374Water Inc. Q2 FY2024 earnings call

• Advanced AirSCWO technology towards commercialization, expanded ability to destroy organic waste streams, and deployed the system to Orlando. - Temporarily relocated core manufacturing operations near Orlando. - Made key hires across the organization. - Discussed the AirSCWO system's capabilities, including handling various waste streams like biosolids, PFAS, etc. - Highlighted the large market opportunity for the technology in the U.S., with a pipeline of $1.6 billion in municipal, federal, and industrial opportunities. - Focused on meeting contractual obligations in municipal and federal markets, commercializing the technology, securing TSDF partnerships, expanding personnel, and facilities. - Building additional AirSCWO units, expanding lab operations, and seeking strategic partnerships with TSDFs.

For the first half of 2024, revenue was $352,000 compared to $851,000 in the first half of 2023. Direct costs declined due to the end of assembly and fabrication work on a sold unit. As of June 30, 2024, working capital was $7.2 million, consisting of $8.8 million in current assets (cash, receivables, inventory) and $1.5 million in current liabilities (accounts payable, accrued expenses). There were no outstanding debt obligations.

• Focus on commercializing the AirSCWO technology, expanding its use cases, and accelerating technology development across waste streams. - Plan to begin designing the AS30 unit in 2024 and manufacturing in 2025. - Continue to pursue partnerships and expand operations to support technology development and commercialization.

• Concern about cash burn rate, with a need to evaluate ways to improve the cash position. - Potential for additional dilution from fundraising activities to address cash needs and support growth.

Q: Talk about what you liked about Orlando in terms of moving the first system to be deployed there and lease space. Also, did you look at other states or cities?

A: When deploying technology, Orlando was optimal as it allowed performing other tests besides biosolids. Moved manufacturing operations there temporarily. Are looking at multiple other geographies for a larger manufacturing facility but no decision made yet.

Q: How will the two inputs for the Orlando unit (biosolids and PFAS tests) work?

A: Will do biosolids processing and PFAS tests separately, with easy changeout of waste streams.

Q: Describe services revenue, specifically lab tests.

A: Services revenue relates to lab tests where customers pay to see the efficacy of the AirSCWO system in destroying their waste streams. The lab is being expanded, and tests range from early destruction demonstrations to commercial scale.

Q: Will AirSCWO be paying for operating costs of the unit in Orlando?

A: Yes, AirSCWO will be paying for the operating costs of the unit in Orlando.

Q: Sense of how long the demonstration phase will take in Orlando and Orange County?

A: Orlando demonstration is 7 months. Orange County Sanitation has a 12-month demonstration with 6 months run by 374Water engineers and 6 months by OCSAN staff.

Q: Key metrics watched for demonstration determinations?

A: Throughput, ability to process waste, and time between down cycles for repairs/maintenance. Focus on a 5 days on, 2 days off schedule.

Q: EPA's regulation of PFAS and change with a new administration?

A: Litigation and awards in PFAS space suggest momentum, and the 'train has left the station' in terms of required implementation, with continued interest in the technology for PFAS contaminants.

Q: Concern about cash burn rate and ways to fix it?

A: Evaluating ways to improve cash position, including additional revenue from tests/demonstrations and considering debt/equity financing. Goal is to raise capital in least dilutive way for shareholders.