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Revenue for the quarter ended March 31, 2023 was $801,000, compared to $273,000 for the same period in 2022, an increase of 193%.

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2023 revenue was due to manufacturing assembly services while 2022 revenue was primarily due to consulting and advisory services.

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At the same time, the Company managed its Cost of Goods Sold to generate a 222% increase in its Gross Profit compared to the period ended March 31, 2022.

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Total Operating Expenses increased as the Company makes strides in building its pipeline while commercializing and improving its technology:

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Research and Development expenses increased from $186,000 to $356,000, primarily a result of the increase in engineering costs related to commercializing our system.

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Compensation-related expenses grew to $719,000 from $301,000 primarily due to increased payroll and benefit expenses as a result of growing active projects.

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General and administrative expenses increased to $586,000 from $261,000 primarily as a result of increased insurance costs and public company expenses.

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As of March 31, 2023 we had working capital of $13,966,018 compared to working capital of $7,060,511 at December 31, 2022. This increase in working capital is due primarily to share issuances under the Company's the-market common stock offering.

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The Company successfully demonstrated its AirSCWO™ supercritical water oxidation (SCWO) technology during SCWO week at its manufacturing partner's facility in Indiana. The event showcased the company's revolutionary waste management solution to hundreds of prospective customers, along with analysts and investors. The 3-day event, attended by over 400 guests featured a demonstration of the first commercial unit (Ana), set to be deployed in Orange County, CA, later this year. Attendees included over 200 potential customers, and several municipalities, representing over 10 countries.

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374Water participated in the United Nations 2023 Water Conference and hosted an accredited side event. During the conference, the Company hosted its own "Future of PFAS, Waste and Clean Water" expert panel in the Nasdaq Boardroom.

Assets

Current Assets:

Cash

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

Unbilled accounts receivable

Other accounts receivable

Inventory

Investments

Prepaid expenses

Total Current Assets

Long-Term Assets:

Equipment, net

Intangible asset, net

Total Long-Term Assets

Total Assets

Liabilities and Stockholders` Equity

Current Liabilities:

Accounts payable and accrued expenses

Deferred revenue

Other liabilities

Total Current Liabilities

Total Liabilities

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

Additional paid-in capital

Accumulated (deficit)

Accumulated other comprehensive loss

Total Stockholders` Equity

Total Liabilities and Stockholders` Equity

Revenue

Cost of goods sold

Gross profit

Operating Expenses

Research and development

Compensation and related expenses

Professional fees

General and administrative

Total Operating Expenses

Loss from Operations

Other Income (Expense)

Interest income

Other income

Total Other Income (Expense)

Net Loss before Income Taxes

Provision for Income Taxes

Net Loss

Other comprehensive loss

Change in foreign currency translation

Change in unrealized loss on marketable securities

Total other comprehensive loss

Total comprehensive loss

Net Loss per Share - Basic and Diluted

Weighted Average Common Shares Outstanding - Basic and Diluted

Cash Flows from Operating Activities

Net loss

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization expense

Stock based compensation

Change in foreign currency translation

Changes in operating assets and liabilities:

Accounts receivable

Unbilled accounts receivable

Other accounts receivable

Inventory

Prepaid expenses

Accounts payable and accrued expenses

Deferred revenue

Other liabilities

Cash Provided by (Used In) Operating Activities

Cash Flows from Investing Activities

Purchase of equipment

Increase in intangible assets

Cash Provided by (Used In) Investing Activities

Cash Flow from Financing Activities

Proceeds from the issuance of common stock

Cash Provided by Financing Activities

Net Increase in Cash

Cash, Beginning of the Period

Cash, End of the Period

NON-CASH FINANCING ACTIVITIES

Conversion of preferred stock to common stock