374Water (US:SCWO)2025-05-15 20:06PART I: FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) The company reported a net loss of $3.7 million for Q1 2025, with assets decreasing to $16.0 million, indicating substantial doubt about its going concern Condensed Consolidated Balance Sheets Total assets decreased to $16.0 million by March 31, 2025, from $19.2 million at year-end 2024, primarily due to reduced cash and equity Condensed Consolidated Balance Sheet Highlights (in USD) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $6,883,845 | $10,651,644 | | Total Current Assets | $11,582,523 | $14,887,807 | | Total Assets | $15,978,163 | $19,183,833 | | Liabilities & Equity | | | | Total Current Liabilities | $2,848,223 | $3,127,676 | | Total Liabilities | $3,401,433 | $3,709,052 | | Total Stockholders' Equity | $12,576,730 | $15,474,781 | | Total Liabilities and Stockholders' Equity | $15,978,163 | $19,183,833 | Condensed Consolidated Statements of Operations Revenues increased to $543,100 in Q1 2025, but net loss widened to $3.7 million due to significantly higher operating expenses Statement of Operations Summary (in USD) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $543,100 | $315,278 | | Gross margin (deficit) | $138,283 | $(302,020) | | Total Operating Expenses | $3,923,793 | $1,899,183 | | Loss from Operations | $(3,785,510) | $(2,201,203) | | Net Loss | $(3,698,414) | $(2,024,465) | | Net Loss per Share | $(0.03) | $(0.02) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $3.5 million in Q1 2025, resulting in a period-end cash balance of $6.9 million Cash Flow Summary (in USD) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(3,494,477) | $(2,508,653) | | Net Cash Used In Investing Activities | $(297,322) | $(590) | | Net Cash Provided by Financing Activities | $24,000 | $0 | | Net Decrease in Cash | $(3,767,799) | $(2,509,243) | | Cash at End of Period | $6,883,845 | $7,936,161 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the AirSCWO business, substantial doubt about going concern due to recurring losses, customer concentration, and a legal settlement - The company's AirSCWO system is designed to destroy organic wastes, including PFAS, and convert them into recoverable resources like water, minerals, and energy22 - Recurring net losses ($3.7M in Q1 2025) and significant cash used in operations ($3.5M) raise substantial doubt about the company's ability to continue as a going concern, necessitating additional capital for the next twelve months6263 - Two customers accounted for approximately 94% of total revenues for the three months ended March 31, 202537 - The company accrued $335,000 for a legal settlement with its former CEO, which was officially settled on April 2, 202596 - Subsequent to the quarter's end, the company appointed Stephen Jones to its Board of Directors and approved a significant equity compensation grant to its Chief Technology Officer100101 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 72% revenue increase to $543,100, but net loss widened to $3.7 million due to a 107% rise in operating expenses Results of Operations Comparison (in USD) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $543,100 | $315,278 | $227,822 | 72% | | Gross margin | $138,283 | $(302,020) | $440,303 | (146)% | | Total operating expenses | $3,923,793 | $1,899,183 | $2,024,610 | 107% | | Net loss | $(3,698,414) | $(2,024,465) | $(1,673,949) | 83% | - Compensation expenses rose 112% to $1.7 million due to increased headcount and a $538,000 increase in stock-based compensation112 - Professional fees increased 205% to $771,901, mainly from legal fees for a litigation settlement and recruiting fees113 - General and administrative expenses grew 193% to $942,440, driven by costs for a new manufacturing facility, higher depreciation, and increased travel and investor relations expenses111 - The company's plan for 2025 includes completing the City of Orlando demonstration, deploying systems for the Department of Defense and Orange County Sanitation District, scaling manufacturing, and launching Waste Destruction Services (WDS) hubs108 Quantitative and Qualitative Disclosures about Market Risk The company states that this item is not applicable - This section is not applicable for the company125 Controls and Procedures Disclosure controls and procedures were deemed ineffective due to a material weakness from insufficient finance and accounting resources, with a remediation plan underway - The company's disclosure controls and procedures were deemed not effective as of the end of the reporting period126 - The ineffectiveness is due to a material weakness in internal controls caused by a lack of full-time resources in the finance and accounting department126129 - A remediation plan is being established to hire additional full-time personnel to enhance financial and accounting resources129 PART II: OTHER INFORMATION Legal Proceedings Information regarding a legal settlement for $335,000 with the former CEO is incorporated by reference from Note 8 - Information regarding legal proceedings is incorporated by reference from the 'Legal Settlement' section in Note 8 of the financial statements133 Risk Factors The company outlines significant risks to its business, financial condition, and stock price, including unproven technology, capital needs, and potential Nasdaq delisting Risks Related to Business and Economic Conditions Key business risks include unproven commercial viability of AirSCWO technology, limited operating history, and identified material weaknesses in internal controls - A sustainable market for the company's products may never develop, and the technology's commercial viability is unproven as it has not been utilized on a full-scale commercial basis141142 - The company has a limited operating history with no material revenues, making evaluation of its business difficult143 - Material weaknesses have been identified in the company's internal control over financial reporting due to personnel limitations156159 Risks Related to Financial Position and Capital Requirements Recurring losses and negative cash flows raise substantial doubt about the company's going concern ability, necessitating additional financing which may cause dilution - The company does not generate sufficient revenue and will require additional capital to continue as a going concern, as current cash resources are insufficient for the next twelve months196197 - The company has inadequate capital and needs substantial additional funds to execute its business plan; future financing may not be available or could be on unfavorable terms, leading to potential dilution201202205 Risks Related to Intellectual Property The company faces risks in protecting its intellectual property, potential infringement claims, and reliance on third-party licensed technologies - The company may have difficulty protecting its intellectual property and could incur substantial costs in patent litigation207208 - The company may become subject to claims of infringing on the intellectual property of others, which could lead to costly litigation and prohibit product development214216 - The company depends on technologies licensed from third parties, and any loss of these rights could prevent the sale of its products221222 Risks Related to Reliance on Third Parties The company is highly dependent on third-party suppliers and manufacturers, facing risks of component shortages, delays, and price changes without long-term contracts - The company's products contain materials from numerous global suppliers, exposing it to potential component shortages, delays, and price changes225226 - The company is dependent on third-party manufacturers and suppliers; if they are unable or unwilling to provide components, the company's ability to sell its products could be impaired228229 Risks Related to Common Stock and Capital Structure Common stock volatility and potential Nasdaq delisting due to non-compliance with minimum bid price and independent director requirements pose significant risks - The company may not regain compliance with Nasdaq's continued listing requirements, including the $1.00 minimum bid price rule, and faces a potential delisting253254256 - The company also fails to comply with Nasdaq's independent director requirement and is in a cure period to regain compliance257259 - The market price of the common stock has been highly volatile and has declined significantly, partly due to large sales by a single significant stockholder231247 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None261 Defaults Upon Senior Securities The company reported no defaults upon senior securities - None261 Mine Safety Disclosures The company states that this item is not applicable - Not applicable262 Other Information No other material information was reported, and no Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers - During the fiscal quarter ended March 31, 2025, no directors or officers informed the company of the adoption, modification, or termination of a Rule 10b5-1 trading arrangement264 Exhibits This section lists exhibits filed with Form 10-Q, including the CTO's employment agreement, CEO/CFO certifications, and XBRL data - Exhibits filed include the employment agreement for Rajesh Melkote (CTO), CEO/CFO certifications (SOX 302 & 906), and XBRL files266