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iso4217:USD xbrli:shares xbrli:pure

UNITED STATES

SECURITIES AND EXCHANGECOMMISSION

Washington D.C. 20549

Form 10-Q

For the Quarterly Period ended March 31, 2025

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

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

Commission file No. 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.)

100 Southcenter Court, Suite 200

Morrisville, North Carolina 27560

(Address of principal executive offices)

440-601-9677

(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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 stock, as of the latest practicable date: At May 15, 2025, the issuer had 144,682,963 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 March 31, 2025 (Unaudited) and December 31, 2024 |  | 4 |
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024 (Unaudited) |  | 5 |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024 (Unaudited) |  | 6 |
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 (Unaudited) |  | 7 |
| Notes to Unaudited Condensed Consolidated Financial Statements |  | 8 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 23 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |  | 24 |
Item 4. | Controls and Procedures |  | 25 |
PART I I | OTHER INFORMATION |  |  |
Item 1. | Legal Proceedings |  | 27 |
Item 1A. | Risk Factors |  | 27 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |  | 46 |
Item 3. | Defaults upon Senior Securities |  | 46 |
Item 4. | Mine Safety Disclosures |  | 46 |
Item 5. | Other Information |  | 27 |
Item 6. | Exhibits |  | 47 |
SIGNATURES |  | 48 |

2
Table of Contents

Cautionary Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q (the “Form 10-Q”) contains certain statements related to future results of 374 Water, Inc. (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
Table of Contents

PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
374Water Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2025 (Unaudited) and December 31, 2024
|  | March 31, 2025 |  |  | December 31, 2024 |
Assets |  |  |  |  |  |
Current Assets: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 6,883,845 |  |  | $ | 10,651,644 |
Accounts receivable, net of allowance |  |  | 94,103 |  |  |  | 269,733 |
Unbilled accounts receivable |  |  | 2,163,417 |  |  |  | 1,653,007 |
Other accounts receivable |  |  | 29,246 |  |  |  | 43,886 |
Inventory, net |  |  | 1,876,554 |  |  |  | 1,701,474 |
Contract assets |  |  | 197,043 |  |  |  | 136,651 |
Prepaid expenses |  |  | 338,315 |  |  |  | 431,412 |
Total Current Assets |  |  | 11,582,523 |  |  |  | 14,887,807 |
Long-Term Assets: |  |  |  |  |  |  |  |
Property, and equipment, net |  |  | 2,719,232 |  |  |  | 2,567,571 |
Intangible asset, net |  |  | 998,251 |  |  |  | 1,016,594 |
Right-of-use asset, net |  |  | 662,310 |  |  |  | 691,014 |
Other assets |  |  | 15,847 |  |  |  | 20,847 |
Total Long-Term Assets |  |  | 4,395,640 |  |  |  | 4,296,026 |
Total Assets |  | $ | 15,978,163 |  |  | $ | 19,183,833 |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |
Current Liabilities: |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 819,528 |  |  | $ | 906,394 |
Accrued bonuses |  |  | 380,000 |  |  |  | 570,000 |
Accrued contract loss provision |  |  | 1,000,000 |  |  |  | 1,000,000 |
Accrued legal settlement |  |  | 335,000 |  |  |  | 335,000 |
Unearned revenue |  |  | 170,000 |  |  |  | 197,683 |
Operating lease liability |  |  | 105,697 |  |  |  | 101,320 |
Other liabilities |  |  | 37,998 |  |  |  | 17,279 |
Total Current Liabilities |  |  | 2,848,223 |  |  |  | 3,127,676 |
Long-Term Liabilities: |  |  |  |  |  |  |  |
Unearned revenue, less current portion |  |  | 30,000 |  |  |  | 30,000 |
Operating lease liability, less current portion |  |  | 523,210 |  |  |  | 551,376 |
Total Long-Term Liabilities |  |  | 553,210 |  |  |  | 581,376 |
Total Liabilities |  |  | 3,401,433 |  |  |  | 3,709,052 |
Commitments and contingencies (Note 9) |  |  |  |  |  |  |  |
Stockholders’ Equity |  |  |  |  |  |  |  |
Preferred stock: 50,000,000 shares authorized, par value $0.0001 per share, nil issued and outstanding at March 31, 2025 and December 31, 2024 |  |  | - |  |  |  | - |
Common stock: 200,000,000 authorized, par value $0.0001 per share, 144,682,963 and 144,301,977 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively |  |  | 14,467 |  |  |  | 14,429 |
Additional paid-in capital |  |  | 44,645,824 |  |  |  | 43,845,499 |
Accumulated deficit |  |  | (32,086,032 | ) |  |  | (28,387,618 | )
Accumulated other comprehensive income |  |  | 2,471 |  |  |  | 2,471 |
Total Stockholders’ Equity |  |  | 12,576,730 |  |  |  | 15,474,781 |
Total Liabilities and Stockholders’ Equity |  | $ | 15,978,163 |  |  | $ | 19,183,833 |

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

4
Table of Contents

374Water Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

|  | Three months ended March 31, |
|  | 2025 |  |  | 2024 |
Revenues |  | $ | 543,100 |  |  | $ | 315,278 |
Cost of revenues |  |  | 404,817 |  |  |  | 617,298 |
Gross margin (deficit) |  |  | 138,283 |  |  |  | (302,020 | )
Operating Expenses |  |  |  |  |  |  |  |
Research and development |  |  | 533,587 |  |  |  | 535,147 |
Compensation and related expenses |  |  | 1,675,865 |  |  |  | 790,190 |
Professional fees |  |  | 771,901 |  |  |  | 252,705 |
General and administrative |  |  | 942,440 |  |  |  | 321,141 |
Total Operating Expenses |  |  | 3,923,793 |  |  |  | 1,899,183 |
Loss from Operations |  |  | (3,785,510 | ) |  |  | (2,201,203 | )
Other Income |  |  |  |  |  |  |  |
Interest income |  |  | 89,710 |  |  |  | 104,620 |
Other income (expense) |  |  | (2,614 | ) |  |  | 72,118 |
Total Other Income, net |  |  | 87,096 |  |  |  | 176,738 |
Net Loss before Income Taxes |  |  | (3,698,414 | ) |  |  | (2,024,465 | )
Provision for Income Taxes |  |  | - |  |  |  | - |
Net Loss |  | $ | (3,698,414 | ) |  | $ | (2,024,465 | )
Net Loss per Share - Basic and Diluted |  | $ | (0.03 | ) |  | $ | (0.02 | )
Weighted Average Common Shares Outstanding - Basic and Diluted |  |  | 144,607,438 |  |  |  | 132,668,777 |

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

5
Table of Contents

374Water Inc. and Subsidiaries

Condensed Consolidated Changes in Stockholders’Equity

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

For the Three Months Ended March 31, 2025
|  | Preferred Stock |  |  | Common Stock |  |  | Additional |  |  |  |  |  | Other |  |  | Total |
|  | Number of Shares |  |  | Amount |  |  | Number of Shares |  |  | Amount |  |  | Paid in Capital |  |  | Accumulated Deficit |  |  | Comprehensive Income |  |  | Stockholders’ Equity |
Balances, December 31, 2024 |  |  | - |  |  | $ | - |  |  |  | 144,301,977 |  |  | $ | 14,429 |  |  | $ | 43,845,499 |  |  | $ | (28,387,618 | ) |  | $ | 2,471 |  |  | $ | 15,474,781 |
Issuance of shares of common stock for services |  |  | - |  |  |  | - |  |  |  | 180,986 |  |  |  | 18 |  |  |  | 66,882 |  |  |  | - |  |  |  | - |  |  |  | 66,900 |
Accretion of stock-based compensation – options |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 460,512 |  |  |  | - |  |  |  | - |  |  |  | 460,512 |
Accretion of stock-based compensation – restricted stock |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 248,951 |  |  |  | - |  |  |  | - |  |  |  | 248,951 |
Issuance of shares of common stock for option exercise |  |  | - |  |  |  | - |  |  |  | 200,000 |  |  |  | 20 |  |  |  | 23,980 |  |  |  | - |  |  |  | - |  |  |  | 24,000 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,698,414 | ) |  |  | - |  |  |  | (3,698,414 | )
Balances, March 31, 2025 |  |  | - |  |  |  | - |  |  |  | 144,682,963 |  |  | $ | 14,467 |  |  | $ | 44,645,824 |  |  | $ | (32,086,032 | ) |  | $ | 2,471 |  |  | $ | 12,576,730 |

For the Three Months Ended March 31, 2024 |  |  |  |  |  |  |
|  | Preferred Stock |  |  | Common Stock |  |  | Additional |  |  |  |  |  | Other |  |  | Total |
|  | Number of Shares |  |  | Amount |  |  | Number of Shares |  |  | Amount |  |  | Paid in Capital |  |  | Accumulated Deficit |  |  | Comprehensive Income |  |  | Stockholders’ Equity |
Balances, December 31, 2023 |  |  | - |  |  | $ | - |  |  |  | 132,667,107 |  |  | $ | 13,266 |  |  | $ | 30,684,943 |  |  | $ | (15,953,504 | ) |  | $ | 2,471 |  |  | $ | 14,747,176 |
Issuance of shares for services |  |  | - |  |  |  | - |  |  |  | 3,339 |  |  |  | - |  |  |  | 4,500 |  |  |  | - |  |  |  | - |  |  |  | 4,500 |
Stock-based compensation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 183,200 |  |  |  | - |  |  |  | - |  |  |  | 183,200 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,024,465 | ) |  |  | - |  |  |  | (2,024,465 | )
Balances, March 31, 2024 |  |  | - |  |  |  | - |  |  |  | 132,670,446 |  |  | $ | 13,266 |  |  | $ | 30,872,643 |  |  | $ | (17,977,969 | ) |  | $ | 2,471 |  |  | $ | 12,910,411 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6
Table of Contents

374Water Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2025 and 2024 (Unaudited)

Cash Flows from Operating Activities |  | 2025 |  |  | 2024 |
Net loss |  | $ | (3,698,414 | ) |  | $ | (2,024,465 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  | 164,004 |  |  |  | 24,560 |
Non-cash lease expense |  |  | 28,704 |  |  |  | - |
Issuance of common stock for services |  |  | 66,900 |  |  |  | 4,500 |
Stock-based compensation |  |  | 709,463 |  |  |  | 183,200 |
Increase in inventory reserve |  |  | - |  |  |  | 50,000 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 175,630 |  |  |  | (19,532 | )
Unbilled accounts receivable |  |  | 14,640 |  |  |  | (277,056 | )
Other receivables |  |  | (510,410 | ) |  |  | 5,588 |
Inventory |  |  | (175,080 | ) |  |  | (374,981 | )
Contract assets |  |  | (60,392 | ) |  |  | - |
Prepaid expenses |  |  | 93,097 |  |  |  | (340,280 | )
Other assets |  |  | 5,000 |  |  |  | - |
Accounts payable and accrued expenses |  |  | (86,866 | ) |  |  | 183,424 |
Accrued bonus |  |  | (190,000 | ) |  |  | - |
Accrued contract loss provision |  |  | - |  |  |  | 100,000 |
Unearned revenue |  |  | (27,683 | ) |  |  | 2,768 |
Other liabilities |  |  | 20,719 |  |  |  | (26,379 | )
Operating lease liability |  |  | (23,789 | ) |  |  | - |
Net Cash Used In Operating Activities |  |  | (3,494,477 | ) |  |  | (2,508,653 | )
Cash Flows from Investing Activities |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  | (297,322 | ) |  |  | - |
Increase in intangible assets |  |  | - |  |  |  | (590 | )
Net Cash Used In Investing Activities |  |  | (297,322 | ) |  |  | (590 | )
Cash Flows from Financing Activities |  |  |  |  |  |  |  |
Proceeds from the exercise of stock options |  |  | 24,000 |  |  |  | - |
Net Cash Provided by Financing Activities |  |  | 24,000 |  |  |  | - |
Net Decrease in Cash and Cash Equivalents |  |  | (3,767,799 | ) |  |  | (2,509,243 | )
Cash and cash equivalents, Beginning of the Period |  |  | 10,651,644 |  |  |  | 10,445,404 |
Cash and cash equivalents, End of the Period |  | $ | 6,883,845 |  |  | $ | 7,936,161 |
SUPPLEMENTAL CASHFLOW DISCLOSURES: |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | - |  |  | $ | - |
Cash paid for taxes |  | $ | - |  |  | $ | - |

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

7
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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 global industrial technology and services company providing innovative solutions addressing global organic waste destruction/treatment and waste management issues within the Municipal, Federal, and Industrial markets. 374Water offers our proprietary AirSCWO system, which is designed to efficiently destroy and mineralize a broad spectrum of non-hazardous and hazardous organic wastes producing safe dischargeable water streams, safe mineral effluent, safe vent gas, and recoverable heat energy. Importantly, our AirSCWO system eliminates recalcitrant organic wastes without creating waste byproducts. Our AirSCWO system effectively converts solid and liquid wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., “per-and polyfluoroalkyl substances” or “PFAS”) into recoverable resources including water, minerals, and heat energy, by focusing on waste as a valuable resource.

In the first quarter of fiscal year 2025, 374Water continued to build on the strategic plan implemented in 2024. During the first quarter, we continued to execute our plan towards reaching critical business milestones. Our first quarter 2025 achievements to date include (i) continuing ruggedizing and optimizing our AirSCWO system to effectively and continuously process a variety of organic waste streams; (ii) preparing our first commercial scale AirSCWO system at the City of Orlando for the Iron Bridge Water Reclamation Facility bio-sludge test; (iii) completing various federal waste destruction demonstrations; (iv) secured a waste destruction services contract for aqueous film forming firefighting form (“AFFF”) with the University of North Carolina at Chapel Hill Collaboratory; and (v) strengthening our leadership team and organization.

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. as of and for the year ended December 31, 2024 filed with the SEC on March 28, 2025.

The results of operations for the three months ended March 31, 2025, 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, currently inactive, each a wholly-owned subsidiary of 374 Water. Intercompany balances and transactions have been eliminated in consolidation.

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 inventory reserve, equity-based compensation, revenue recognition, and accrued loss provisions on onerous contracts, useful lives of long-lived assets, and valuation allowance against deferred tax assets.

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Receivables

Accounts Receivable, Net

Accounts receivable consist of balances due from equipment and service revenues. The Company monitors accounts receivable and provides allowances when considered necessary based on historical loss patterns, the number of days that billings are past due, an evaluation of the potential risk of loss associated with delinquent accounts, current market conditions and reasonable and supportable forecasts of future economic conditions to form adjustments to historical loss patterns. At March 31, 2025 and December 31, 2024, accounts receivable were considered to be fully collectible but in accordance with the allowance for credit losses, the Company recorded an allowance for credit losses based on a reserve of current and aged receivables which was not significant at March 31, 2025 and December 31, 2024.

Unbilled Accounts Receivable

Unbilled accounts receivable consist of balances due from revenues earned but not yet billed related to one customer contract for an equipment sale and one customer contract for a full-scale demonstration completed in January 2025.

Inventory, Net

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. Further, as we continue to hence and develop are AirSCWO systems we may replace materials and parts with upgrades to enhance the units. If it is not probable that the replacement part will be used, we establish a reserve against the material or part or dispose of it. 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. Based on our evaluation we estimated an inventory allowance of $50,000 at both March 31, 2025 and December 31, 2024.

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Property and Equipment

Property and Equipment is recorded at cost. Depreciation is computed using the straight-line method and the estimated useful life of the asset. Expenses for maintenance and repairs are charged to expense as incurred.

The following table presents property and equipment at March 31, 2025 and December 31, 2024:

|  | March 31, 2025 |  |  | December 31, 2024 |
Computers |  | $ | 19,977 |  |  | $ | 19,977 |
Equipment |  |  | 578,352 |  |  |  | 366,400 |
Equipment – Demo System |  |  | 2,356,041 |  |  |  | 2,298,666 |
Vehicles |  |  | 87,300 |  |  |  | 59,306 |
Total property and equipment |  |  | 3,041,670 |  |  |  | 2,744,349 |
Less: accumulated depreciation |  |  | (322,438 | ) |  |  | (176,778 | )
Total property and equipment, net |  | $ | 2,719,232 |  |  | $ | 2,567,571 |

We completed the manufacturing and fabrication of one of our AirSCWO systems that we will be using for full-scale wastewater treatment demonstration purposes (“Demo System”). We have capitalized the material and labor costs incurred to develop this Demo System, and had previously classified these costs within inventory. In the first quarter of 2024, we executed a contract with the City of Orlando, Florida to deploy the Demo System as part of a full-scale demonstration. We began the set up and commissioning process of this Demo System in the third quarter of 2024 which was completed in October 2024. We began depreciating the Demo System over an estimated life of five years during the last calendar quarter of 2024. We expect to continue to develop and enhance this unit as we perform our demonstrations and continue progressing towards commercialization. Upgrades and enhancements that will improve the operational efficiency of the unit itself will be capitalized.

Depreciation expense for the three months ended March 31, 2025 and 2024 was $145,661 and $156,002, respectively.

Depreciation expense is presented as follows on the unaudited condensed consolidated statement of operations:

|  | March 31, 2025 |  |  | March 31, 2024 |
Cost of revenues |  | $ | 40,327 |  |  | $ | - |
General and administrative |  |  | 105,334 |  |  |  | 156,002 |
Total depreciation expense |  |  | 145,661 |  |  |  | 156,002 |

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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. 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, purchases, accounts receivable and accounts payable. Two customers made up approximately 94% of total revenues for the three months ended March 31, 2025 and one customer made up 94% of total revenues for the three months ended March 31, 2024.

At March 31, 2025, and December 31, 2024, two customers comprised 91% and three customers accounted for 89% of our outstanding accounts receivable, respectively.

At March 31, 2025, and December 31, 2024, two customers and one customer comprised our unbilled receivables. These customers comprise the majority of our revenue. The loss of a significant customer could adversely affect the results of our operations.

During the three months ended March 31, 2024, the Company purchased a substantial portion of manufacturing services from one third party vendor, Merrell Bros Fabrication, LLC (“Merrell Bros.”) (see Note 7).

Refer to Note 8 for a license agreement we have with Duke University for the SCWO technology used in our systems.

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 generates revenue from the sale of equipment (AirSCWO units) and services, specifically the completion of full-scale demonstrations and treatability studies. In the case of equipment revenues, the Company’s performance obligations are satisfied over time over the life of the contract which are typically long-term fixed price contracts. 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. Equipment sale related contract revenues are recognized in the proportion that contract costs incurred bear to total estimated costs. This method is used because management considers the input method to be the best available measure of progress on these contracts.

Changes in our overall expected cost estimates are recognized as a cumulative adjustment for the inception-to-date effective of such change. If these changes in estimates result in a possible loss being incurred on the contract, we accrue for such a loss in the period such an outcome becomes probable.

Services revenues related to treatability studies are recognized when all five revenue recognition criteria have been completed which is generally when we deliver a completed treatability study report to the customer.

In late 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 unit at the facility. Further, the Company will operate and maintain the AirSCWO unit for a period of approximately three months and is required to treat no less than 193 metric tons of wastewater during the three month period. Lastly, the Company will decommission, disassemble and demobilize the AirSCWO unit after the contract period. The Company will receive $812,000 as consideration for the full-scale demonstration.

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In accordance with ASC 606-10-25-21, we have concluded that the Demo Contract includes one performance obligation the full-scale demonstration. The system design, site preparation, installation, commissioning and decommissioning represent fulfillment activities versus separate performance obligations. At March 31, 2025 and December 31, 2024, we have accounted for such costs as contract costs under ASC 340-40 (see below). 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 simultaneously to the Company’s performance, which will commence in 2025.

We plan to invoice the City of Orlando in accordance with the contract terms. Invoices are due within thirty days of receipt. At March 31, 2025, we have invoiced and collected $170,000 which is included in unearned revenue. 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.

During the three months ended March 31, 2025, we completed a full-scale demonstration for another customer. The contract with this customer included three performance obligations: i) treatability studies, ii) full-scale demonstration and iii) a technical report summarizing the results of the full-scale demonstration. We have allocated the transaction price of approximately $498,000 among the performance obligations using stand-alone selling price (“SASP”) for the treatability study, cost-plus-margin for the technical report and the residual approach in the case of the full-scale demonstration. Under the residual approach, the stand-alone selling price is estimated after subtracting the sum of the observable SASP allocated to the other performance obligations within the contract. We do not have a history of selling full-scale demonstrations and a technical report separately to our customers. At March 31, 2025, the delivery of the technical report is the only remaining performance obligation which approximately $72,000 of the contract transaction price has been allocated. We anticipate this performance obligation to be completed in the second quarter of 2025.

During the three months ended March 31, 2025, we recognized as revenue approximately $25,000 and $376,000 for the completion of a treatability study and the full-scale demonstration, respectively. We have not yet billed for the full-scale demonstration and therefore, our unbilled receivables include the $376,000 at March 31, 2025.

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. General, selling, and administrative costs are charged to expenses as incurred. At March 31, 2025, we have capitalized an aggregate of $197,043 of costs incurred to date related to the following: (i) third-party costs totaling $60,393 related to the technical report to be delivered on the contract discussed above in the second quarter of 2025, which will be expensed at that time, and (ii) $136,651 of fulfillment related activities for the Demo Contract with the City of Orlando which will be expensed over the three month demonstration period expected to begin in the second quarter of 2025.

At December 31, 2024, contract costs were comprised of the $136,651 fulfillment related activities for the Demo Contract with the City of Orlando.

See further revenue related disclosures in Note 5.

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Accrued Contract Loss Provision and Onerous Contracts

Onerous contracts are those where the costs to fulfill a contract exceed the consideration expected to be received under the contract. The revenue standard does not provide guidance on the accounting for onerous contracts or onerous performance obligations. U.S. GAAP contains other applicable guidance on the accounting for onerous contracts, and those requirements should be used to identify and measure onerous contracts.

Our outstanding equipment manufacturing contract is a fixed price contract. Due to the nature of the contract, including customer specific equipment design, we applied ASC 605-35, Revenue Recognition—Provision for Losses on Construction-Type and Production-Type Contract (ASC 605-35). ASC 605-35 requires the recognition of a liability for anticipated losses on contracts prior to those losses being incurred when a loss is probable and can be estimated.

At March 31, 2025, and December 31, 2024, we evaluated the total costs incurred on this contract to date and the estimated costs we anticipate incurring to complete the contract. Based on this analysis, we accrued a total accrued loss provision of $1,000,000 at March 31, 2025 and December 31, 2024, respectively, which has been presented on the accompanying unaudited condensed consolidated balance sheets. Any changes to the estimated loss provision are reflected within cost of revenues on the accompanying unaudited condensed consolidated statements of operations.

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 $533,587 and $535,147 for the three months ended March 31, 2025 and 2024, respectively.

Loss Per Share

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 three- months ended March 31, 2025 and 2024 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 of 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. At March 31, 2025 and March 31, 2024, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive: options for 16,409,062 and 10,740,250 shares of common stock, 14,675,244 and 1,235,000 of outstanding common stock warrants and unvested restricted stock units of 5,931,576 and 0, respectively.

Reclassifications

We have made certain reclassifications to prior period amounts presented on our consolidated statements of operations to conform to the current period presentation with no impact to net loss or loss per share. These reclassifications consisted of reclassifying $138,586 of stock-based compensation expense from general and administrative expenses to compensation and related expenses.

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Recent Accounting Pronouncements - Not Yet Adopted

In December 2023 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 requires public business entities to disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages. The guidance requires the rate reconciliation to include specific categories and provides further guidance on disaggregation of those categories based on a quantitative threshold equal to 5% or more of the amount determined by multiplying pretax income (loss) from continuing operations by the applicable statutory rate. For entities reconciling to the US statutory rate of 21%, this would generally require disclosing any reconciling items that impact the rate by 1.05% or more. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 (generally, calendar year 2025) and effective for all other business entities one year later. Effective January 1, 2025, we adopted ASU 2023-09 on a prospective basis. The adoption of ASU 2023-09 did not have a material impact on these unaudited condensed consolidated financial statements.

ASU 2024-03, Disaggregation of Income Statement Expenses (“DISE”). In November 2024, the FASB issued a new accounting standard to improve the disclosures about an entity’s expenses and address requests from investors for more detailed information about the types of expenses included in commonly presented expense captions. The new standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with retrospective application permitted. The Company is evaluating the disclosure requirements related to the new standard and its impact on our consolidated financial statements.

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

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 financial statements are issued. At March 31, 2025, the Company had working capital of $8,734,300 and an accumulated deficit of $32,086,032. For the three months ended March 31, 2025, the Company incurred a net loss of $3,698,414 and used $3,494,477 of net cash in operations for the period. These conditions raise substantial doubt regarding our ability to continue as a going concern.

Presently, the Company will need additional debt or equity financing or a combination of both to continue its operations and meet its financial obligations for at least the next twelve months from the date these unaudited condensed interim consolidated financial statements were issued and beyond. We may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding. We expect to incur continuing losses and negative cash flows from operations for the foreseeable future.

Since inception, we have financed our operations principally through the sale of debt and equity securities and operating cash flows. We have an at-the-market (ATM) equity offering under which we may issue up to $100 million of common stock, subject to applicable law. At March 31, 2025, approximately $86,154,000 remains available to be sold in the Company’s at-the-market offerings, subject to various limitations. During the three months ended March 31, 2025 and 2024, we did not use the ATM to raise capital. The Company is evaluating strategies to obtain the required additional funding for future operations.

During 2024, we closed on an offering of shares of common stock and common stock warrants resulting in net proceeds of approximately $11,393,000.

Any additional debt or equity financing that the Company obtains may substantially dilute the ownership held by our existing stockholders. The economic dilution to our shareholders will be significant if our stock price does not materially increase, or if the effective price of any sale is below the price paid by a particular investor. The Company may be unable to access further equity or debt financing when needed or obtain additional financing under acceptable terms, if at all.

We may decide to raise additional capital through a variety of sources in the short-term and in the long-term, including but not limited to:

| ☐ | the public equity markets;
| ☐ | private equity financings;
| ☐ | collaborative arrangements;
| ☐ | asset sales; and/or
| ☐ | public or private debt.

If the Company is unable to raise additional capital, there is a risk that the Company could be required to discontinue or significantly reduce the scope of its operations. These unaudited condensed interim consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Note 4 – Inventory, Net

Inventory, net consists of:

Name |  | Balance at March 31, 2025 |  |  | Balance at December 31, 2024 |
Raw materials |  | $ | 1,926,554 |  |  | $ | 1,751,474 |
Work-in-process |  |  | - |  |  |  | - |
Less: inventory reserves |  |  | (50,000 | ) |  |  | (50,000 | )
Total |  | $ | 1,876,554 |  |  | $ | 1,701,474 |

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Note 5 – Revenue

The following is a summary of our revenues by type for the three months ended March 31, 2025 and March 31, 2024:

Name |  | March 31, 2025 |  |  | % |  |  | March 31, 2024 |  |  | % |
Equipment revenue |  | $ | 134,410 |  |  |  | 25 | % |  | $ | 296,096 |  |  |  | 94 | %
Service revenue |  |  | 408,690 |  |  |  | 75 | % |  |  | 19,182 |  |  |  | 6 | %
Total |  | $ | 543,100 |  |  |  | 100 | % |  | $ | 315,278 |  |  |  | 100 | %
Unearned Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

The following is a summary of our unearned revenue activity for the three months ended March 31, 2025 and year ended December 31, 2024:

Name |  | Balance at March 31, 2025 |  |  | Balance at December 31, 2024 |
Unearned revenue at beginning of the period |  | $ | 227,683 |  |  | $ | 130,000 |
Billings deferred |  |  | - |  |  |  | 197,683 |
Refundable deposit returned |  |  | - |  |  |  | (100,000 | )
Recognition of prior unearned revenue |  |  | (27,683 | ) |  |  | - |
Unearned revenue at end of period |  | $ | 200,000 |  |  | $ | 227,683 |

At March 31, 2025 , we anticipate recognizing approximately $170,000 of the unearned revenue in 2025 which has been presented as a current liability at March 31, 2025. The remaining balance of $30,000 has been classified as a long-term liability as the timing of revenue recognition is unknown.

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Unbilled Accounts Receivable

The following is a summary of our unbilled accounts receivable activity for the three months ended March 31, 2025 and the year ended December 31, 2024:

|  | Balance at |  |  | Balance at |
Name |  | March 31, 2025 |  |  | December 31, 2024 |
Unbilled accounts receivable at beginning of the period |  | $ | 1,653,007 |  |  | $ | 1,494,553 |
Services performed but not yet billed |  |  | 510,410 |  |  |  | 217,666 |
Services billed |  |  | - |  |  |  | (59,212 | )
Unbilled accounts receivable at end of the period |  | $ | 2,163,417 |  |  | $ | 1,653,007 |

Pursuant to contractual terms with our customers, we anticipate billing the unbilled accounts receivable during our 2025 fiscal year.

Note 6 – Stockholder’ Equity

Issuance of Stock for Services

During the three months ended March 31, 2025, we issued 180,986 fully vested shares of common stock to service providers with a fair value of $66,900 based on the market price of our common stock on date of grant.

During the three months ended March 31, 2024, we issued 3,339 fully vested shares of common stock to a service provider with a fair value of $4,500 based on the market price of our common stock on date of grant.

Common Stock for Stock Option Exercises

During the three months ended March 31, 2025, we issued an aggregate of 200,000 shares of common stock for stock option exercises that resulted in cash proceeds of $24,000.

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Stock-based compensation

2021 Plan

The Company has reserved 24,000,000 shares of common stock or common stock equivalents to be issued under our 2021 Equity Incentive Plan (the “2021 Plan”) to the Company’s employees and non-employee services providers. At March 31, 2025, the Company has issued a total of 18,114,133 stock options and restricted stock units under the 2021 Plan with 5,885,867 reserved shares remaining for issuance.

During the three months ended March 31, 2025, and 2024, the Company recorded stock-based compensation of $460,512 and $183,200, respectively, related to granted options to employees and various consultants expected to vest. During the three months ended March 31, 2025, $428,678 was charged as compensation and related expenses and $31,834 as research and development expenses in the accompanying unaudited condensed consolidated statements of operations. During the three months ended March 31, 2024, $138,586 was charged as compensation and related expenses and $44,614 as research and development expenses in the accompanying unaudited condensed consolidated statements of operations.

Stock Options

Stock option activity for the three months ended March 31, 2025 is summarized as follows:

|  |  |  |  |  |  |  |  |  |  | Weighted |
|  |  |  |  | Weighted |  |  |  |  |  | Average |
|  |  |  |  | Average |  |  | Aggregate |  |  | Remaining |
|  | Shares |  |  | Exercise Price |  |  | Intrinsic Value |  |  | Contractual Life (Years) |
Options outstanding at December 31, 2024 |  |  | 15,843,116 | * |  | $ | 0.94 |  |  | $ | 3,324,000 |  |  |  | 5.95 |
Granted |  |  | 908,659 |  |  |  | 0.66 |  |  |  | - |  |  |  | - |
Exercised |  |  | (200,000 | ) |  |  | 0.12 |  |  |  | - |  |  |  | - |
Expired/forfeit |  |  | (142,713 | ) |  |  | 2.96 |  |  |  | - |  |  |  | - |
Options outstanding at March 31, 2025 |  |  | 16,409,062 | * |  | $ | 0.92 |  |  | $ | 1,274,000 |  |  |  | 5.98 |
Options Exercisable at March 31, 2025 |  |  | 8,150,185 | * |  | $ | 0.60 |  |  | $ | 1,274,000 |  |  |  | 2.74 |

*At March 31, 2025 and December 31, 2024, the options outstanding and exercisable include 5,700,00 and 5,900,000 granted in connection with a merger that occurred in 2021, respectively, which were not granted under the 2021 Plan and include 275,000 of options granted in 2024 pursuant to a legal settlement and were not granted under the 2021 Plan.

During the three months ended March 31, 2025, the options granted were primarily to our Chief Financial Officer and key employees. The weighted average grant-date fair value of the granted options was $0.33.

Of the total options outstanding at March 31, 2025, 3,708,288 of the options include performance conditions. The performance-based options vest as follows: 50% vest upon the achievement of operating profit, as defined in the employment agreements, and 50% upon the achievement of a revenue target of $100 million by the end of fiscal year 2028. The performance-based options with the revenue target begin vesting once the Company achieves $15 million in revenue for a fiscal year. Vesting will occur on January 31 of each year through January 31, 2029. The number of options that vest is based on the proportionate percentage of each fiscal year’s revenue to the $100 million target. For example, if our annual revenue for fiscal year 2026 is $20 million, 20% of the restricted stock units with the revenue performance condition will vest on January 31, 2027.

At March 31, 2025, total unrecognized compensation expense for service based and performance-based options was $3,315,257 and $2,821,770, respectively. The unrecognized service-based expense will be recognized over a weighted-average period of 2.89 years. The unrecognized expense associated with the performance-based options will be expensed when it becomes probable that the performance obligations will be met.

At March 31, 2025, intrinsic value is computed based on the difference between options exercise price and the market price of our common stock at March 31, 2025 of $0.34 per share multiplied by the total common stock options outstanding or exercisable whose market price exceeds the exercise price.

During the three months ended March 31, 2025, 200,000 stock options issued outside of the 2021 Plan were exercised with an exercise price of $0.12 for total proceeds to the Company of $24,000.

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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:

|  | March 31, |  |  | March 31, |
|  | 2025 |  |  | 2024 |
Expected volatility |  |  | 67.81 – 69.25% |  |  |  | 26.36 – 26.38% |
Expected term (years) |  |  | 6.25 Years |  |  |  | 6.25 Years |
Risk-free rate |  |  | 4.14 - 4.51% |  |  |  | 4.09 – 4.31% |
Dividend rate |  |  | 0.00% |  |  |  | 0.00% |

Restricted Stock Units

During the three months ended March 31, 2025, the Company granted an aggregate of 2,382,284 unvested restricted stock units under the 2021 Plan as follows: 617,284 to our Chief Financial Officer (“CFO”) pursuant to an employment agreement and 1,765,000 to non-executive key employees of the Company.

The unvested restricted stock units granted to our CFO consist of 308,642 units with time-based vesting provisions and 308,642 units with performance-based vesting provisions. The performance-based units vest as follows: 50% vest upon the achievement of Operating Profit, as defined in the employment agreements, and 50% upon the achievement of revenue targets between $15 and $100 million by the end of fiscal year 2028. The restricted stock units with the revenue target begin vesting once the Company achieves $15.0 million in revenue for a fiscal year. Vesting will occur on January 31 of each year through January 31, 2029. The number of restricted stock units that vest is based on the proportionate percentage of each fiscal year’s revenue to the $100 million target. For example, if our annual revenue for fiscal year 2026 is $20 million, 20% of the restricted stock units with the revenue performance condition will vest on January 31, 2027. The 1,765,000 restricted stock units granted to non-executive key employees are all time-based vesting and vest as follows: 50% on the one-year grant-date anniversary with the remaining vesting ratably over a period of thirty-six months.

The grant-date fair value of the restricted stock units was determined using the market price of our common stock on the date of grant which ranged from $0.62 to $0.63.

A summary of our outstanding nonvested restricted stock units is as follows:

|  |  |  |  | Weighted- Average |
|  |  |  |  | Grant Date |
|  | Amount |  |  | Fair Value |
Nonvested, beginning of the year |  |  | 3,549,292 |  |  | $ | 1.23 |
Granted |  |  | 2,382,284 |  |  |  | 0.62 |
Vested |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |
Nonvested, end of the year |  |  | 5,931,576 |  |  | $ | 0.98 |

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At March 31, 2025, we have $2,524,952 of unrecognized stock-based compensation associated with the restricted stock units with a performance condition which will be recognized when the performance conditions are probable of being met. At March 31, 2025, the Company had $2,749,402 of unrecognized stock-based compensation associated with the time vesting restricted stock units which will be recognized over a weighted-average period of approximately 3.43 years. During the three months ended March 31, 2025, our stock based compensation associated with the time-based restricted stock units totaled $248,951, of which $216,982 was charged as compensation and related expenses, and $31,969 as research and development expenses in the accompanying unaudited condensed consolidated statements of operations.

Stock Warrants

At March 31, 2025, there were 14,675,244 warrants outstanding which relate to and offering completed in November 2024, where investors were offered one and a half warrants for every one common share purchased in the offering at an exercise price of $1.125 per share.

During the three months ended March 31, 2025 and 2024, no warrants were issued or exercised.

A summary of warrant activity for the three months ended March 31, 2025, is as follows:

|  | Shares |  |  | Weighted Average Exercise Price |  |  | Aggregate Intrinsic Value |  |  | Weighted Average Remaining Contractual Life (Years) |
Outstanding and exercisable at December 31, 2024 |  |  | 14,675,244 |  |  |  | 1.13 |  |  | $ | - |  |  |  | 4.88 |
Issued |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Outstanding and exercisable at March 31, 2025 |  |  | 14,675,244 |  |  |  | 1.13 |  |  | $ | - |  |  |  | 4.63 |

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Note 7 - Related Party Transactions

On July 7, 2021, we entered into a manufacturing and services agreement (the “M&S Agreement”) to fabricate and manufacture the AirSCWO systems with Merrell Bros. Fabrication, LLC (“Merrell Bros.”). As part of the agreement, the Company appointed Terry Merrell, one of the owners of Merrell Bros., to its board of directors. On December 18, 2024, Mr. Merrell notified the Company of his intention to resign from the Company's Board of Directors effective December 31, 2024, to allow him to focus more on his core business responsibilities at Merrell Bros. The M&S Agreement terminated on its original expiration date of July 7, 2024.

On March 27, 2024, we executed a supplemental manufacturing and services agreement (the “Supplemental M&S Agreement”) with Merrell Bros. as Merrell Bros. indicated to us their intent to not renew the Original M&S Agreement and we indicated our desire to relocate to a larger manufacturer facility with more square footage dedicated to expanding our manufacturing operations (see Note 9). The Supplemental M&S Agreement became effective on July 7, 2024 and replaced the Original M&S Agreement. Under the Supplemental M&S Agreement, our relationship and the manufacturing services provided by Merrell Bros. will continue an as needed basis based on statements of work to be agreed upon by both parties to fulfill future and current manufacturing orders. The term of the Supplemental M&S Agreement is one year from July 7, 2024 with a one-year renewal upon a mutually executed written extension. Either party may terminate this Supplement M&S Agreement upon written notice of such a termination, specifying the extent to which performance of work is terminated and the effective date of termination. The Supplemental M&S Agreement terminated during the year ended December 31, 2024.

During the three months ended March 31, 2025 and 2024, the Company incurred $0 and $130,321, respectively, in related party expenses related to the manufacturing of our AirSCWO systems. At March 31, 2025 and December 31, 2024, we did not have any outstanding obligations owed to Merrell Bros. for these services.

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Note 8 – Commitments and Contingencies

License Agreement

The patented technology underlying 374Water’s supercritical water oxidation (SCWO) units, which was developed principally through the efforts of Messrs. Nagar and Deshusses at the facilities of Duke University, Durham, North Carolina (“Duke”), where Dr. Deshusses 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 Note 5). 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. At March 31, 2025, the Company has not incurred any expenses in connection with this License Agreement. The Company may terminate the license agreement anytime by providing Duke 60 days’ written notice.

Legal Settlement

On November 4, 2024, our former Chief Executive Officer and Chairman of the Board filed a complaint against the Company alleging unpaid wages and a bonus. Management and the board of directors, in consultation with its attorneys, have estimated a potential loss associated with this complaint of approximately $335,000. At December 31, 2024, we established an accrual for legal settlement of this amount as presented on the consolidated balance sheet. This legal matter was officially settled on April 2, 2025 for the amount accrued. We have agreed to pay $110,000 of the settlement within ten calendar days of certain conditions being met by the plaintiff, as defined in the settlement agreement, with the remaining settlement being paid in equal statements through December 31, 2025. As of the date of this filling, we have paid the agreed upon $110,000 as all plaintiff conditions were met.

We note that in the ordinary course of business we may be the subject of, or party to, various pending or threatened legal actions which could result in a material adverse outcome for which the related damages may not be estimable. We do not believe any legal action would have a significant impact on the financials other than the matter disclosed above. However, there is inherent uncertainty regarding such matters.

Note 9 - Segment Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly provided to the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer comprise the Company’s CODMs. The CODMs review financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The CODMs use consolidated net income (loss) to assess performance, evaluate cost optimization, and allocate resources, including personnel-related and financial or capital resources, in the annual budget and forecasting process, as well as budget-to-actual variances on a monthly basis. As such, the Company has determined that it operates as one operating and reportable segment.

The significant expenses regularly reviewed by the CODMs are consistent with those reported on the Company's unaudited condensed consolidated statement of operations and expenses are not regularly reviewed on a more disaggregated basis for assessing segment performance and deciding how to allocate resources. The CODMs do not regularly review total assets for our single reportable segment as total assets are not used to assess performance or allocate resources.

Note 10 - Subsequent Events

On April 13, 2025, the Company appointed Stephen Jones to the Company’s Board of Directors, effective April 14, 2025. Mr. Jones, age 63, is being appointed to the Board of Directors to fill the vacancy on the Board of Directors. From March 2015 through October 2020, Mr. Jones was President, Chief Executive Officer and a director of Covanta Holding Corporation (formerly NYSE: CVA, now owned by private equity) (“Covanta”), a leading global provider of sustainable waste and energy solutions. Prior to joining Covanta in January 2015, Mr. Jones was employed from 1992 through September 2014 by Air Products and Chemicals, Inc. (“Air Products”), a global supplier of industrial gases and equipment. Mr. Jones held a variety of senior-level management positions at Air Products including in the company’s tonnage gases, equipment, energy and industrial chemicals businesses, culminating with his role as Air Products’ China president based at the company’s office in Shanghai. Mr. Jones is a director of Tronox Holdings plc, an industrial and chemical company (NYSE: TROX), and chairman of the board of directors of Badger Infrastructure Solutions Ltd., a Canadian infrastructure solutions company specializing in nondestructive excavation services (TSE: BDGI). Mr. Jones also serves as a special advisor to the supervisory board of Hitachi Zosen Inova AG, a global cleantech company. Prior to joining Air Products in 1992, Mr. Jones practiced corporate law at Dechert LLP in Philadelphia, PA, primarily in the area of mergers and acquisitions.

Pursuant to an employment agreement executed with our Chief Technology Officer on March 31, 2025, our board of directors approved the following equity compensation grant under our 2021 Plan on April 30, 2025:

1,515,152 restricted stock units and 1,515,152 stock options vesting as follows: (a) with respect to 757,576 restricted stock and 757,576 shares subject to stock options, 25% vest on the first anniversary of the CTO’s employment agreement, and the remaining 75% vest in equal increments on the last day of every month thereafter over the following 36 months, subject to the CTO’s continued employment with the Company on each vesting date: and (b) with respect to the remaining 757,576 restricted stock and 757,576 stock options, each vest in accordance with a performance based milestone set forth by the Company and defined in the CTO’s employment agreement. See Note 6 for further disclosures on the performance-related milestones. The stock options have an exercise price of $0.33 and a ten-year contractual term.

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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 2024 Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 28, 2025 (the “2024 Form 10-K”), 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

In preparing the condensed consolidated financial statements, we have made estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs, and expenses, and the disclosure of contingent assets and liabilities as in our condensed consolidated financial statements. Actual results may differ from these estimates. A summary of our critical accounting estimates and policies is included in our 2024 Form 10-K under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." During the three months ended March 31, 2025, there have been no significant changes to these estimates and policies previously disclosed in our 2024 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.

Overview

374Water Inc. (the “Company”, “374Water”, “We”, or “Our”) is a global industrial technology and services company providing innovative solutions addressing global organic waste destruction/treatment and waste management issues within the Municipal, Federal, and Industrial markets. 374Water offers our proprietary AirSCWO system, which is designed to efficiently destroy and mineralize a broad spectrum of non-hazardous and hazardous organic wastes producing safe dischargeable water streams, safe mineral effluent, safe vent gas, and recoverable heat energy. Importantly, our AirSCWO system eliminates recalcitrant organic wastes without creating waste byproducts. Our AirSCWO system effectively converts solid and liquid wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., “per-and polyfluoroalkyl substances” or “PFAS”) into recoverable resources including water, minerals, and heat energy, by focusing on waste as a valuable resource.

In the first quarter of fiscal year 2025, 374Water continued to build on the strategic plan implemented in 2024. During the first quarter, we continued to execute our plan towards reaching critical business milestones. Our first quarter 2025 achievements to date include (i) continuing ruggedizing and optimizing our AirSCWO system to effectively and continuously process a variety of organic waste streams; (ii) preparing our first commercial scale AirSCWO system at the City of Orlando for the Iron Bridge Water Reclamation Facility bio-sludge test; (iii) completing various federal waste destruction demonstrations; (iv) secured a waste destruction services contract for aqueous film forming firefighting form (“AFFF”) with the University of North Carolina at Chapel Hill Collaboratory; and (v) strengthening our leadership team and organization.

374Water has a robust plan to scale revenue, operations, and capitalize our business. During 2025, we expected 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 (“OC San”) in Fountain Valley, CA; 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 Waste Destruction Services (“WDS”) hub(s) at partner Treatment, Storage, and Disposal Facilities (“TSDF”).

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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 unaudited condensed consolidated financial statements:

Three Months Ended March 31, 2025, as Compared to the Three Months Ended March 31, 2024

|  | Three Months Ended March 31, |
|  | 2025 |  |  | 2024 |  |  | $ Change |  |  | % Change |
Revenues |  | $ | 543,100 |  |  | $ | 315,278 |  |  | $ | 227,822 |  |  |  | 72 | %
Cost of revenues |  |  | 404,817 |  |  |  | 617,298 |  |  |  | (212,481 | ) |  |  | (34 | )%
Gross margin |  |  | 138,283 |  |  |  | (302,020 | ) |  |  | 440,303 |  |  |  | (146 | )%
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research and development |  |  | 533,587 |  |  |  | 535,147 |  |  |  | (1,560 | ) |  |  | (0 | )%
Compensation and related expenses |  |  | 1,675,865 |  |  |  | 790,190 |  |  |  | 885,675 |  |  |  | 112 | %
Professional fees |  |  | 771,901 |  |  |  | 252,705 |  |  |  | 519,196 |  |  |  | 205 | %
General and administrative |  |  | 942,440 |  |  |  | 321,141 |  |  |  | 621,299 |  |  |  | 193 | %
Total operating expenses |  |  | 3,923,793 |  |  |  | 1,899,183 |  |  |  | 2,024,610 |  |  |  | 107 | %
Loss from operations |  |  | (3,785,510 | ) |  |  | (2,201,203 | ) |  |  | (1,584,307 | ) |  |  | 72 | %
Other income, net |  |  | 87,096 |  |  |  | 176,738 |  |  |  | (89,642 | ) |  |  | (51 | )%
Loss before income taxes |  |  | (3,698,414 | ) |  |  | (2,024,465 | ) |  |  | (1,673,949 | ) |  |  | 83 | %
Provision for income taxes |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0 | %
Net loss |  | $ | (3,698,414 | ) |  | $ | (2,024,465 | ) |  | $ | (1,673,949 | ) |  |  | 83 | %

Our business has been focused on the development and commercialization of our supercritical water oxidation (SCWO) systems. We generated $543,100 and $315,278 in revenue from equipment manufacturing services and services, specifically a full-scale demonstration and treatability studies during the three months ending March 31, 2025 and March 31, 2024, respectively. During the three months ended March 31, 2025, we completed a full-scale demonstration for a customer resulting in an increase in our service revenues of $376,000, offset by a decrease in equipment manufacturing revenue of approximately $162,000. 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 period on equipment manufacturing services.

Our general and administrative expenses increased to $942,440 during the three months ended March 31, 2025, as compared to $321,141 in the same period of 2024, primarily because of increased costs incurred related to relocating to our own short-term manufacturing facility in Florida of approximately $131,000, an increase in depreciation expense of $98,000 due to the capitalization of our owned unit in the fourth quarter 2024, and an increase in travel and related expenses of $70,000 due to our increased headcount, increase of $73,000 of investor relation expenses and $249,000 of general expenses due to increased headcount and expenses associated with our physical locations.

Our compensation and related expenses increased to $1,675,865 during the three months ended March 31, 2025, as compared to $790,190 in the same period of 2024, primarily because of increased payroll and fringe benefit expenses due to increase in headcount and our executive team and an increase in our stock based compensation of approximately $538,000.

Our professional fees increased to $771,901 during the three months ended March 31, 2025, as compared to $252,705 in the same period of 2024, primarily because of increased legal fees as a result of a litigation settlement and recruiting fees related to the increase in our headcount.

Our research and development expenses decreased to $533,587 during the three months ended March 31, 2025, as compared to $535,147 in the same period of 2024, primarily due to a temporary reduction in personal in this department during the current period, offset by an increase in stock based compensation of approximately $49,000. We anticipate our research and development expenses to increase as we build up our resources to continue our efforts to commercializing our systems.

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Liquidity, Capital Resources and Going Concern

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 financial statements are issued. At March 31, 2025, the Company had working capital of $8,734,300 and an accumulated deficit of $32,086,032. For the three months ended March 31, 2025, the Company incurred a net loss of $3,698,414 and used $3,494,477 of net cash in operations for the period. These conditions raise substantial doubt regarding our ability to continue as a going concern.

Presently, the Company will need additional debt or equity financing or a combination of both to continue its operations and meet its financial obligations for at least the next twelve months from the date these unaudited condensed interim consolidated financial statements were issued and beyond. We may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding. We expect to incur continuing losses and negative cash flows from operations for the foreseeable future.

Since inception, we have financed our operations principally through the sale of debt and equity securities and operating cash flows. We have an at-the-market (ATM) equity offering under which we may issue up to $100 million of common stock, subject to applicable law. During the three months ended March 31, 2025 and 2024, we did not use the ATM to raise capital. The Company is evaluating strategies to obtain the required additional funding for future operations.

On November 18, 2024, we closed on an offering of shares of common stock and common stock warrants resulting in net proceeds of approximately $11,393,000.

Any additional debt or equity financing that the Company obtains may substantially dilute the ownership held by our existing stockholders. The economic dilution to our shareholders will be significant if our stock price does not materially increase, or if the effective price of any sale is below the price paid by a particular investor. The Company may be unable to access further equity or debt financing when needed or obtain additional financing under acceptable terms, if at all.

We may decide to raise additional capital through a variety of sources in the short-term and in the long-term, including but not limited to:

| ☐ | the public equity markets;
| ☐ | private equity financings;
| ☐ | collaborative arrangements;
| ☐ | asset sales; and/or
| ☐ | public or private debt.

If the Company is unable to raise additional capital, there is a risk that the Company could be required to discontinue or significantly reduce the scope of its operations. These unaudited condensed interim consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Cash Flows

We used $3,494,477 of cash in operating activities for the three months ended March 31, 2025 compared to $2,508,653 of cash used in operating activities for the corresponding period in 2024 an increase of $985,824. The increase in cash used in operating activities was primarily due to the increase in our net loss of $1,673,949, offset by an increase in noncash expenses of $706,811 and increase in operating cash outflows from operating assets and liabilities of $18,686. The cash used in operations was primarily to fund operations as well as our working capital requirements.

We used $297,322 of cash in investing activities for the three months ended March 31, 2025 compared to receiving $590 of cash used in financing activities for the corresponding period in 2024 an increase of $296,732. The increase in cash used by investing activities for the three months ended March 31, 2025 was primarily due a $297,322 increase in purchases of property and equipment, offset by a decrease of $590 in purchases of intangible assets.

We received $24,000 of cash from financing activities for the three months ended March 31, 2025 compared to $0 cash provided by financing activities for the corresponding period in 2024 an increase of $24,000 This increase was from proceeds received from the exercise of a stock option during the three months ended March 31, 2025.

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 the Company’s management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15I 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 Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective due to the identified material weakness in the Company’s internal controls over financial reporting caused by the lack of full-time resources in our finance and accounting department. As a result of the identified material weaknesses, we are working to establish a remediation plan, which includes additional full-time personnel with the necessary skills and expertise to enhance the Company’s financial and accounting resources and control environment.

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Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance of such reliability and may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s Annual Report on Internal Control Over Financial Reporting

Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective due to material weaknesses in our financial reporting caused by the lack of full-time resources in our finance and accounting department. As a result of the identified material weaknesses, we are working to establish a remediation plan focused on strengthening our internal controls and hiring full-time personnel with the necessary skills and expertise to enhance the Company’s financial and accounting resources and control environment.

Changes in Internal Control Over Financial Reporting

There have been no other changes in our internal control over financial reporting during the first three months of 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings.

The information set forth under the “Legal Settlement” section in Note 8 – Commitments and Contingencies, in the notes to the unaudited condensed consolidated financial statements in Item 1 of Part I of this Form 10-Q, is incorporated herein by reference.

Item 1A. Risk Factors.

You should carefully consider the following risks. These risks could materially affect our business, results of operations or financial condition, cause the trading price of our common stock to decline materially or cause our actual results to differ materially from those expected or those expressed in any forward-looking statements made by us or on our behalf. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businesses described elsewhere in our Form 10-K Report filed with the SEC on March 28, 2025.

Summary of Risk Factors

Risks Related to Our Business and General Economic Conditions

| · | A sustainable market for our products may never develop.
| · | Our ability to treat hazardous wastes on a commercially viable basis is unproven, which could have a detrimental effect on our ability to generate or sustain revenues.
| · | We have a limited operating history with no material revenues.
| · | Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management.
| · | Our products may have defects, which could damage our reputation, decrease market acceptance of our products, cause us to lose customers and revenue and result in costly litigation or liability.
| · | Our management team may not be able to successfully implement our business strategies.
| · | Our ability to generate revenue will depend in part on government contracts which expose us to the uncertainties of governmental budgetary and funding constraints and local, national and international political conditions and events.
| · | We have identified material weaknesses in our internal control over financial reporting.
| · | Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.
| · | We may be unable to obtain required licenses from third parties for product development.
| · | If we fail to manage growth or to prepare for product scalability effectively, it could have an adverse effect on our employee efficiency, product quality, working capital levels and results of operations.
| · | We may be adversely affected by the effects of inflation.
| · | We face competition in our industry, and we may be unable to attract customers and maintain a viable business.
| · | We are required to obtain permits in different areas of the world in order to utilize our products in such regions. Our need to apply for and receive permits could substantially limit our ability to operate and grow our business.
| · | We have in the past and may in the future be involved in litigation matters or other legal proceedings that are expensive and time consuming.
| · | Developments in, and compliance with, current and future environmental and climate change laws and regulations could impact our business, financial condition or results of operations.
| · | If we become subject to claims relating to handling, storage, release or disposal of hazardous materials, we could incur significant cost and time to comply.
| · | Failure to effectively treat emerging contaminants could result in material liabilities.
| · | Wastewater operations entail significant risks that may impose significant costs.
| · | We may incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees, which could reduce our profitability.
| · | We enter into various contracts in the normal course of our business, some or all of which may require us to indemnify the other party to the contract. In the event we have to perform under these indemnification provisions, it could have an adverse effect on our business, financial condition and results of operation.
| · | Natural disasters and other catastrophic events beyond our control could adversely affect our business operations and financial performance.
| · | United States trade policies and other factors beyond the Company’s control, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations.

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Risks Related to Our Financial Position and Capital Requirements

| · | We will require and may have difficulty or be unsuccessful in raising needed capital in the future to continue to operate as a going concern.
| · | Our financial results depend on successful project execution and may be adversely affected by cost overruns, failure to meet customer schedules or other execution issues.
| · | We have inadequate capital and need for additional financing to accomplish our business and strategic plans. Terms of subsequent financing, if any, may adversely impact your investment.
| · | Our research and development expenses may increase in the future.

Risks Related to Our Intellectual Property

| · | We may have difficulty in protecting our intellectual property and may incur substantial costs to defend ourselves in patent infringement litigation.
| · | We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from developing our products, require us to obtain licenses from third parties or to develop non-infringing alternatives and subject us to substantial monetary damages.
| · | We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
| · | We may need to depend on certain technologies that are licensed to us. We would not control these technologies and any loss of our rights to them could prevent us from selling our products.

Risks Related to our Reliance on Third Parties

| · | Our suppliers may fail to deliver materials and parts according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these materials and parts effectively.
| · | Failure by third parties to supply or manufacture components of our products or to deploy our systems timely or properly could adversely affect our business, financial condition and results of operations.

Risks Related to our Common Stock and Capital Structure

| · | The market price of our common stock historically has been highly volatile and is likely to continue to be volatile, and you could lose all or part of your investment.
| · | If we cannot maintain full compliance with Nasdaq listing standards, or if we cannot cure any violations within the time afforded under the Nasdaq listing standards, then we may face penalties that could significantly impact our stock price, including delisting of our stock from Nasdaq.
| · | The interests of our principal stockholders, officers and directors, who collectively beneficially own a significant amount of our common stock, may not coincide with yours and such stockholders will have the ability to control decisions with which you may disagree.
| · | Because we are a “smaller reporting company,” we may take advantage of certain scaled disclosures available to us, resulting in holders of our securities receiving less Company information than they would receive from a public company that is not a smaller reporting company.
| · | We do not intend to pay dividends on our common stock for the foreseeable future.
| · | If securities or industry analysts do not publish research about our business, or publish negative reports about our business, our share price and trading volume could decline.
| · | Future sales or potential sales of our common stock in the public market could cause our share price to decline.
| · | The market price of our common shares has been, and may continue to be, particularly volatile, and our shareholders may be unable to resell their shares at a profit.
| · | We incur costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
| · | Provisions in our Amended and Restated Certificate of Incorporation and Bylaws and of Delaware law may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.
| · | We may not regain compliance with the continued listing requirements of The Nasdaq Capital Market.

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RISK FACTORS

Risks Related to Our Business and General Economic Conditions

A sustainable market for our products may never develop.

A sustainable market for our products may never develop or may take longer to develop than we anticipate which would adversely affect our results of operations. Our products represent an emerging market, and we do not know whether our targeted customers will accept our technology or will purchase our products in sufficient quantities to allow our business to grow. To succeed, demand for our products must increase significantly in existing markets, and there must be strong demand for products that we introduce in the future.

Our ability to treat hazardous wastes on a commercially viable basis is unproven, which could have a detrimental effect on our ability to generate or sustain revenues.

The technologies we use to treat sludge, biosolids and wastewater, have never been utilized on a full-scale commercial basis. Our AirSCWO technology and systems remain in a research and development status. All of the tests conducted to date by us with respect to the technology have been performed in a limited scale or small commercial scale environment and the same or similar results may not be obtainable at competitive costs on a large-scale commercial basis. We have never employed our technology under the conditions or in the volumes that will be required for us to be profitable and we cannot predict all of the difficulties that may arise. Accordingly, our technology may not perform successfully on a commercial basis and we may never generate any revenues or be profitable. Even if we are able to fully commercialize our products, we may not be able to grow our business at scale. Due to the uncertainties and potential difficulties to level up our technology to be deployed on a large-scale commercial basis, there is no guarantee that the costs of operating commercial-scale products will not exceed the revenues we earn. If we cannot grow our business at scale, then our business, results of operations, financial condition and stock price could be significantly impacted. If we are unable to sell additional AirSCWO systems or are unable to deliver on existing or future contracts, such failure could adversely affect our results of operations.

We have a limited operating history with no material revenues.

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. 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.

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.

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Our products may have defects, which could damage our reputation, decrease market acceptance of our products, cause us to lose customers and revenue and result in costly litigation or liability.

Our products may contain defects for many reasons, including defective design or manufacture, defective material or software interoperability issues. Products as complex as those we offer, frequently develop or contain undetected defects or errors. Defects or errors may arise in our existing or new products, which could result in loss of revenue, market share, failure to achieve market acceptance, diversion of development resources, injury to our reputation, and increased service and maintenance costs. Such defects or errors in our products and solutions might discourage customers from purchasing future products. Often, these defects are not detected until after the products have been installed. If any of our products contain defects or perceived defects or have reliability, quality or compatibility problems or perceived problems, our reputation might be damaged significantly, we could lose or experience a delay in market acceptance of the affected product or products and might be unable to retain existing customers or attract new customers. In addition, these defects could interrupt or delay sales. In the event of an actual or perceived defect or other problem, we may need to invest significant capital, technical, managerial and other resources to investigate and correct the potential defect or problem and potentially divert these resources from other development efforts. If we are unable to provide a solution to the potential defect or problem that is acceptable to our customers, we may be required to incur substantial product recall, repair and replacement and even litigation costs. These costs could have a material adverse effect on our business and operating results.

Furthermore, if there are defects in the design, production or testing of our products and systems, we could face substantial repair, replacement or service costs, potential liability and damage to our reputation. Defects or malfunctioning of our products, if they were to occur, would likely result in significant damage and loss of life. These events could also lead to product recalls, safety or security alerts, or result in the removal of a product from the market, warranty or liability claims or contractual damages against us. We may not be able to obtain product liability or other insurance to fully cover such risks, and our efforts to implement appropriate design, testing and manufacturing processes for our products or systems may not be sufficient to prevent such occurrences, which could have a material adverse effect on our business, results of operations and financial condition.

Our management team may not be able to successfully implement our business strategies.

If our management team is unable to execute on its business strategies, then our development, including the establishment of revenues and our sales and marketing activities would be materially and adversely affected. As described in “Item 1. 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 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.

In addition, even if we manage to grow our business in the ways we plan, we may encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by any future growth. Our historical financial information may not be reflective of our future financial performance, and the costs and expenses that we have incurred in the past is likely not indicative of the volume of costs and expenses that we will incur in the future as we try to scale and fully commercialize our business. We expect there to be a period of time, during which we need to increase our costs and expenses to invest in our future commercialization success as a company. However, we may be stuck in such a period of time indefinitely if we cannot recognize revenue quickly enough and we cannot manage our costs efficiently during the time it takes us to ramp up production and development, negotiate and win new contracts and streamline the maintenance and continued work required on our AirSCWO systems.

Since our business is still in its nascent stages, there is no historical basis upon which to evaluate our ability to successfully execute on our business strategies, 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.

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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.

Our ability to generate revenue will depend in part on government contracts which expose us to the uncertainties of governmental budgetary and funding constraints and local, national and international political conditions and events.

We expect to derive a significant portion of our future revenues directly or indirectly from government agencies. The funding of government programs could be reduced or eliminated due to numerous factors, including changes in administration, governmental budget constraints, changes in funding priorities and policies, and developments in geopolitical events and macroeconomic conditions that are beyond our control. Reduction or elimination of government spending under our contracts would imperil the sales of our products and may cause a negative effect on our revenues, results of operations, cash flow and financial condition.

We have identified material weaknesses in our internal control over financial reporting, which may have a material adverse effect on our results of operations and financial condition for future periods.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and to effectively prevent fraud. Any inability to provide reliable financial reports or to prevent fraud could harm our business. The Sarbanes-Oxley Act requires management to evaluate and assess the effectiveness of our internal controls over financial reporting. In order to comply with the requirements of the Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate, enhance our policies, procedures and internal controls.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. While we continue the process of reviewing and improving our internal controls and procedures for compliance with applicable law, implementing any appropriate changes to our internal controls requires significant attention from our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete. However, our efforts do not always result in maintaining effective internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate and complete financial statements on a timely basis may harm the trading price of our ordinary shares and make it more difficult for us to effectively market and sell our service to new and existing customers.

Give the early-stage of our Company, 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 hired a full-time Chief Financial Officer. For the fiscal year ended December 31, 2024, 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. 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 we are still working to further expand our financial reporting and related personal to support our Chief Financial Officer and internal controls processes, 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 Part I, Item 4 “Controls and Procedures” for further discussion about the material weakness and our remediation activities.

If we are unable to remedy our material weaknesses in a timely manner, we may be unable to produce timely and accurate financial statements, and we may again discover additional material weaknesses and conclude that our internal control over financial reporting is not effective in future periods, which could adversely impact our investors’ confidence and our stock price. If we continue to fail to maintain the adequacy of our internal controls over financial reporting, we could be subject to litigation or regulatory scrutiny.

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Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.

A significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or unauthorized access could negatively impact our business and operations. We could also experience business interruption, information theft and/or reputational damage from cyberattacks, which may compromise our systems and lead to data leakage either internally or at our third-party providers. Our systems have been, and are expected to continue to be, the target of malware and other cyberattacks. The measures we have undertaken to reduce these risks may not be successful in preventing compromise and/or disruption of our information technology systems and related data. As a technology company, our business depends on our ability to protect our propriety intellectual property. We also maintain records of sensitive and/or confidential information about our customers, including various governmental agencies. If we are not able to prevent access to our systems and a bad actor gains access to such proprietary, sensitive or confidential information, then our business, financial condition and reputation could be significantly impacted.

We may be unable to obtain required licenses from third parties for product development.

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. or abroad.

If we fail to manage growth or to prepare for product scalability effectively, it could have an adverse effect on our employee efficiency, product quality, working capital levels and results of operations.

Any significant growth in the market for our products or our entry into new markets may require an expansion of our employee base for managerial, operational, financial, and other purposes. During any period of growth, we may face problems related to our operational and financial systems and controls, including quality control and delivery and service capacities. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees. Aside from increased difficulties in the management of human resources, we may also encounter working capital issues, as we will need increased liquidity to finance the development of new products and the hiring of additional employees. For effective growth management, we will be required to continue improving our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability.

We may be adversely affected by the effects of inflation.

Inflation has the potential to adversely affect our business, results of operations, financial position and liquidity by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we expect to charge our customers. The existence of inflation in the economy has the potential to result in higher interest rates and capital costs, supply shortages, increased costs of labor and other similar effects. As a result of inflation, we have experienced and may continue to experience, increases in our costs associated with operating our business including labor, equipment and other inputs. If we are unable to take measures to mitigate the impact of inflation through pricing actions upon commercialization of our product and efficiency gains, then our business, results of operations, financial position and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred.

We face competition in our industry, and we may be unable to attract customers and maintain a viable business.

The markets for our products and services are highly competitive, with companies offering a variety of competitive products and services. We expect competition in our markets to intensify in the future as new and existing competitors introduce new or enhanced products and services that are potentially more competitive than our products and services. We compete with direct competitors in the SCWO Field. Additionally, several other technologies are in competition with SCWO, depending on the market sector, including but not limited to: anaerobic digestion, landfilling, drying and incineration, lagoon and spray-fields, and lime stabilization.

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We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, greater ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with a larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, and greater financial, research and development, marketing, distribution, and other resources than we do and the ability to offer financing for projects. Our competitors and potential competitors may also be able to develop products or services that are equal or superior to ours, achieve greater market acceptance of their products and services, and increase sales by utilizing different distribution channels than we do. Some of our competitors may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market share, or a failure to grow market share for us once we attain commercialization. If we are not able to compete effectively against our current or potential competitors, our prospects, operating results, and financial condition could be adversely affected.

Our ability to commercialize our systems and grow and achieve profitability in accordance with our business plan will depend on our ability to satisfy our customers and withstand increasing competition by providing superior waste treatment at reasonable cost. There can be no assurance that we will be able to achieve or maintain a successful competitive position.

We are required to obtain permits in different areas of the world in order to utilize our products in such regions. Our need to apply for and receive permits could substantially limit our ability to operate and grow our business.

Our ability to continue with our current scope of operations and expand our operations and business across the globe is subject, in certain cases, to our receiving a permit for different purposes, including the use of land. It may be difficult to receive the required permits, which may require our management team to divert its attention from other aspects of our business, or it may be more capital intensive or a more time-consuming process than expected to receive permits, either of which could increase costs and delay the launch of our products.

We have in the past and may in the future be involved in litigation matters or other legal proceedings that are expensive and time consuming.

We have in the past and may in the future become involved in litigation matters, including class action lawsuits and lawsuits relating to intellectual property and product liability. 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.

If any of our current or future products and services that we make or sell (including items that we source from third parties) are defectively designed or manufactured, contain defective components, are misused, have safety or quality issues, have inadequate operating guidelines, malfunctions or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation. Misuse of our products by us or other operating parties or services or failing to adhere to the operating guidelines could cause significant harm to the public and the environment. The foregoing events could lead to recalls or safety alerts, result in the removal of a product or service from the market and result in product liability or similar claims being brought against us.

Any product liability claims brought against us could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. We may not have sufficient product insurance coverage for all future claims. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry and could reduce revenue, if any. Product and services liability claims in excess of our insurance coverage would be paid out of cash reserves, harming our financial condition and adversely affecting our results of operations.

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In addition, if we expand into additional geographic markets, we may then be exposed to different and changing regulations regarding, for example, environmental impact and damages, which entail risks for compensation obligation, which may mean that we would need to update our existing insurance policy or obtain additional policies for specific geographical markets. If we do not have sufficient insurance coverage or the cost of obtaining the appropriate insurance coverage is costly, this could have a material adverse effect on our business, results of operations and financial position.

Moreover, in the past companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities. For further information on our legal proceedings, see Part II, Item 3. “Legal Proceedings.”

Developments in, and compliance with, current and future environmental and climate change laws and regulations could impact our business, financial condition or results of operations.

Our business, operations, and product and service offerings are subject to and affected by many federal, state, local and foreign environmental laws and regulations, including those enacted in response to climate change concerns.

Increasing public and governmental awareness and concern regarding the effects of climate change has led to significant legislative and regulatory efforts to limit greenhouse gas emissions and will likely result in further environmental and climate change laws and regulations. Compliance with existing laws and regulations currently requires, and compliance with future laws is expected to continue to require, increasing operating and capital expenditures, including with respect to the design or re-design of our products in order to conform to changing environmental standards and regulations, which could impact our business, financial condition and results of operations. Furthermore, environmental laws and regulations may authorize substantial fines and criminal sanctions as well as facility shutdowns to address violations, and may require the installation of costly pollution control equipment or operational changes to limit emissions or discharges. We also incur, and expect to continue to incur, costs to comply with current environmental laws and regulations. Developments such as the adoption of new environmental laws and regulations, stricter enforcement of existing laws and regulations, violations by us of such laws and regulations, discovery of previously unknown or more extensive contamination, litigation involving environmental impacts, our inability to recover costs associated with any such developments, or financial insolvency of other responsible parties could in the future have a material adverse effect on our financial condition and results of operations.

If we become subject to claims relating to handling, storage, release or disposal of hazardous materials, we could incur significant cost and time to comply.

Our business activities, including our manufacturing processes and waste recycling and treatment processes, currently involve the use, treatment, storage, transfer, handling and/or disposal of hazardous materials, chemicals and wastes. These activities create a risk of significant environmental liabilities and reputational damage. Under applicable environmental laws and regulations, we could be strictly, jointly and severally liable for releases of regulated substances by us at our current or former properties or the properties of others or by other businesses that previously owned or used our current or former properties, including if such releases result in contamination of air, water or soil, or cause harm to individuals. We could also be liable or incur reputational damage if we merely generate hazardous materials or wastes, or arrange for their transportation, disposal or treatment, or we transport such materials, and they are subsequently released or cause harm.

Our business activities also create a risk of contamination or injury to our employees, customers or third parties, from the use, treatment, storage, transfer, handling and/or disposal of these materials.

In the event that our business activities result in environmental liabilities, such as those described above, we could incur significant costs or reputational damage in connection with the investigation and remediation of environmental contamination, and we could be liable for any resulting damages including natural resource damages. Such liabilities could exceed our available cash or any applicable insurance coverage we may have. Additionally, we are subject to, on an ongoing basis, federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with these laws and regulations may become significant and could have a material adverse effect on our business, financial condition, results of operations or prospects.

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Further, we may incur costs to defend our position even if we are not liable for consequences arising out of a release of or exposure to a hazardous substance or waste, or other environmental damage. Our insurance policies may not be sufficient to cover the costs of such claims.

Failure to effectively treat emerging contaminants could result in material liabilities.

A number of emerging contaminants might be found in water that we treat, including PFAS, 1,4-dioxane, dinitrotoluene, perchlorate, in addition to other pathogens and hazardous substances that have the potential to cause any number of illnesses, including cholera, typhoid fever, cancer, giardiasis, cryptosporidiosis, amoebiasis and free-living amoebic infections. There is a risk that workers may be exposed to these contaminants and pathogens before material is treated, the unit may not be operated properly and waste not fully treated during the process, or there is a malfunction and waste is not properly treated, creating a risk of third-party exposure to contaminants in byproducts that are generated. The potential impact of a failure to adequately treat is difficult to predict and could lead to an increased risk of exposure to property damage, natural resource damage, personal injury or even product liability claims, increased scrutiny by federal and state regulatory agencies and negative publicity.

Wastewater operations entail significant risks that may impose significant costs.

Wastewater treatment involves various unique risks. If our treatment systems fail or do not operate properly, or if there is a spill, untreated or partially treated wastewater could discharge onto property or into nearby streams and rivers, causing various damages and injuries, including environmental damage. Liabilities resulting from such damages and injuries could materially adversely affect our business, financial condition, results of operations or prospects.

These risks could be increased by the potential physical impacts of climate change on our operations. The physical impacts of climate change are highly uncertain and vary depending on geographical location, but could include changing temperatures, water shortages, changes in weather and rainfall patterns and changing storm patterns and intensities. Many climate change predictions, if true, present several potential challenges to water and wastewater service providers, such as increased precipitation and flooding, potential degradation of water quality and changes in demand for water services.

We may incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees, which could reduce our profitability.

We anticipate that our customers may require product warranties as to the proper operation and conformance to specifications of the products we manufacture or install and performance guarantees as to any effluent produced by our equipment and services. Failure of our products to operate properly or to meet specifications of our customers or our failure to meet our performance guarantees may increase costs by requiring additional engineering resources and services, replacement of parts and equipment and frequent replacement of consumables or monetary reimbursement to a customer or could otherwise result in liability to our customers. There are significant uncertainties and judgments involved in estimating warranty and performance guarantee obligations, including changing product designs, differences in customer installation processes and failure to identify or disclaim certain variables in a customer’s influent. To the extent that we incur substantial warranty or performance guarantee claims in any period, our reputation, earnings and ability to obtain future business could be materially adversely affected.

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We enter into various contracts in the normal course of our business, some or all of which may require us to indemnify the other party to the contract. In the event we have to perform under these indemnification provisions, it could have an adverse effect on our business, financial condition and results of operations.

In the normal course of business, we may enter into agreements that contain indemnification provisions which require us to indemnify the other parties against adverse events occurring as a result of our operations. Should our obligation under an indemnification provision exceed applicable insurance coverage or if we were denied insurance coverage, our business, financial condition and results of operations could be adversely affected. Similarly, if we are relying on a third party to indemnify us and the party is denied insurance coverage, or the indemnification obligation exceeds the applicable insurance coverage and does not have other assets available to indemnify us, our business, financial condition and results of operations could be adversely affected.

Natural disasters and other catastrophic events beyond our control could adversely affect our business operations and financial performance.

The occurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events, such as civil unrest in a country in which our suppliers are located or terrorist or military activities disrupting transportation, communication or utility systems; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks, could adversely affect our operations and financial performance. Such events could result, among other things, in operational disruptions, physical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and transportation disruptions. These factors could also cause consumer confidence and spending to decrease or result in increased volatility in the United States and global financial markets and economy. Such occurrences could have a material adverse effect on us and could also have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable damage.

United States trade policies and other factors beyond the Company’s control, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations.

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, imposing 25% tariffs on $30 billion worth of U.S.-origin products immediately, 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. China has also retaliated with tariffs on U.S.-origin farm products and trade and investment restrictions on certain U.S. companies.

There continues to be significant uncertainties regarding these recent changes in U.S. trade policies, legislation, treaties, and tariffs, and potential future developments. If maintained, the newly announced tariffs and the potential escalation of trade disputes, a trade war or other governmental action related to tariffs or international trade agreements or policies, have the potential to negatively impact our and/or our clients’ costs, demand for our clients’ products, and/or the U.S. economy or certain sectors thereof and, thus, adversely affect our business, financial condition, and results of operations. These tariffs and changes in trade policies may result in significant increases in our cost of doing business, including increases in costs to our R&D and increases in costs of materials in our supply chain. If we are not able to find cheaper alternative sources, or if we are unable to obtain supplies at all, we could experience material harm to our business, results of operations and financial condition.

See “Risks Related to our Reliance on Third Parties—Our suppliers may fail to deliver materials and parts according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these materials and parts effectively.” for more information about risks related to our ability to source materials and parts from our suppliers

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Risks Related to Our Financial Position and Capital Requirements

We will require and may have difficulty or be unsuccessful in raising needed capital in the future to continue to operate as a going concern.

Our business currently does not generate sufficient revenues to meet our capital requirements and we do not expect that it will do so in the near future.

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 equity offerings, 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.

Our actual capital requirements will depend on many factors, including:

· | continued progress and cost of our research and development programs;
· | the time and costs involved in obtaining regulatory approvals and permitting, if any;
· | regulatory actions with respect to our technology;
· | costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property rights;
· | costs of developing sales, marketing and distribution channels and our ability to sell our products;
· | competing technological and market developments;
· | market acceptance of our products;
· | costs for recruiting and retaining employees and consultants; and
· | unexpected legal, accounting and other costs and liabilities related to our business.

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Our financial results depend on successful project execution and may be adversely affected by cost overruns, failure to meet customer schedules or other execution issues.

A significant portion of our revenue will be derived from large projects that are technically complex and may occur over multiple years. These projects are subject to a number of significant risks, including project delays, cost overruns, changes in scope, unanticipated site conditions, design and engineering issues, incorrect cost assumptions, increases in the cost of materials and labor, safety hazards, third party performance issues, weather issues and changes in laws or permitting requirements. If we are unable to manage these risks, we may incur higher costs, liquidated damages and other liabilities to our customers, which may decrease our profitability and harm our reputation. Our continued growth will depend in part on executing a higher volume of large projects, which will require us to expand and retain our project management and execution personnel and resources.

We have inadequate capital and need for additional financing to accomplish our business and strategic plans. Terms of subsequent financing, if any, may adversely impact your investment in our securities.

We will need to raise substantial additional funds in order to execute our business plan. Our ability to secure additional financing depends on a variety of different factors, including but not limited to our ability to meet major milestones in our technology R&D pursuits, our ability to attract new customers and grow our business, our ability to attract new investors who believe in our business strategy and our potential for future growth, our ability to successfully convert financing into tangible business successes, our stock price and the marketability (or perceived marketability) of our securities, among others. There is no guarantee that we will be able to secure financing on terms that are favorable to us, or at all. If the cost of securing financing is too high, or if the obligations to which we are subject pursuant to the terms of the financing we secure are too burdensome, we may not be able to realize the full benefits of the financing we receive. If we cannot secure financing at all, we may have to cease operations or scale back our activities. Our ultimate success may depend on our ability to raise additional capital. In the absence of additional financing or significant revenues and profits, we will have to approach our business plan from a much different and much more restricted direction, attempting to secure additional funding sources to fund our growth, borrowing money from lenders or elsewhere or to take other actions to attempt to provide funding.

We may have to engage in common equity, debt, or preferred stock financings in the future. Your rights and the value of your investment in the common stock could be reduced by the dilution caused by future equity issuances. Interest on debt securities could increase costs and negatively impact operating results and debt issuances may subject us to restrictive covenants which may limit our flexibility. In the event we issue preferred stock pursuant to the terms of our certificate of incorporation, preferred stock could be issued in series from time to time with such designation, rights, preferences, and limitations as needed to raise capital. The terms of preferred stock would be more advantageous to those investors than to the holders of common stock. In addition, if we need to raise more equity capital from the sale of common stock, institutional or other investors may negotiate terms possibly less favorable to us, and thereby cause our stock price to fall.

Our research and development expenses may increase in the future.

Our research and development expenses primarily relate to our efforts to increase the output, durability and commercial viability of our technology. The results of such research and development can be unforeseen and undesirable and therefore our forecasted costs related to such research and development are associated with great uncertainty. We expect that our research and development expenses will increase in the future. Unforeseen research and development results could require us to undertake supplementary research and development at significant costs or cause us to pause or stop research and development efforts. A delay or non-existent launch of our technology or an insufficient investment (or overspend on such expenditure) could have a material adverse effect on our business, results of operations and financial position.

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Risks Related to Our Intellectual Property

We may have difficulty in protecting our intellectual property and may incur substantial costs to defend ourselves in patent infringement litigation.

At this time, we rely primarily on a combination of patents, trade secrets, copyright and trademark laws, and confidentiality procedures to protect our proprietary technology, which is our principal asset.

Our ability to compete effectively will depend to a large extent on our success in protecting our proprietary technology, both in the United States and abroad. There can be no assurance that (i) any patents that we apply for will be issued, (ii) we will ever obtain the rights to any patents covering the technology on which our current systems are based, (iii) any patents issued will not be challenged, invalidated, or circumvented, (iv) we will have the financial resources to enforce any such patents, (v) our confidentiality and invention agreements will be honored or that we will be able to protect our rights to our non-patented trade secrets and know-how effectively, (vi) our competitors will not independently develop equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets and know-how, and (vi) any patent rights granted will provide any competitive advantage. We could incur substantial costs in obtaining patent coverage and defending any patent infringement suits or in asserting our patent rights, including those granted by third parties, and we might not be able to afford such expenditures.

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, 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. 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.

In addition, we have taken steps to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with our executive officers, employees, consultants and advisors; however, such agreements may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States. Moreover, the following can limit our ability to protect our intellectual property and technology:

| · | intellectual property laws in certain jurisdictions may be relatively ineffective;
| · | detecting infringements and enforcing proprietary rights may divert management’s attention and company resources;
| · | contractual measures such as non-disclosure agreements and confidentiality provisions may afford only limited protection;
| · | any patents we may receive will expire, thus providing competitors access to the applicable technology;
| · | competitors may independently develop products that are substantially equivalent or superior to our products or circumvent our intellectual property rights; and
| · | competitors may register patents in technologies relevant to our business areas.

In addition, various parties may assert infringement claims against us. The cost of defending against infringement claims could be significant, regardless of whether the claims are valid. If we are not successful in defending such claims, we may be prevented from the use or sale of certain of our products, or liable for damages and required to obtain licenses, which may not be available on reasonable terms, any of which may have a material adverse impact on our business, results of operation or financial condition.

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We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from developing our products, require us to obtain licenses from third parties or to develop non-infringing alternatives and subject us to substantial monetary damages.

Third parties could, in the future, assert infringement or misappropriation claims against us with respect to products we develop. Whether a product infringes a patent or misappropriates other intellectual property involves complex legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property rights of others. Our potential competitors may assert that some aspect of our product infringes their patents. Because patent applications may take years to issue, there also may be applications now pending of which we are unaware that may later result in issued patents upon which our products could infringe. There also may be existing patents or pending patent applications of which we are unaware upon which our products may inadvertently infringe.

Any infringement or misappropriation claim could cause us to incur significant costs, place significant strain on our financial resources, divert management’s attention from our business and harm our reputation. If the relevant patents in such a claim were upheld as valid and enforceable and we were found to infringe them, we could be prohibited from selling any product that is found to infringe unless we could obtain licenses to use the technology covered by the patent or are able to design around the patent. We may be unable to obtain such a license on terms acceptable to us, if at all, and we may not be able to redesign our products to avoid infringement. A court could also order us to pay compensatory damages for such infringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarily or permanently enjoin us and our customers from making, using, or selling products, and could enter an order mandating that we undertake certain remedial activities. Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties.

We also employ individuals who were previously employed at other companies in our industry, including our competitors or potential competitors. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our products. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We employ individuals or hire consultants who are employed by or otherwise affiliated with universities and have commitments or obligations under employment agreements, policies, and other contracts with those universities. Failure by these employees and consultants to comply with their commitments or obligations to any university may result in disputes over our intellectual property or technology. The resolution of any dispute that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, which could adversely impact our business.

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We may need to depend on certain technologies that are licensed to us. We would not control these technologies and any loss of our rights to them could prevent us from selling our products.

We have entered into license agreements with third parties for certain licensed technologies that are not currently utilized in the systems we market but may be in the future. In addition, we may in the future elect to license third-party intellectual property to further our business objectives and/or as needed for freedom to operate our systems. We do not and will not own the patents or patent applications that are a subject of these licenses. Our rights to use these technologies and employ the inventions claimed in the licensed patents and patent applications are or will be subject to the continuation of and compliance with the terms of those licenses.

In some cases, we do not or may not control the prosecution, maintenance, or filing of the patents or patent applications to which we hold licenses, or the enforcement of these patents against third parties. As a result, we cannot be certain that drafting or prosecution of the licensed patents and patent applications by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:

| · | the scope of rights granted under the license agreement and other interpretation-related issues;
| · | the extent to which our products, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
| · | our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
| · | the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and
| · | the priority of invention of patented technology.

In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected products, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.

Risks Related to our Reliance on Third Parties

Our suppliers may fail to deliver materials and parts according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these materials and parts effectively.

Our products contain materials and parts purchased globally from numerous suppliers, including single-source direct suppliers, which exposes us to potential component shortages or delays. Unexpected changes in business conditions, materials pricing, labor issues, natural disasters, health epidemics, trade and shipping disruptions, port congestions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational. Additionally, if our suppliers do not accurately forecast and effectively allocate production or if they are not willing to allocate sufficient production to us, it may reduce our access to components and require us to search for new suppliers. The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools for producing and supporting our products, as well as impact the capacity of our AirSCWO systems. Product design changes by us may also require us to procure additional components in a short amount of time. Our suppliers may not be willing or able to sustainably meet our timelines or our cost, quality and volume needs, or to do so may cost us more, which may require us to replace them with other sources. There is no assurance that we will be able to secure additional or alternate sources for our components quickly or at all.

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As we scale production of our AirSCWO systems, we will also need to accurately forecast, purchase, warehouse and transport components at high volumes to our manufacturing facilities. If we are unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain and parts management, we may incur unexpected production disruption, storage, transportation and write- off costs, which may harm our business and operating results.

Failure by third parties to supply or manufacture components of our products or to deploy our systems timely or properly could adversely affect our business, financial condition and results of operations.

We have been and expect to continue to be dependent on third parties to supply and manufacture components of our technology. If, for any reason, our third-party manufacturers or vendors are not willing or able to provide us with components or supplies in a timely fashion, or at all, our ability to manufacture and sell many of our products could be impaired, which, in turn, could have a material adverse effect on our business, results of operations and financial position.

We do not have long-term contracts with all of our third-party suppliers and manufacturers or vendors. Therefore, if we do not develop ongoing relationships with those vendors located in different regions, we may not be successful at controlling unit costs as our manufacturing volume increases. We may not be able to negotiate new arrangements with these third parties on acceptable terms, or at all. In addition, we rely on third parties, under our oversight, for the deployment and installation of our AirSCWO systems. For example, the manufacture, assembly and installation of the hydraulic, control and automation and electrical sub-systems of our AirSCWO systems are performed by third-party suppliers. The mechanical sub-system is installed (moored) at the relevant project site by third-party engineering service providers. If these third parties do not properly manufacture, assemble, and install our AirSCWO technology and systems, or otherwise do not perform adequately, or if we fail to recruit and retain third parties to deploy our systems in particular geographic areas, our business, financial condition and results of operations could be adversely affected.

Risks Related to our Common Stock and Capital Structure

The market price of our common stock historically has been highly volatile and is likely to continue to be volatile, and you could lose all or part of your investment.

The market price of our common stock has been volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include:

| · | Inability to obtain additional capital;
| · | Failure to meet or exceed financial or operational projections we may provide to the public;
| · | Failure to meet or exceed the financial or operational projections of the investment community;
| · | Significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
| · | Additions or departures of key management personnel;
| · | Significant lawsuits, including shareholder litigation;
| · | If securities or industry analysts issue an adverse or misleading opinion regarding our common stock;
| · | Changes in market valuations of similar companies;
| · | General market or macroeconomic conditions;
| · | Sales of shares of our common stock by us or our shareholders in the future; and
| · | Trading volume of our common stock.

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In addition, companies trading in the stock market in general, and on the Nasdaq Capital Market, have experienced extreme price and volume fluctuations, and we have in the past experienced volatility that has been unrelated or disproportionate to our operating performance. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Further, on some occasions, our share price may be, or may be purported to be, subject to “short squeeze” activity. A “short squeeze” is a technical market condition that occurs when the price of a stock increases substantially, forcing market participants who had taken a position that its price would fall (i.e., who had sold the stock “short”), to buy it, which in turn may create a significant, short-term demand for the stock not for fundamental reasons, but rather due to the need for such market participants to acquire the stock in order to forestall the risk of even greater losses. A “short squeeze” condition in the market for a stock can lead to short-term conditions involving very high volatility and trading that may or may not track fundamental valuation models.

In addition, in the past, class action litigation has often been instituted against companies whose securities experienced periods of volatility in market price. Securities litigation brought against us following volatility in the price of our common stock, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business.

The interests of our principal stockholders, officers and directors, who collectively beneficially own a significant amount of our common stock, may not coincide with yours and such stockholders will have the ability to control decisions with which you may disagree.

At December 31, 2024, our principal stockholders, officers and directors beneficially owned approximately 43.5% of our common stock. As a result, our principal stockholders, officers and directors will have the ability to control matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of the Company and make some future transactions more difficult or impossible without the support of our controlling stockholders. The interests of such stockholders may not coincide with your interests or the interests of other stockholders.

Because we are a “smaller reporting company,” we may take advantage of certain scaled disclosures available to us, resulting in holders of our securities receiving less Company information than they would receive from a public company that is not a smaller reporting company.

We are a “smaller reporting company” as defined under Rule 12b-2 of the Exchange Act. As a smaller reporting company, we may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our Common Stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and our Common Stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. Based on the closing price of our common stock on June 30, 2024, we will remain a smaller reporting company through at least the end of fiscal year 2025. To the extent we take advantage of any reduced disclosure obligations, it may make it harder for investors to analyze the Company’s results of operations and financial prospectus in comparison with other public companies.

As a smaller reporting company, we are permitted to comply with scaled-back disclosure obligations in our SEC filings compared to other issuers, including with respect to disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We have elected to adopt the accommodations available to smaller reporting companies. Until we cease to be a smaller reporting company, the scaled-back disclosure in our SEC filings will result in less information about our company being available than for other public companies.

If investors consider our Common Stock less attractive as a result of our election to use the scaled-back disclosure permitted for smaller reporting companies, there may be a less active trading market for our Common Stock and our share price may be more volatile.

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We do not intend to pay dividends on our common stock for the foreseeable future.

We currently intend to retain our future earnings to finance the development and expansion of our business and, therefore, do not intend to pay cash dividends on our common stock for the foreseeable future. The timing, declaration, amount and payment of future dividends to stockholders will fall within the discretion of our Board of Directors. Our Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including our financial condition, earnings, capital requirements of our business and covenants associated with debt obligations, as well as legal requirements, regulatory constraints, industry practice and other factors that our Board of Directors deem relevant. There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends.

If securities or industry analysts do not publish research about our business, or publish negative reports about our business, our share price and trading volume could decline.

The trading market for our common stock may, depend on the research and reports that securities or industry analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts elect to cover us and downgrade our shares or lower their opinion of our shares, our share price would likely decline. If one or more of these analysts elect to cover us and subsequently cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Additionally, there may be risks associated with us becoming public through a merger. Securities analysts of major brokerage firms and securities institutions may not provide coverage of us because there were no broker-dealers who sold our stock in a public offering that would be incentivized to follow or recommend the purchase of our common stock. The absence of such research coverage could limit investor interest in our common stock, resulting in decreased liquidity. No assurance can be given that established brokerage firms will, in the future, want to cover our securities or conduct any secondary offerings or other financings on our behalf.

Future sales or potential sales of our common stock in the public market could cause our share price to decline.

If the existing holders of our common stock, particularly our directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock. We have an at-the-market equity offering pursuant to which, we can issue up to an aggregate of $100 million of common stock, subject to applicable law and our previous at-the-market equity offering 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 twelve months, and may continue to fluctuate or decline in the future. Between January 1, 2022 and December 31, 2024, the closing price per share of our common shares has ranged from a high of $4.94 (on April 3, 2023) to a low of $0.67 (on December 30, 2024). 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.

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We incur costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public reporting company, we incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act and rules subsequently implemented by the SEC, have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will entail significant legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept low policy limits and coverage.

Provisions in our Amended and Restated Certificate of Incorporation and Bylaws and of Delaware law may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.

Several provisions of our Amended and Restated Certificate of Incorporation, Bylaws and Delaware law may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable. These include, but are not limited to, provisions that:

| · | Only our board of directors may fill board vacancies;
| · | Permit us to issue blank check preferred stock;
| · | Prevent stockholders from calling special meetings;
| · | Maintain a plurality voting standard for our board of directors;
| · | Does not include an opt out of Delaware anti-takeover law;
| · | Require stockholders to follow certain advance notice and disclosure requirements in order to propose business or nominate directors at an annual or special meeting; and
| · | Limit our ability to enter into business combination transactions with certain stockholders.

These and other provisions of our Amended and Restated Certificate of Incorporation, Bylaws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of us, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price.

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”).

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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.

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.

(a) None.

(b) None.

(c) During the fiscal quarter ended March 31, 2025, none of our directors or officers informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits.

(a) | Exhibits

10.1 |  | Amendment No. 1 to the License Agreement dated as of April 16, 2021 between 374Water Inc. and Duke University
10.2 |  | Employment Agreement dated as of March 31, 2025 between 374Water Inc. and Rajesh Melkote.
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 TAXONOMYEXTENSION SCHEMA
101.CAL |  | XBRL TAXONOMYEXTENSION CALCULATION LINKBASE
101.DEF |  | XBRL TAXONOMYEXTENSION DEFINITION LINKBASE
101.LAB |  | XBRL TAXONOMYEXTENSION LABEL LINKBASE
101.PRE |  | XBRL TAXONOMYEXTENSION PRESENTATION LINKBASE

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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: May 15, 2025 | By: | /s/ Christian Gannon |
|  | Christian Gannon |
|  | Chief Executive Officer |
Dated: May 15, 2025 | By: | /s/ Russell Kline |
|  | Russell Kline |
|  | Chief Financial Officer |

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Exhibit Index

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