt notes by the Company, $217,000 in franchise tax expense due to the increase in our authorized shares, and $424,000 of stock-based compensation for services provided by the Board of Directors, offset by approximately $173,000 reductions in other general and administrative expenses as the Company focuses on reducing expenses.
Our compensation and related expenses increased to $4,370,773 during the six months ended June 30, 2026, as compared to $3,672,252 in the same period of 2025, an increase of approximately $699,000, primarily due to an increase in stock-based compensation expense of approximately $578,000 and an increase in payroll wages and related of $120,000.
Our professional fees decreased to $666,972 during the six months ended June 30, 2026, as compared to $1,421,239 in the same period of 2025, a decrease of approximately $754,000, primarily due to decreased legal fees as the Company focuses on reducing expenses.
Our research and development expenses decreased to $734,423 during the six months ended June 30, 2026, as compared to $1,064,757 in the same period of 2025, a decrease of approximately $330,000, primarily due to a decrease in stock-based compensation of approximately $100,000 from stock issued for services and a decrease in research and development activities as the Company focuses on reducing expenses.
Other expenses, net increased to $1,047,706 during the six months ended June 30, 2026, as compared to other income, net of $144,598 in the same period of 2025, an increase in other expenses of approximately $1,192,000. This increase is primarily attributable to a loss on debt extinguishment recognized of approximately $1,022,000 during the six months ended June 30, 2026 related to a modification of terms on outstanding convertible notes payable, as well as interest expense of approximately $103,000 recognized on the outstanding convertible notes payable.
Net Loss
Our net loss decreased to $7,267,858, during the six months ended June 30, 2026, as compared to our net loss of $8,278,862 in the same period of 2025, a decrease of approximately $1,011,000. This decrease is primarily attributable to the increase in revenues, offset by an increase in operating expenses and other expenses, as more fully described above.
In accordance with ASU No. 2014-15 Presentation of Financial Statements – Going Concern (subtopic 205-40), the Company’s management evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. At MarchJune 31,30, 2026, the Company had a working capital deficit of $1,521,955,approximately $2,420,000, an accumulated deficit of $54,508,221$57,204,456 and a cash balance of $447,453.$1,776,259. For the threesix months ended MarchJune 31,30, 2026, the Company incurred a net loss of $4,571,623$7,267,858 and used $2,508,341$2,297,376 of net cash in operations for the period. These conditions raise substantial doubt regarding our ability to continue as a going concern.
As of the date of our 2025 Form 10-K ,10-K, the aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was approximately $39,144,000, which was calculated based on 11,184,116 outstanding shares of the Company’s common stock held by non-affiliates at a price of $3.50 per share, the closing price of our common stock on March 25, 2026, as reported on Nasdaq. Pursuant to General Instruction I.B.6 of Form S-3, or the “baby shelf” rules, in no event will we sell securities registered on our Form S-3 registration statement, including under our ATM, with a value of more than one-third of the aggregate market value of shares of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of shares of our common stock held by non-affiliates is less than $75 million. After giving effect to the approximate $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3 and deducting the shares sold within the preceding 12 months, approximately $3,700,000 shares of common stock remain available at this time for sale under our Form S-3, including through our ATM.
We used $2,508,341$2,297,376 cash in operating activities for the threesix months ended MarchJune 31,30, 2026 compared to $3,494,477$7,621,070 of cash used in operating activities for the corresponding period in 2025, a decrease of $986,136.approximately $5,324,000. The decrease in cash used in operating activities was primarily due to the decrease in net loss of approximately $1,011,000, increase in noncash expenses of $616,346$2,061,000, and increase in operating cash inflows, net,inflows from changes in operating assets and liabilities of $1,242,999,approximately offset by an increase in our net loss of $873,209. The cash used in operations was primarily to fund operations as well as our working capital requirements.$2,252,000.
We used $345,949$1,253,440 in investing activities for the threesix months ended MarchJune 31,30, 2026 compared to using $297,322$901,823 of cash used in financinginvesting activities for the corresponding period in 20252025, an increase of $48,627.approximately $352,000. The increase in cash used by investing activities for the threesix months ended MarchJune 31,30, 2026 was primarily due to a $48,627an increase in purchases of property and equipment.equipment and equipment-in-process of $352,000.
We received $103,061$2,128,393 of cash from financing activities for the threesix months ended MarchJune 31,30, 2026 compared to $24,000 cash received by financing activities$20,264 for the corresponding period in 20252025, an increase of $79,061.approximately $2,108,000. This increase was primarily due to $800,000$2,960,000 of proceeds received from the issuance of convertible notes, offset by $696,939approximately $836,000 of repayments on debt obligations, duringoffset theby threea monthsdecrease endedin Marchproceeds 31,from 2026stock comparedoption to the $24,000exercises of financingapproximately activities during the three months ended March 31, 2025.$17,000.
SCWO insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 2 trade dates, 18,831 shares, about $45.0K). Net open-market shares: -18,831 (purchases minus sales); net value about -$45.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-12 | Meyers Brad Ian |
Open-market sale | 9,831 | $2.33 | $22.9K |
| 2026-06-11 | Meyers Brad Ian |
Open-market sale | 9,000 | $2.46 | $22.1K |
| 2026-04-30 | Nagar Yaacov |
Gift | 1,440,000 | $2.48 | $3.6M |
Well-known investors holding SCWO (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 48,459 | $92.1K | 0.0% | Reduced 24% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 14,726 | $28.0K | 0.0% | New position |
| Two Sigma Investments | 2026-06-30 | 13,627 | $25.9K | 0.0% | No change |