UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

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

For the Quarterly Period ended ~~March 31,~~June 30, 2023

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

Commission file number: 000-27866

374WATER INC.

(Exact name of Registrant as specified in its charter)

Delaware

88-0271109

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

701 W Main Street, Suite 410

Durham, NC 27701

(Address of principal executive offices)

(919) 888-8194

(Registrant’s telephone number including area code)

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

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

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

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

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

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

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of ~~May~~August 8, 2023, the issuer had ~~129,027,819~~132,667,107 shares of common stock outstanding.

Index to Form 10-Q

		Page
PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	34
	Condensed Consolidated Balance Sheets at ~~March 31,~~June 30, 2023 (Unaudited) and December 31, 2022	34
	Condensed Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	45
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	56
	Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	67
	Notes to Unaudited Condensed Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2223
Item 4.	Controls and Procedures	2223

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	2325
Item 1A.	Risk Factors	2325
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2325
Item 3.	Defaults upon Senior Securities	2325
Item 4.	Mine Safety Disclosures	2325
Item 5.	Other Information	2325
Item 6.	Exhibits	2426

SIGNATURES		2527

Table of Contents

Cautionary Note Regarding Forward-Looking Information

This Form 10-Q contains certain statements related to future results of the Company that are considered “forward-looking ~~statements''~~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.

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

374Water Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

~~March 31,~~June 30, 2023 (Unaudited) and December 31, 2022

2023

2022

Assets

Current Assets:

Cash

$ 9,153,161

$ 4,046,937

Accounts receivable, net of allowance of $191 and $0

26,188

—

Unbilled accounts receivable

1,672,454

918,164

Other accounts receivable

308,374

—

Inventory

1,788,019

1,660,710

Investments

1,960,761

1,944,464

Prepaid expenses

130,170

153,455

Total Current Assets

15,039,127

8,723,730

Long-Term Assets:

Equipment, net

140,857

143,079

Intangible asset, net

1,035,817

1,050,022

Total Long-Term Assets

1,176,674

1,193,101

Total Assets

$ 16,215,801

$ 9,916,831

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable and accrued expenses

$ 868,000

$ 1,449,582

Deferred revenue

205,109

200,109

Other liabilities

-

13,528

Total Current Liabilities

1,073,109

1,663,219

Total Liabilities

1,073,109

1,663,219

Stockholders’ Equity

Preferred stock: 50,000,000 convertible Series D preferred shares authorized; par value $0.0001 per share, nil issued and outstanding at March 31, 2023 and December 31, 2022

—

—

Common stock : 200,000,000 common shares authorized, par value $0.0001 per share, 128,840,421 and 126,702,545 shares outstanding at March 31, 2023 and December 31, 2022, respectively

12,883

12,669

Additional paid-in capital

24,619,639

16,110,221

Accumulated (deficit)

(9,490,325 )

(7,849,982 )
Accumulated other comprehensive loss

495

(19,296 )
Total Stockholders’ Equity

15,142,692

8,253,612

Total Liabilities and Stockholders’ Equity

$ 16,215,801

$ 9,916,831

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

~~Table of Contents~~

~~374Water, Inc. and Subsidiaries~~

~~Condensed Consolidated Statements of Operations~~

~~For the three months ended March 31, 2023 and 2022~~

~~(Unaudited)~~

Three months ended March 31,

2023

2022

Revenue

$ 801,458

$ 273,231

Cost of goods sold

720,146

247,986

Gross profit

81,312

25,245

Operating Expenses

Research and development

355,905

185,653

Compensation and related expenses

718,760

301,235

Professional fees

99,572

150,658

General and administrative

585,659

261,403

Total Operating Expenses

1,759,896

898,950

Loss from Operations

(1,678,584 )

(873,705 )

Other Income (Expense)

Interest income

37,859

840

Other income

382

7

Total Other Income (Expense)

38,241

847

Net Loss before Income Taxes

(1,640,343 )

(872,858 )
Provision for Income Taxes

—

—

Net Loss

$ (1,640,343 )

$ (872,858 )

Other comprehensive loss

Change in foreign currency translation

824

—

Change in unrealized loss on marketable securities

18,967

—

Total other comprehensive loss

19,791

—

Total comprehensive loss

(1,620,552 )

(872,858 )
Net Loss per Share - Basic and Diluted

$ (0.01 )

$ (0.01 )

Weighted Average Common Shares Outstanding - Basic and Diluted

127,146,695

126,499,142

	2023			2022
Assets
Current Assets:
Cash	$	14,599,361		$	4,046,937
Accounts receivable, net of allowance of $406 and $0		17,526			—
Unbilled accounts receivable		1,709,027			918,164
Inventory		1,804,495			1,660,710
Investments		—			1,944,464
Prepaid expenses		206,453			153,455
Total Current Assets		18,336,862			8,723,730
Long-Term Assets:
Equipment, net		139,965			143,079
Intangible asset, net		1,021,781			1,050,022
Total Long-Term Assets		1,161,746			1,193,101
Total Assets	$	19,498,608		$	9,916,831

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	334,229		$	1,449,582
Deferred revenue		183,061			200,109
Other liabilities		-			13,528
Total Current Liabilities		517,290			1,663,219
Total Liabilities		517,290			1,663,219
Stockholders’ Equity
Preferred stock: 50,000,000 authorized; par value $0.0001 per share, nil issued and outstanding at June 30, 2023 and December 31, 2022		—			—

Common stock: 200,000,000 common shares authorized, par value $0.0001 per share, 130,679,012 and 126,702,545 shares outstanding at June 30, 2023 and December 31, 2022, respectively		13,067			12,669
Additional paid-in capital		30,103,715			16,110,221
Accumulated (deficit)		(11,140,902	)		(7,849,982	)
Accumulated other comprehensive loss		5,438			(19,296	)
Total Stockholders’ Equity		18,981,318			8,253,612
Total Liabilities and Stockholders’ Equity	$	19,498,608		$	9,916,831

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

Table of Contents

374Water Inc. and Subsidiaries

Condensed Consolidated ~~Changes in Stockholders’ Equity~~Statements of Operations

For the three and six months ended ~~March 31,~~June 30, 2023 and 2022

(Unaudited)

~~For the three months ended March 31, 2023~~

Preferred Stock

Common Stock

Additional

Other

Total

Number of

Number of

Paid in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

Income

Equity

Balances, December 31, 2022

—

$ —

126,702,545

$ 12,669

$ 16,110,221

$ (7,849,982 )

$ (19,296 )

$ 8,253,612

Issuance of shares of common stock

—

—

2,137,876

214

8,294,494

—

—

8,294,708

Stock-based compensation

—

—

—

—

214,924

—

—

214,924

Foreign currency gain (Loss)

—

—

—

—

—

—

824

824

Unrealized gain (loss) on investments

—

—

—

—

—

—

18,967

18,967

Net loss

—

—

—

—

—

(1,640,343 )

—

(1,640,343 )
Balances, March 31, 2023

—

—

128,840,421

$ 12,883

$ 24,619,639

$ (9,490,325 )

495

$ 15,142,692

~~For the three months ended March 31, 2022~~

Preferred Stock

Common Stock

Additional

Other

Total

Number of

Number of

Paid in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

Income

Equity

Balances, December 31, 2021

27,272

$ 3

125,317,746

$ 12,531

$ 15,474,566

$ (3,160,015 )

$ —

$ 12,327,085

Conversion of preferred shares to common shares

(27,272 )

(3 )

1,363,149

136

(135 )

—

—

(2 )
Stock-based compensation

—

—

—

—

97,558

—

—

97,558

Net loss

—

—

—

—

—

(872,858 )

—

(872,858 )
Balances, March 31, 2022

—

—

126,680,895

$ 12,667

$ 15,571,989

$ (4,032,873 )

—

$ 11,551,783

	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022

Revenue	$	49,863		$	1,030,528		$	851,321		$	1,303,759
Cost of Goods Sold		45,257			902,508			765,403			1,150,494
Gross Profit		4,606			128,020			85,918			153,265
Operating Expenses
Research and development		271,964			422,695			627,869			608,348
Compensation and related expenses		733,121			399,448			1,451,881			700,683
Professional Fees		92,285			141,104			191,857			291,760
General and administrative		676,333			379,661			1,261,995			641,067
Total Operating Expenses		1,773,703			1,342,908			3,533,602			2,241,858

Loss from Operations		(1,769,097	)		(1,214,888	)		(3,447,684	)		(2,088,593	)

Other Income (Expense)
Interest income		74,967			613			112,826			1,453
Other income		43,553			—			43,938			7
Total Other Income (Expense)		118,520			613			156,764			1,460
Net Loss before Income Taxes		(1,650,577	)		(1,214,275	)		(3,290,920	)		(2,087,133	)
Provision for Income Taxes		—			—			—			—

Net Loss	$	(1,650,577	)	$	(1,214,275	)	$	(3,290,920	)	$	(2,087,133	)

Other comprehensive loss
Change in foreign currency translation		4,943			(771	)		5,438			(771	)
Change in unrealized loss on marketable securities		—			(11,243	)		—			(11,243	)
Total other comprehensive gain (loss)		4,943			(12,014	)		5,438			(12,014	)

Total comprehensive loss		(1,645,634	)		(1,226,289	)		(3,285,482	)		(2,099,147	)
Net Loss per Share - Basic and Diluted	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.02	)

Weighted Average Common Shares Outstanding - Basic and Diluted		129,389,098			126,680,895			128,274,091			126,591,017

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

Table of Contents

374Water Inc. and Subsidiaries

Condensed Consolidated ~~Statements of Cash Flows~~Changes in Stockholders’ Equity

For the three months ended ~~March 31,~~June 30, 2023 and 2022

(Unaudited)

2023

2022

Cash Flows from Operating Activities

Net loss

$ (1,640,343 )

$ (872,858 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization expense

29,105

16,458

Stock based compensation

214,924

97,558

Change in foreign currency translation

824

—

Changes in operating assets and liabilities:

Accounts receivable

(26,188 )

—

Unbilled accounts receivable

(754,290 )

—

Other accounts receivable

(308,374 )

—

Inventory

(127,309 )

—

Prepaid expenses

23,285

(50,599 )
Accounts payable and accrued expenses

(581,582 )

81,059

Deferred revenue

5,000

763,333

Other liabilities

(13,528
)

(20,238 )

Cash Provided by (Used In) Operating Activities

(3,178,476 )

115,911

Cash Flows from Investing Activities

Purchase of equipment

(7,303 )

(3,291 )
Increase in intangible assets

(2,705 )

—

Cash Provided by (Used In) Investing Activities

(10,008 )

(3,291 )

Cash Flow from Financing Activities

Proceeds from the issuance of common stock

8,294,708

—

Cash Provided by Financing Activities

8,294,708

—

Net Increase in Cash

5,106,224

112,620

Cash, Beginning of the Period

4,046,937

11,131,175

Cash, End of the Period

$ 9,153,161

$ 11,243,795

NON-CASH FINANCING ACTIVITIES

Conversion of preferred stock to common stock

$ —

$ 133

For the three and six months ended June 30, 2023

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

For the three and six months ended June 30, 2022

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

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

Table of Contents

374Water Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2023 and 2022(Unaudited)

	2023			2022
Cash Flows from Operating Activities
Net loss	$	(3,290,920	)	$	(2,087,133	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		44,281			33,174
Stock based compensation		514,934			236,470
Change in foreign currency translation		5,767			—

Changes in operating assets and liabilities:
Accounts receivable		(17,526	)		(242,816	)
Unbilled accounts receivable		(790,863	)		—
Inventory		(143,785	)		—
Prepaid expenses		(52,998	)		(309,234	)
Accounts payable and accrued expenses		(1,115,353	)		619,652
Deferred revenue		(17,048	)		732,620
Other liabilities		(13,528	)		(6,465	)

Cash Provided by (Used In) Operating Activities		(4,877,039	)		(1,023,731	)

Cash Flows from Investing Activities
Purchase of marketable securities		—			(6,999,927	)
Purchase of equipment		(7,303	)		(6,608	)
Increase in intangible assets		(5,623	)		(494	)

Cash Provided by (Used In) Investing Activities		(12,926	)		(7,007,029	)

Cash Flow from Financing Activities
Proceeds from the sale of investments		1,963,430			—
Proceeds from the issuance of common stock		13,478,959			—

Cash Provided by Financing Activities		15,442,389			—

Net Increase in Cash		10,552,424			(8,030,760	)
Cash, Beginning of the Period		4,046,937			11,131,175
Cash, End of the Period	$	14,599,361		$	3,100,415

NON-CASH FINANCING ACTIVITIES
Conversion of preferred stock to common stock	$	—		$	133

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

Table of Contents

374Water Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – Nature of Business and Presentation of Financial Statements

Description of the Company

374Water Inc. (the “Company”, “374Water”, “We”, or “Our”) is a Delaware corporation which was formed in September 2005 as PowerVerde, Inc. At that time, the Company was focused on developing, commercializing and marketing a series of unique electric generating power systems designed to produce electrical power with zero emissions or waste byproducts, based on a pressure-driven expander motor and related organic ~~rankine~~Rankine cycle technology.

On April 16, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger”) with 374Water Inc., a privately held company based in Durham, North Carolina, (“374Water Private Company”) and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde.

Following the Merger, 374Water offers a disruptive technology that transforms ~~all~~certain wet wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., PFAS) into recoverable resources by focusing on waste as a valuable resource for water, energy, and minerals. ~~We are pioneers in~~Our goal is to support a new era of waste management that supports a circular economy and enables organizations to achieve their environment, social, and governance (ESG) goals. Our vision is a world without waste and our mission is to help create and preserve a clean and healthy environment that sustains life.

Presentation of Financial Statements

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

The results of operations for the ~~three~~six months ended ~~March 31,~~June 30, 2023, are not necessarily indicative of the results to be expected for the full year or for future periods. The condensed consolidated financial statements include the accounts of 374Water Inc., 374Water Systems Inc, and 374Water Sustainability Israel LTD, each a wholly-owned subsidiary of 374 Water. Intercompany balances and transactions have been eliminated in consolidation.

Table of Contents

Note 2 – Summary of Significant Accounting Policies

Cash and Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company held ~~$2,696,107~~$13,202,816 and $1,182,412 in cash equivalents as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

The Company held marketable securities as of ~~March 31,~~June 30, 2023 as noted in the following table:

	Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities		Adjusted Cost		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	9,153,161		—	$	9,153,161	$	9,153,161		—		—	$	14,599,361		—	$	14,599,361	$	14,599,361		—		—
Level 2:
U.S. Treasury securities	$	1,960,761	$	8,049	$	1,952,712	$	—	$	1,952,712		—	$	—	$	—	$	—	$	—	$	—		—
Total	$	11,113,922	$	8,049	$	11,105,873	$	9,153,161	$	1,952,712		—	$	14,599,361	$	—	$	14,599,361	$	14,599,361	$	—		—

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

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

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

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

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

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

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

∙•

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

Table of Contents

Accounts Receivable

Accounts receivables consist of balances due from sales, service revenues, unbilled accounts receivables which is for revenues earned but not yet billed, and other receivables relating to common stock subscription purchases where the stock has been transferred but the cash has not been received. The Company monitors accounts receivable and provides allowances when considered necessary. At ~~March 31,~~June 30, 2023 and December 31, 2022, accounts receivable were considered to be fully collectible but in accordance with the allowance for credit losses, the Company recorded an allowance for bad debt based on a reserve of current and aged receivables. Accordingly, an allowance for doubtful accounts of ~~$191~~$406 and $0 was recorded as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Accounts Receivable

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

Unbilled Accounts Receivable

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

~~Other Accounts Receivable~~

Other accounts receivables consist of cash due from the investment bank after the sale of common stock that has not cleared the bank yet by the end of the period. The cash is transferred from the investment bank to the Company typically within 3 to 5 days of the sale of common stock.

Accounts receivable allowance for credit losses

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

Name	Three Months Ending at March 31, 2023		Three Months Ending at March 31, 2022		Six Months Ending at June 30, 2023		Year Ending at December 31, 2022
Beginning balance	$	—	$	—	$	—	$	—
Current period provision		191		—		406		—
Write-offs		—		—		—		—
Ending Balance	$	191	$	—	$	406	$	—

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The majority of our inventory is raw materials and work in progress. Net realizable value is the value of an asset that can be realized upon the sale of the asset, less a reasonable estimate of the costs associated with either the eventual sale or the disposal of the asset in question. We utilize third-party suppliers to produce our products. Costs associated with fabrication, and other costs associated with the manufacturing of products, are recorded as inventory. We periodically evaluate the carrying value of our inventories in relation to estimated forecasts of product demand, which takes into consideration the life cycle of product releases. When quantities on hand exceed estimated sales forecasts, we perform an analysis to determine if a write-down for such excess inventories is required. Once inventory has been written down, it creates a new cost basis for inventory. Inventories are classified as current assets in accordance with recognized industry practice.

910

Table of Contents

Property and Equipment

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

Period Ended March 31,

2023

2022

Depreciation

$ 9,525

$ 235

	Period Ended June 30,
	2023		2022
Depreciation	$	10,417	$	728

Intangible Assets

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

Long-Lived Assets

The Company reviews long-lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. Recoverability of assets held and used is measured by a comparison of the carrying amount to the future undiscounted expected net cash flows to be generated by the asset. As of ~~March 31,~~June 30, 2023 and December 31, 2022, there were no impairments.

Concentrations of Credit Risk

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

Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. Our customer revenue for one customer made up over 90% of revenue for the period ended ~~March 31,~~June 30, 2023 and year ended December 31, 2022. In 2023 and 2022, the Company purchased a substantial portion of manufacturing services from one third party vendor, Merrell Bros Fabrication, LLC.

Revenue Recognition

The Company follows the revenue standards of Codification (ASC) Topic 606: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation using the input method.

1011

Table of Contents

The Company’s performance obligations are satisfied over time over the life of the contract. The ~~Company's~~Company’s revenue arrangements consist of a single performance obligation to transfer services. Revenue is recognized over time by measuring the progress toward complete satisfaction of the performance obligation using specific milestones. These milestones within the contract are assigned revenue recognition percentages, based on overall expected cost-plus margin estimates of those milestones compared to the total cost of the contract. Contract revenues are recognized in the proportion that contract costs incurred bear to total estimated costs. This method is used because management considers the input method to be the best available measure of progress on these contracts. Contract costs include all direct material and labor and subcontractor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. General, selling, and administrative costs are charged to expense as incurred.

We also record as revenue all amounts billed to customers for shipping and handling costs and record the actual shipping costs as a component of cost of revenues. Reimbursements received from customers for out-of-pocket expenses are recorded as revenues, with related costs recorded as cost of revenues. We present revenues net of any taxes collected from customers and remitted to government authorities.

Revenues for the six-month period ended ~~March 31,~~June 30, 2023 in the amount of ~~$793,458 was~~$843,321 were generated from the sale of the AirSCWO system, ~~and~~ $8,000 was generated from the sale of treatability services.

Revenues for the ~~year~~six-month period ended ~~December 31,~~June 30, 2022 in the amount of ~~$2,952,020 was~~$1,303,759 were generated from the sale of the AirSCWO ~~system and $63,501 was generated from the sale of treatability services.~~ system.

Stock-based Compensation

The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – “Stock Compensation” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the stock options. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

Income Tax Policy

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

Accounting for Uncertainty in Income Taxes

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

1112

Table of Contents

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 ~~$355,905~~$627,869 and ~~$185,653~~$608,348 for the ~~three~~six months ended ~~March 31,~~June 30, 2023, and 2022, respectively.

Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with ASC Topic 260, “Earnings per Share” Basic weighted-average number of shares of common stock outstanding for the years ended ~~March 31,~~June 30, 2023 and December 31, 2022 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. As of ~~March 31,~~June 30, 2023, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be antidilutive : options for 12,855,467 shares of common stock and 1,235,000 warrants. As of December 31, 2022, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be ~~antidilutive:~~antidilutive : options for ~~13,025,000~~12,752,000 shares of common stock and 1,250,000 warrants.

Financial Instruments

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

1213

Table of Contents

Foreign Currency Translation

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

Use of Estimates

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

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has completed its assessment on the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption and noted that there is no impact at this time, ~~for our HTM investments~~ and noted a small adjustment for the allowance for bad debt which was recorded on January 1, 2023. This has been ~~recorded~~regularly assessed and most recently updated as of ~~March 31,~~June 30, 2023.

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

Note 3 – Liquidity, Capital Resources and Going Concern

As of ~~March 31,~~June 30, 2023, the Company had working capital of ~~$13,966,018~~$17,819,572 compared to working capital of $7,060,511 at December 31, 2022. As of ~~March 31,~~June 30, 2023, the Company had an accumulated deficit of ~~$9,490,325.~~$11,140,902. For the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company had a net loss of ~~$1,640,343~~$3,290,920 and used ~~$3,178,476~~$4,877,039 of net cash in operations for the period.

The Company believes it has sufficient cash-on-hand ~~(including its marketable securities described in Note 2 above)~~ for the Company to meet its financial obligations as they come due at least the next 12 months from the date of the report.

Note 4 – Inventory

Inventory consists of:

Name	Balance at March 31, 2023		Balance at December 31, 2022		Balance at June 30, 2023		Balance at December 31, 2022
Raw materials	$	533,925	$	755,218	$	396,115	$	755,218
Work-in-process		1,254,094		905,492		1,408,380		905,492
Total	$	1,788,019	$	1,660,710	$	1,804,495	$	1,660,710

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

1314

Table of Contents

Note 5 – Intangible Assets

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

Name	Estimated Life	Balance at December 31, 2022		Additions		Amortization		Balance at March 31, 2023		Estimated Life	Balance at December 31, 2022		Additions		Amortization		Balance at June 30, 2023
License agreement	17 Years	$	964,965	$	—	$	15,787	$	949,178	17 Years	$	964,965	$	—	$	31,574	$	933,391
Patents	20 Years		85,057		2,705		1,123		86,639	20 Years		85,057		5,623		2,290		88,390
Total		$	1,050,022	$	2,705	$	16,910	$	1,035,817		$	1,050,022	$	5,623	$	33,864	$	1,021,781

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

Amortization expense for the ~~three~~six months ended ~~March~~June 31, 2023 and 2022, was ~~$16,910~~$33,864 and ~~$16,458,~~$33,174, respectively.

1415

Table of Contents

Estimated future amortization expense as of ~~March 31,~~June 30, 2023:

	March 31,		June 30,
	2023		2023
2023	$	50,827	$	33,967
2024		67,769		67,933
2025		67,769		67,933
2026		67,769		67,933
2027		67,769		67,933
Thereafter		713,914		716,082
Intangible assets, Net	$	1,035,817	$	1,021,781

Note 6 – Revenue

The following is a summary of our revenues by type for the six-month period ended ~~March 31,~~June 30, 2023 and ~~March 31,~~June 30, 2022:

Name	Balance at March 31, 2023		%			Balance at March 31, 2022		%			June 30, 2023		%			June 30, 2022		%
Equipment revenue	$	793,458		99	%	$	273,231		100	%	$	843,321		99	%	$	1,303,759		100	%
Service revenue		8,000		1	%		—		—	%		8,000		1	%		—	—		%
Total	$	801,458		100	%	$	273,231		100	%	$	851,321		100	%	$	1,303,759		100	%

1516

Table of Contents

~~Unearned~~Deferred Revenue

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

Name

Balance at
March 31,
2023

Balance at
December 31,
2022

Unearned revenue at beginning of year

$ 200,109

$ —

Billings deferred

5,000

1,467,189

Recognition of prior unearned revenue

—

(1,267,080 )
Unearned revenue at end of year

$ 205,109

$ 200,109

Name	Balance at June 30, 2023			Balance at December 31, 2022
Deferred revenue at beginning of year	$	200,109		$	—
Billings deferred		21,190			1,467,189
Recognition of prior deferred revenue		(38,238	)		(1,267,080	)
Deferred revenue at end of year	$	183,061		$	200,109

Unbilled Accounts Receivable

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

Name	Balance at March 31, 2023			Balance at December 31, 2022		Balance at June 30, 2023		Balance at December 31, 2022
Unbilled accounts receivable at beginning of year	$	918,164		$	—	$	918,164	$	—
Services performed but unbilled		793,458			918,164		790,863		918,164
Services billed		(39,168	)		—		—		—
Unbilled accounts receivable at end of year	$	1,672,454		$	918,164
Unbilled accounts receivable at end of period						$	1,709,027	$	918,164

Note 7 – ~~Stockholder’~~Stockholders’ Equity

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

Preferred Stock

~~On October 30, 2020, the~~The Company ~~designated 1,000,000 shares as Series D Convertible Preferred Stock with a par value of $0.0001.~~

~~On April 16, 2021, the Company closed on a private placement of 440,125~~is authorized, subject to limitations prescribed by Delaware law, to issue up to 50,000,000 shares of ~~Series D Convertible Preferred Stock (the “Preferred Stock'') with a par value~~preferred stock in one or more series, to establish from time to time the number of ~~$0.0001, yielding gross proceeds~~shares to be included in each series and to fix the designation, powers, preferences and rights of ~~$6,551,691 (the “Private Placement”) and settlement of a $50,000 liability for Preferred Stock shares. The Private Placement proceeds will be used for working capital, primarily for~~ the development, manufacturing and commercialization of 374Water’s Air SCWO systems. The Preferred Stock has a stated value of $15 per share, is convertible into common stock at $0.30 per share and has voting rights based on the underlying shares of each series and any of its qualifications, limitations or restrictions. The board of directors can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by the Company’s stockholders. The Company board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. ~~Upon liquidation~~The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of the Company and may adversely affect the ~~Preferred Stockholders have a liquidation preference before any assets can be distributed to common stockholders. All~~market price of the ~~Preferred Stock were sold pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2)~~Company’s common stock and the voting and other rights of the ~~Securities Act~~holders of ~~1933, as amended. On September 29, 2021, 412,853 shares of Preferred Stock were converted into 20,642,667 shares of common stock. On January 12, 2022,~~ the ~~Company converted the remaining 27,272 shares of Preferred Stock to 1,363,149 shares of~~Company’s common stock. As of ~~March 31,~~June 30, 2023, there were no shares of ~~Preferred Stock~~preferred stock issued ~~and~~or outstanding.

Common Stock

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the directors’ election. There is no right to cumulative voting in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available for payment of dividends subject to the prior rights of holders of preferred stock and any contractual restrictions the Company has against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive rights and have no right to convert their common stock into any other securities. As of ~~March 31,~~June 30, 2023, there were ~~128,840,421~~130,679,012 shares of common stock issued and outstanding.

1617

Table of Contents

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

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, a total of ~~2,137,876~~3,766,422 shares of common stock have been sold pursuant to the equity distribution agreement resulting in a total of ~~$8.35~~$13.44 million in proceeds, net of ~~$0.11~~$0.23 million of commission fees and ~~$0.05~~$0.11 million of accounting and legal fees. As of ~~March 31,~~June 30, 2023, ~~$91.5~~$86.56 million remained available under the Company’s at-the-market public facility, subject to various limitations.

Stock-based compensation

During the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, the Company recorded stock-based compensation of ~~$214,924~~$514,934 and ~~$97,558,~~$236,471, respectively, related to common stock issued, restricted stock issued, or vested options to employees and various consultants of the Company.

For the ~~three~~six months ended ~~March 31,~~June 30, 2023, ~~$189,283~~$458,540 was charged as general and administrative expenses and ~~$25,641~~$56,394 as research and development expenses in the accompanying condensed consolidated statements of operations. For the ~~three~~six months ended ~~March 31,~~June 30, 2022, ~~$93,868~~$214,381 was charged as general and administrative expenses and ~~$3,690~~$22,089 as research and development expenses in the accompanying condensed consolidated statements of operations.

Stock Options

Stock option activity for the ~~three~~six months ended ~~March 31,~~June 30, 2023 is summarized as follows:

	Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)		Shares			Weighted Average Exercise Price			Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2022		12,752,000	$	0.62	$	28,543,370		5.09		12,752,000		$	0.62		$	28,543,370		5.09
Granted		273,000		3.09		—		—		273,000			3.09			—		—
Exercised		—		—		—		—		—			—			—		—
Expired/forfeit		—		—		—		—		—			—			—		—
Options outstanding at March 31, 2023		13,025,000		0.67	$	52,705,860		4.93		13,025,000			0.67		$	52,705,860		4.93
Granted										640,000			3.25			—		—
Exercised										(175,045	)		(1.05	)		—		—
Expired/forfeit										(634,488	)		(1.36	)		—		—
Options outstanding at June 30, 2023										12,855,467			0.76		$	20,968,586		4.73

Stock option activity for the ~~three~~six months ended ~~March 31,~~June 30, 2022 is summarized as follows:

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

Total unrecognized compensation associated with these unvested options is approximately ~~$2,213,723~~$2,342,261 which will be recognized ~~over a period of four years.~~based on the options associated vesting schedules.

1718

Table of Contents

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, 2023			March 31, 2022			June 30, 2023			June 30, 2022
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%
Expected life	5.45 – 5.79 Years			5.65 – 5.75 Years			5.45 – 6.53 Years			5.28 – 6.10 Years
Expected volatility	35.24 – 35.88		%	37.73 – 39.18		%	30.00–35.88		%	34.37–39.18		%
Risk-free interest rate	3.58 – 3.97		%	1.44 – 2.12		%	3.57–3.97		%	1.44–3.56		%

Stock Warrants

As of ~~March 31,~~June 30, 2023, there were ~~1,250,000~~1,235,000 warrants outstanding which relate to the Series 1 offering executed in December 2021, where investors were offered a warrant for every two common shares purchased during the offering at an exercise price of $2.50 per share. The intrinsic value of all outstanding warrants as of ~~March 31,~~June 30, 2023 was ~~$2,775,000~~$0 based on the market price of our common stock of ~~$4.72~~$2.39 per share, which was the Company’s closing per share common stock price as reported on Nasdaq as of ~~March 31,~~June 30, 2023.

During the three months ended ~~March 31,~~June 30, 2023, there were no new warrants issued and there were ~~issued or exercised.~~15,000 shares of common stock exercised under existing warrants. As of ~~March 31,~~June 30, 2023, there are ~~1,250,000~~1,235,000 outstanding warrants.

A summary of warrant activity during the ~~three~~six months ended ~~March 31,~~June 30, 2023, is as follows:

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

Note 8 - Related Party Transactions

In 2021, the Company entered into an agreement to fabricate and manufacture the AirSCWO systems with Merrell Bros. Holding Company. As part of the agreement, the Company appointed Terry Merrell to its board of directors. As of ~~March 31,~~June 30, 2023, Merrell Bros. or their affiliates own stock in excess of 5% of the outstanding common stock. ~~As of March 31,~~For the six-month period ending June 30, 2023, the Company incurred ~~$535,201~~$599,571 in related party expenses, all of which ~~$514,399~~ was related to non-recurring labor as well as costs associated with the manufacturing of the AirSCWO systems. As of ~~March 31,~~June 30, 2023, there is an accrual of ~~$446,081~~$29,293 in related party expenses, all of which ~~$432,582 related to~~are costs associated with the manufacturing of the AirSCWO systems.

Note 9 - Commitments

The patented technology underlying 374Water’s supercritical water oxidation (SCWO) units, which was developed principally through the efforts of Messrs. Nagar and Deshusses at the facilities of Duke University, Durham, North Carolina (“Duke”), where Dr. Deshusses, the Company’s Head of Technology, is a professor. The SCWO technology is licensed to 374Water pursuant to a worldwide license agreement with Duke executed on April 16, 2021 (the “License Agreement”). In connection with the License Agreement, 374Water also executed an equity transfer Agreement with Duke pursuant to which Duke received a small number of common stock in the Company (See Notes 5 and 7). Under the terms of the License Agreement, the Company is required to make royalty payments based on a percentage of licensed product sales, as defined in the License Agreement which is triggered by the sale of licensed products. Further, the Company is also required to pay royalties on a percentage of sublicensing fees. The Company will reimburse Duke for any ongoing patent expenses incurred. During the ~~three-month~~six-month period ending ~~March 31,~~June 30, 2023, the Company has not incurred any expenses in connection with this License Agreement. The Company may terminate the license agreement anytime by providing Duke 60 days’ written notice.

~~Note 10 - Subsequent Events~~

From April 1, 2023 through May 5, 2023, we raised approximately $717,835 in net proceeds through an at-the-market equity offering of 152,285 shares of common stock. Pursuant to the at-the-market equity offering, we may issue up to $100 million of common stock, less the amounts already raised.

1819

Table of Contents

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

Forward Looking Statements

Readers are cautioned that the statements in this Report that are not descriptions of historical facts may be “forward-looking statements” that are subject to risks and uncertainties. This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on the beliefs of our management, as well as on assumptions made by and information currently available to us as of the date of this Report. When used in this Report, the words “plan,” “will,” “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project” and similar expressions are intended to identify such forward-looking statements. Although we believe these statements are reasonable, actual actions, operations and results could differ materially from those indicated by such forward-looking statements as a result of the risk factors included in our 2022 Annual Report on Form 10-K filed with the SEC on March 16, 2023, or other factors. We must caution, however, that this list of factors may not be exhaustive and that these or other factors, many of which are outside of our control, could have a material adverse effect on us and our ability to achieve our objectives. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above.

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

Critical Accounting Policies

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

Accounting for Uncertainty in Income Taxes

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

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

1920

Table of Contents

Revenue Recognition

Revenues for the ~~three~~six months ended ~~March 31,~~June 30, 2023 were generated from the sale of an AirSCWO system, and consulting and advisory services, which were recognized when the Company performed the service pursuant to its agreements with its clients which was the point in time when the Company completed its performance obligations under the agreements.

Common Stock Purchase Warrants

The Company accounts for common stock purchase warrants in accordance with ASC Topic 815- 40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). Based on the provisions of ASC 815- 40, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). As of ~~March 31,~~June 30, 2023, there were ~~1,250,000~~1,235,000 outstanding warrants classified as equity.

Stock-based compensation.

We account for stock-based compensation based on ASC Topic 718-Stock Compensation which requires expensing of stock options and other share-based payments based on the fair value of each stock option awarded. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model. This model requires management to estimate the expected volatility, expected dividends, and expected term as inputs to the valuation model.

Overview

374Water offers a technology that transforms certain wet wastes such as sewage sludge, biosolids, food waste, hazardous and non-hazardous waste, and forever chemicals (e.g., PFAS) into recoverable resources by focusing on waste as a valuable resource for water, energy, and minerals. ~~We consider ourselves pioneers in~~Our goal is to support a new era of waste management that supports a circular economy and enables organizations to achieve their environment, social, and governance (ESG) goals. Our vision is a world without waste and our mission is to help create and preserve a clean and healthy environment that sustains life.

We have developed proprietary waste stream treatment systems based on Supercritical Water Oxidation (SCWO). The term used for the process is ~~AirSCWO~~^TM.AirSCWO. SCWO leverages the unique properties of water in its supercritical phase (above 374 ^oC and 221 Bar) to convert organic matter to energy and safe products that can be recovered and used. ~~The~~We believe the AirSCWO^TM systems ~~are essentially~~will be largely waste stream agnostic and able to treat a variety of complex, hazardous and non-hazardous waste streams, opening up opportunities for multiple applications in diverse market verticals on an international scale. Most pertinently, the technology is shifting the landscape in addressing environmental challenges that, until now, have been considered unsurmountable (due to science/engineering or cost barriers), one good example being the global PFAS crisis.

We currently outsource manufacturing of the AirSCWO^TM systems to our strategic partner in the US, Merrell Bros., Inc., that have the facilities and capability to rapidly ramp-up manufacturing volumes and also support system modifications and deployment as required per market and clients. We envision in the future applying an outsourced manufacturing model in a few territories, and may consider establishing our own manufacturing capability in geographies where this is needed to adequately grow our market share.

~~The~~Our goal is to supply the systems ~~are supplied~~ to multiple market verticals, and our revenue model includes both capital equipment sales and long-term service agreements based on throughput and capacity (Waste Purchase Agreements). Our market penetration strategy is combined of direct client and channel partner sales routes, depending on the specific market and territory. In some cases, the systems may be white labeled and sold as part of a broader solution package.

2021

Table of Contents

Results of Operations

The following table sets forth, for the periods presented, the consolidated statements of operations data, which is derived from the accompanying consolidated financial statements:

	Period Ended March 31,												Three-Months Ended June 30
	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Revenue	$	801,458		$	273,231		$	528,227			193	%	$	49,863		$	1,030,528		$	(980,665	)		(95	%)
Cost of revenues		720,146			247,986			472,160			190	%		45,257			902,508			(857,251	)		(95	%)
Net revenue		81,312			25,245			56,067			222	%		4,606			128,020			(123,414	)		(96	%)
Operating expenses:
Research and development		355,905			185,653			170,252			92	%		271,964			422,695			(150,731	)		(36	%)
Compensation and related expenses		718,760			301,235			417,525			139	%		733,121			399,448			333,673			84	%
Professional fees		99,572			150,658			(51,086	)		(34	%)		92,285			141,104			(48,819	)		(35	%)
General and administrative		585,659			261,403			324,256			124	%		676,333			379,661			296,672			78	%
Total operating expenses		1,759,896			898,950			860,946			96	%		1,773,703			1,342,908			430,795			32	%
Income (loss) from operations		(1,678,584	)		(873,705	)		(804,879	)		92	%		(1,769,097	)		(1,214,888	)		(554,209	)		(46	%)
Other income (expenses), net		38,241			847			37,394			4,415	%		118,520			613			117,907			19,234	%
Income (loss) before income taxes		(1,640,343	)		(872,858	)		(767,485	)		88	%		(1,650,577	)		(1,214,275	)		(436,302	)		(36	%)
Provision for (benefit from) income taxes		—			—			—			0	%		—			—			—			0	%
Net income (loss)	$	(1,640,343	)	$	(872,858	)	$	(767,485	)		88	%	$	(1,650,577	)	$	(1,214,275	)	$	(436,302	)		(36	%)

Three Months Ended ~~March 31,~~June 30, 2023, as Compared to the Three Months Ended ~~March 31,~~June 30, 2022

Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated ~~$801,458~~$49,863 and ~~$273,231~~$1,030,528 in revenue from manufacturing assembly services and from consulting and advisory services during the three months ending ~~March 31,~~June 30, 2023 and ~~March 31,~~June 30, 2022, respectively. The decrease in revenue is primarily due to the long sales cycle process we have in place. In addition, during the three months ending June 30, 2022, our contracts included a greater number of conditions, as compared to the three months ending June 30, 2023, thereby allowing us to generate increased revenue.

Our general and administrative expenses increased to ~~$585,659~~$676,333 during the three months ending ~~March 31,~~June 30, 2023, as compared to ~~$261,403~~$379,661 in the same period of 2022, primarily because of increased ~~insurance costs~~stock-based compensation and ~~NASDAQ public company~~marketing expenses. The increase in marketing expense is a strategic move aimed at growing our sales pipeline. By investing more in marketing initiatives, we are able to reach a wider audience and attract potential customers to our products and services. These additional marketing efforts help create brand awareness, generate leads, and nurture prospects through the sales funnel. While this increase may appear as a higher expense, it is calculated investment in our company’s growth and long-term success.

Our compensation and related expenses increased to ~~$718,760~~$733,121 during the three months ending ~~March 31,~~June 30, 2023, as compared to ~~$301,235~~$399,448 in the same period of ~~2022, primarily because~~2022. This is a deliberate step in our strategic growth plan to ensure we have sufficient personnel to support our upcoming growth and sales pipeline. As we aim to expand our business and take advantage of new opportunities, it’s essential to have a talented and capable workforce in place. By investing in human resources, we can build a skilled team that can handle increased ~~payroll~~demands, provide excellent customer service, and ~~fringe benefit expenses produced by an increase in~~drive innovation within the ~~Company’s employee headcount.~~ company. This proactive approach to scaling our personnel aligns with our long-term vision and positions us for success as we move forward.

Our professional fees slightly decreased to ~~$99,572~~$92,285 during the three months ending ~~March 31,~~June 30, 2023, as compared to ~~$150,658~~$141,104 in the same period of 2022, primarily ~~because of increased legal fees as a result of hiring~~attributed to the increase in ~~house legal counsel.~~headcount within our organization. As we expand our team and hire more skilled professionals, we are able to handle various tasks and projects internally, which reduces our reliance on third-party services.

Our research and development expenses ~~increased~~decreased to ~~$355,905~~$271,964 during the three months ending ~~March 31,~~June 30, 2023, as compared to ~~$185,653~~$422,695 in the same period of 2022, ~~primarily because~~is a result of successfully completing the ~~increase in engineering expenses and~~design phase of our ~~continued~~systems. In 2023, our focus shifts from the intensive R&D activities to more streamlined efforts to ~~commercialize our systems.~~bring the product to market. This transition allows us to allocate resources more efficiently, reducing R&D expenses while concentrating on the crucial steps required for successful commercialization.

2122

Table of Contents

	Six-Months Ended June 30,
	2023			2022			$ Change			% Change
Revenue	$	851,321		$	1,303,759		$	(452,438	)		(35	%)
Cost of revenues		765,403			1,150,494			(385,091	)		(33	%)
Net revenue		85,918			153,265			(67,347	)		(44	%)
Operating expenses:
Research and development		627,869			608,348			19,521			3	%
Compensation and related expenses		1,451,881			700,683			751,198			107	%
Professional fees		191,857			291,760			(99,903	)		(34	%)
General and administrative		1,261,995			641,067			620,928			97	%
Total operating expenses		3,533,602			2,241,858			1,291,744			58	%
Income (loss) from operations		(3,447,684	)		(2,088,593	)		(1,359,091	)		(65	%)
Other income (expenses), net		156,764			1,460			155,304			10,637	%
Income (loss) before income taxes		(3,290,920	)		(2,087,133	)		(1,203,787	)		(58	%)
Provision for (benefit from) income taxes		—			—			—			0	%
Net income (loss)	$	(3,290,920	)	$	(2,087,133	)	$	(1,203,787	)		(58	%)

Six Months Ended June 30, 2023, as Compared to the Six Months Ended June 30, 2022

Our business has been focused on the development and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated $851,321 and $1,303,759 in revenue from manufacturing assembly services and from consulting and advisory services during the six months ending June 30, 2023 and June 30, 2022, respectively. The decrease in revenue is primarily due to the long sales cycle process we have in place. In addition, during the six months ending June 30, 2022, our contracts included a greater number of conditions, as compared to the six months ending June 30, 2023, thereby allowing us to generate increased revenue.

Our general and administrative expenses increased to $1,261,995 during the six months ending June 30, 2023, as compared to $641,067 in the same period of 2022, primarily because of increased stock-based compensation and marketing expenses. The increase in marketing expense is a strategic move aimed at growing our sales pipeline. By investing more in marketing initiatives, we are able to reach a wider audience and attract potential customers to our products and services. These additional marketing efforts help create brand awareness, generate leads, and nurture prospects through the sales funnel. While this increase may appear as a higher expense, it is calculated investment in our company’s growth and long-term success.

Our compensation and related expenses increased to $1,451,881 during the six months ending June 30, 2023, as compared to $700,683 in the same period of 2022. This is a deliberate step in our strategic growth plan to ensure we have sufficient personnel to support our upcoming growth and sales pipeline. As we aim to expand our business and take advantage of new opportunities, it’s essential to have a talented and capable workforce in place. By investing in human resources, we can build a skilled team that can handle increased demands, provide excellent customer service, and drive innovation within the company. This proactive approach to scaling our personnel aligns with our long-term vision and positions us for success as we move forward.

Our professional fees slightly decreased to $191,857 during the six months ending June 30, 2023, as compared to $291,760 in the same period of 2022, primarily attributed to the increase in the headcount within our organization. As we expand our team and hire more skilled professionals, we are able to handle various tasks and projects internally, which reduces our reliance on third-party services.

Our research and development expenses increased to $627,869 during the six months ending June 30, 2023, as compared to $608,348 in the same period of 2022, remained relatively the same as a result of successfully completing the design phase of our systems and shifting our focus from the intensive R&D activities from Q1 to more streamlined efforts in the current quarter in order to bring the product to market. This transition allows us to allocate resources more efficiently, reducing R&D expenses while concentrating on the crucial steps required for successful commercialization.

Liquidity and Capital Resources

We have an at-the-market equity offering under which we may issue up to $100 million of common stock, which is currently effective and under which we commenced selling shares at the end of January 2023, and which will remain available to us in the future.

We have financed our operations since inception principally through the sale of equity securities and sales of product and services. As of ~~March 31,~~June 30, 2023, we had working capital of ~~$13,966,018~~$17,819,572 compared to working capital of $7,060,511 at December 31, 2022. This increase in working capital is due primarily to the ~~At the Market~~at-the-market common stock offering that raised additional capital.

We believe that these funds will satisfy our working capital needs for the next 12 ~~months.~~months from the report date. There can be no assurance that these funds will be sufficient to finance our plan of operations and commercialize our systems or that we will be able to raise any necessary additional funds on a commercially reasonable basis or at all.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

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

Table of Contents

Management’s Annual Report on Internal Control Over Financial Reporting

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

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of ~~March 31,~~June 30, 2023. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management ~~identified a~~has remediated the material weakness relating to the lack of proper detailed review as of ~~March 31,~~June 30, 2023. The Company increased its oversight over financial reporting following the addition of an internal financial reporting manager as well as enhanced controls around reporting. As a result of this remediated material weakness, our management concluded that our internal control over financial reporting was ~~not~~ effective as of ~~March 31,~~June 30, 2023.

No Attestation Report

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

Changes in Internal Control Over Financial Reporting

Except for controls implemented to address the deficiencies described above, there have been no other changes in our internal control over financial reporting during the first ~~three~~six months of 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2224

Table of Contents

PART II OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicable.

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

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable

2325

Table of Contents

Item 6. Exhibits.

(a)

Exhibits

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL INSTANCE DOCUMENT

101.SCH		XBRL TAXONOMY EXTENSION SCHEMA

101.CAL		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

101.DEF		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

101.LAB		XBRL TAXONOMY EXTENSION LABEL LINKBASE

101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

Table of Contents

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~~August 8, 2023	By:	/s/ Yaacov Nagar
		Yaacov Nagar
		Chief Executive Officer

Dated: ~~May~~August 8, 2023	By:	/s/ Israel Abitbol
		Israel Abitbol
		Chief Financial Officer

Table of Contents

Exhibit Index

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL INSTANCE DOCUMENT

101.SCH		XBRL TAXONOMY EXTENSION SCHEMA

101.CAL		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

101.DEF		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

101.LAB		XBRL TAXONOMY EXTENSION LABEL LINKBASE

101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

	Three months ended March 31,
	2023			2022

Revenue	$	801,458		$	273,231
Cost of goods sold		720,146			247,986
Gross profit		81,312			25,245
Operating Expenses
Research and development		355,905			185,653
Compensation and related expenses		718,760			301,235
Professional fees		99,572			150,658
General and administrative		585,659			261,403
Total Operating Expenses		1,759,896			898,950

Loss from Operations		(1,678,584	)		(873,705	)

Other Income (Expense)
Interest income		37,859			840
Other income		382			7
Total Other Income (Expense)		38,241			847
Net Loss before Income Taxes		(1,640,343	)		(872,858	)
Provision for Income Taxes		—			—

Net Loss	$	(1,640,343	)	$	(872,858	)

Other comprehensive loss
Change in foreign currency translation		824			—
Change in unrealized loss on marketable securities		18,967			—
Total other comprehensive loss		19,791			—

Total comprehensive loss		(1,620,552	)		(872,858	)
Net Loss per Share - Basic and Diluted	$	(0.01	)	$	(0.01	)

Weighted Average Common Shares Outstanding - Basic and Diluted		127,146,695			126,499,142