XML 33 R19.htm IDEA: XBRL DOCUMENT v3.25.2
Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2025
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, accrued loss provisions on onerous contracts, useful lives of long-lived assets, and valuation allowance against deferred tax assets.
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 June 30, 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 June 30, 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. Due to delays we have experienced in completing the equipment manufacturing process and meeting our next contractual milestone, we have not yet been able to bill for certain costs incurred on completing the equipment manufacturing. We anticipate meeting the next contractual milestone and billing this customer prior to December 31, 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. 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 enhance and develop our 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 June 30, 2025, and December 31, 2024.
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. Equipment-in-progress consists of costs incurred to build a mobile wastewater treatment unit that is not yet completed as of June 30, 2025; therefore, no depreciation has been taken on this in-process equipment.

 

The following table presents property and equipment at June 30, 2025, and December 31, 2024:

 

 

 

June 30,

2025

 

 

December 31,

2024

 

Computers

 

$19,977

 

 

$19,977

 

Equipment

 

 

497,341

 

 

 

366,400

 

Equipment – Demo System

 

 

2,369,827

 

 

 

2,298,666

 

Vehicles

 

 

87,300

 

 

 

59,306

 

Equipment-in-process

 

 

719,916

 

 

 

-

 

Total property and equipment

 

 

3,694,361

 

 

 

2,744,349

 

Less: accumulated depreciation

 

 

(489,465 )

 

 

(176,778 )

Total property and equipment, net

 

$3,204,896

 

 

$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.

 

We are in the process of manufacturing an AirSCWO1 (“AS1”) model that can process 1 metric ton of waste water per day. The AS1 is highly mobile and can be deployed quickly to provide on-site destruction services. As of June 30, 2025, these manufacturing costs have been classified as equipment in-progress.

 

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

 

 

 

Three Months

 

 

Six  Months  Ended

 

 

 

June 30, 2025

 

 

June 30, 2024

 

 

June 30, 2025

 

 

June 30, 2024

 

Cost of revenues

 

$41,284

 

 

$-

 

 

$81,611

 

 

$-

 

General and administrative

 

 

125,744

 

 

 

9,278

 

 

 

231,078

 

 

 

16,910

 

Total depreciation expense

 

$167,028

 

 

$9,278

 

 

$312,689

 

 

$16,910

 
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. Three customers made up approximately 76% of total revenues for the six months ended June 30, 2025, and one customer made up 87% of total revenues for the six months ended June 30, 2024.

 

At June 30, 2025, and December 31, 2024, four customers comprised 94% and three customers accounted for 89% of our outstanding accounts receivable, respectively.

 

At both June 30, 2025, and December 31, 2024, one customer comprised approximately 100% of  our unbilled receivables. The loss of a significant customer could adversely affect the results of our operations.  

 

During the six months ended June 30, 2024, the Company purchased a substantial portion of manufacturing services from one third party vendor, Merrell Bros Fabrication, LLC (“Merrell Bros.”) (see Note 8).
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. 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.

 

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 June 30, 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. We completed our first month of demonstration during the three months ended June 30, 2025 and we recognized $270,667 of service revenue representing one-third of the total contract price. Further, we expensed one-third of the contract costs of $45,550 that had been deferred which have been included in cost of revenues. We anticipate completing the remaining two months of the demonstration in the second half of 2025.

 

We expect to invoice the City of Orlando in accordance with the contract terms. Invoices are due within thirty days of receipt. At June 30, 2025, we invoiced City of Orlando $361,333, of which we have collected $170,000 and $90,666 of the invoiced amount 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 maximum amount of $68,000.

 

During the six months ended June 30, 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 June 30, 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 third quarter of 2025.

 

Cost of revenues 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 June 30, 2025, we have capitalized an aggregate of $151,493 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 full-scale demonstration contract discussed above in the third quarter of 2025, which will be expensed at that time, and (ii) $91,100 of fulfillment related activities for the Demo Contract with the City of Orlando, which will be expensed over the two month demonstration period remaining on this Demo Contract.

 

See further revenue related disclosures in Note 5.
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 June 30, 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 an estimated loss provision of $1,230,000 and $1,000,000 at June 30, 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 $1,064,757 and $1,101,715 for the six months ended June 30, 2025 and 2024, respectively, and $531,170 and $566,568, for the three months ended June 30, 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 six months ended June 30, 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 June 30, 2025 and June 30, 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 17,515,502 and 15,999,370 shares of common stock, 14,675,244 and 1,235,000 outstanding common stock warrants, and unvested restricted stock units of 6,212,819 and 2,962,000, respectively.
Reclassifications

We have made certain reclassifications to prior period amounts presented on our unaudited 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 $229,680 and $368,266 of stock-based compensation expense from general and administrative expenses to compensation and related expenses for the three and six months ended June 30, 2024, respectively.

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.