374Water Inc.

Company Overview

Business Model: 374Water Inc. is a cleantech and environmental services company focused on developing and commercializing its proprietary AirSCWO (supercritical water oxidation) technology. This technology is designed to destroy and mineralize a broad spectrum of non-hazardous and hazardous organic waste streams, including 'forever chemicals' (PFAS), from municipal, federal, and industrial markets. The process yields safe dischargeable water, mineral effluent, vent gas, and recoverable heat energy, aiming to eliminate waste byproducts and simplify complex waste processing practices. Revenue is generated through capital sales of AirSCWO systems, Waste Destruction Services (WDS), and laboratory & testing services.

Market Position: 374Water Inc. operates in an emerging market for advanced waste destruction technologies. The Company targets significant market verticals: the global municipal water and wastewater treatment market (estimated over $347 billion annually in 2024, growing at ~7.5% CAGR), the U.S. federal waste management market (estimated at $15 billion), and the global industrial waste management market (estimated at $144.5 billion in 2025, growing at ~6.74% CAGR). Key differentiators for AirSCWO technology include its continuous waste processing design, scalability, effective destruction of emerging contaminants like PFAS, generation of recoverable heat energy, and provision of on-site waste treatment solutions that reduce transportation costs and liabilities.

Recent Strategic Developments: During the 2025 fiscal year, 374Water Inc. made significant commercial and technological progress. Highlights include:

• Establishment of a Waste Destruction Services (WDS) hub at the City of Orlando’s Iron Bridge Water Reclamation Facility.
• Deployment of a commercial AirSCWO system to Detroit, MI, for a six-week Department of Defense (DoD) Destruction Demonstration of six PFAS-impacted waste streams.
• Deployment of a mobile AirSCWO lab to Peterson Space Force Base in Colorado for waste stream testing.
• Commencement of destruction of 1,000 gallons of Aqueous Film Forming Foam (AFFF) from the University of North Carolina at Chapel Hill Collaboratory.
• Collaboration agreement with Crystal Clean to locate 374Water Inc.’s AirSCWO technology at one of their RCRA-permitted facilities for PFAS waste destruction.
• Agreement with the City of Olathe, KS, for the sale of an AirSCWO system and pre-treatment equipment with an associated service agreement for PFAS-impacted wastewater.
• In 2026, the Company expects to design and scale AirSCWO systems for larger capacities, expand the Orlando WDS hub, deploy technology to Orange County Sanitation District (OC San) in Fountain Valley, CA, and St. Cloud, MN, and negotiate additional Treatment, Storage, and Disposal Facility (TSDF) partnerships.

Geographic Footprint: 374Water Inc. primarily focuses on the U.S. market, serving municipal, federal, and industrial customers. Its principal executive offices are in Morrisville, North Carolina. The Company operates a laboratory in the Research Triangle, North Carolina, and its manufacturing, assembly, and testing facility is located at the Iron Bridge Regional Water Reclamation Facility in Oviedo, Florida. Future plans include expanding sales and marketing efforts into international markets.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: -1093.67% (2025) vs. -204.89% (2024)
• Operating Margin: -9835.84% (2025) vs. -2874.45% (2024)
• Net Margin: -9754.08% (2025) vs. -2791.60% (2024)

Investment in Growth:

• R&D Expenditure: $2.52 million (1174.01% of revenue) in 2025, up from $2.14 million (481.20% of revenue) in 2024.
• Capital Expenditures: $1.90 million in 2025, up from $0.55 million in 2024, primarily for property and equipment related to the Demo System and equipment-in-progress for an AS1 unit.
• Strategic Investments: The Company is investing in scaling AirSCWO systems, building out its WDS hub, and expanding manufacturing, operations, and R&D capacity.

Business Segment Analysis

Single Operating Segment

374Water Inc. operates as a single operating and reportable segment. The Company's Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer, who comprise the Chief Operating Decision Makers (CODMs), review financial information on a consolidated basis for operational decisions, resource allocation, and performance assessment.

Financial Performance:

• Revenue: $0.22 million (-52% YoY). This decrease was primarily due to a $1.88 million decrease in equipment revenue (resulting in negative equipment revenue of $1.65 million for 2025) offset by a $1.65 million increase in service revenues. The equipment revenue reduction was due to a change in accounting estimate related to delays in delivering equipment for the OC San contract, leading to fully constraining variable consideration.
• Gross Deficit: ($2.35 million) (+158% YoY). The increase in gross deficit was driven by higher cost of revenues ($2.57 million in 2025 vs. $1.36 million in 2024), primarily due to increased service revenues, material and labor costs for the sold AirSCWO system, and a $0.60 million increase in the accrued loss provision.
• Net Loss: ($20.98 million) (+69% YoY). The increased net loss reflects higher operating expenses and decreased revenue.

Product Portfolio:

• AirSCWO Solutions: Proprietary technology for waste destruction. Current offerings include a mobile, trailered AS system (processes over 700 kg/day wet waste) for rapid deployment and modular AS systems (scales between 6 and 10 tons/day) for smaller municipal, federal, and industrial sites. The product roadmap includes scaling designs to 20+, 30+, 50+, and 100+ tons per day.
• Pre- and Post-Treatment Solutions: Ancillary equipment developed by 374Water Inc. or strategic partners to condition inlet waste streams and enhance system outputs (e.g., carbon dioxide utilization, minerals recovery, water purification, energy recovery).
• Waste Destruction Services (WDS): Launched in 2024, offering waste destruction without significant capital investment for customers. Based on a partner model with wastewater facilities, industrial facilities, and RCRA Part B permitted TSDFs. The first WDS operation was established at the City of Orlando’s Iron Bridge Water Reclamation Facility in 2025.
• Laboratory & Testing Services: Provides AirSCWO waste destruction treatability evaluations for clients and supports R&D efforts.
• Operations & Maintenance Services: Offers comprehensive system operations, customer training, integration, and on-demand support and maintenance.

Key Growth Drivers:

• Technological Advancements: Continuous R&D to improve throughput, durability, and operability of AirSCWO systems, and to expand applications to new markets (e.g., oil and gas, battery recycling, pharmaceuticals).
• Market Demand: Driven by excessive costs and operational burden of current waste disposal, desire for point-of-generation destruction, outdated infrastructure, increasing waste complexity, public health concerns, stringent regulations (especially for PFAS), resource scarcity, corporate sustainability targets, and climate change.
• Strategic Partnerships: Collaborations with entities like the Department of Defense, Crystal Clean, and municipal governments to expand market reach and service offerings.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: In 2025, 374Water Inc. repurchased 600,000 warrants from its largest investor for $0.65 million.
• Dividend Payments: 374Water Inc. has never declared or paid cash dividends on its common stock and does not intend to do so in the foreseeable future, prioritizing reinvestment in business development and expansion.
• Future Capital Return Commitments: No specific future capital return commitments were disclosed.

Balance Sheet Position:

• Cash and Equivalents: $3.20 million as of December 31, 2025, a significant decrease from $10.65 million as of December 31, 2024.
• Total Debt: $0.83 million as of December 31, 2025, comprising a note payable ($43,149), a secured promissory note ($630,000, repaid in January 2026), and a financing liability ($159,342).
• Net Cash Position: ($0.51 million) as of December 31, 2025 (Cash and Equivalents minus Total Debt).
• Credit Rating: Not disclosed.
• Debt Maturity Profile: The note payable requires fixed payments over 60 months at 10.75% interest. The financing liability requires fixed monthly payments over 11 months at 9.85% interest.

Cash Flow Generation:

• Operating Cash Flow: ($14.33 million) in 2025, an increase in cash used from ($10.59 million) in 2024, primarily due to the increased net loss.
• Free Cash Flow: ($16.22 million) in 2025 (Operating Cash Flow less Capital Expenditures).
• Cash Conversion Metrics: Not explicitly provided.

Operational Excellence

Production & Service Model: 374Water Inc.'s AirSCWO systems are designed, manufactured, assembled, and tested at its facility in Oviedo, Florida. The technology is a continuous flow waste destruction process featuring highly efficient energy recapture to minimize energy demand and maximize reusable energy. Systems are designed for continuous operation at commercial scale with periodic routine maintenance. The Company aims to increase capacity and decrease maintenance downtime to enhance process efficiency.

Supply Chain Architecture: Key Suppliers & Partners:

• Raw Materials & Components: 374Water Inc. sources raw materials, processed, and pre-assembled components globally from various suppliers. A limited number of these suppliers are single-source to maintain consistent quality and support product development, but redundant sources are qualified for many critical materials and components to ensure supply consistency.
• Manufacturing Partners: Merrell Bros. Fabrication, LLC previously provided manufacturing services, but this relationship terminated in 2024, and services are now on an as-needed basis.
• Technology Partners: Duke University - provides a worldwide license for the underlying SCWO technology.

Facility Network:

• Manufacturing: State-of-the-art facility at the Iron Bridge Regional Water Reclamation Facility in Oviedo, Florida, equipped with CNC Plasma cutting, 5-axis milling, pipe bending, CAD/CAM, sheet metal forming, various welding techniques, electrical design and panel build, and full system integration and testing capabilities.
• Research & Development: A dedicated laboratory in the Research Triangle, North Carolina, and the WDS hub at the City of Orlando’s Iron Bridge Water Reclamation Facility also serves as a proving ground for R&D.
• Distribution: Includes a mobile, trailered AS system for rapid deployment to non-permanent or low-infrastructure settings.

Operational Metrics: AirSCWO technology has demonstrated waste destruction results at or above 99.95% on a wide variety of organic waste streams at commercial and laboratory scale. The systems are designed to run continuously at commercial scale with periodic stops for routine maintenance, with ongoing efforts to increase capacity and decrease maintenance frequency.

Market Access & Customer Relationships

Go-to-Market Strategy: 374Water Inc. employs a multi-pronged approach to market access, offering its products and services through capital sales, joint development agreements, and Waste Destruction Services (WDS).

Distribution Channels:

• Direct Sales: The business development and sales team directly engages with municipal water and wastewater leaders, as well as Government experts, Congressional leaders, and civilian and military officials in the federal market (DoD, DoE, FAA).
• Channel Partners: The WDS business model is based on partnerships with wastewater facilities, industrial facilities, and RCRA Part B permitted Treatment, Storage, and Disposal Facilities (TSDFs). These partnerships may involve operational joint ventures or service provider models. A collaboration agreement with Crystal Clean is an example of such a partnership.
• Digital Platforms: Not explicitly detailed in the filing.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: The Company has tested waste streams from major oil and gas companies, multi-national chemical and pharmaceutical companies, the United States Department of Defense and defense contractors, and resource recovery companies.
• Strategic Partnerships: Key partnerships include the City of Orlando (WDS hub), the Department of Defense (destruction demonstrations), Crystal Clean (PFAS waste destruction), and the City of Olathe, KS (AirSCWO system sale).
• Customer Concentration: In 2025, four customers accounted for 84.53% of service revenue (Customer A: 34.01%, Customer B: 25.34%, Customer C: 14.49%, Customer D: 10.69%). For accounts receivable as of December 31, 2025, Customer A represented 73.75%, Customer B 3.68%, and Customer D 1.77%, with one other customer exceeding 10%. Equipment revenue in 2025 was derived from a single customer contract (Orange County Sanitation District).

Geographic Revenue Distribution: The Company's primary focus and revenue generation are within the U.S. municipal, federal, and industrial markets. International expansion is a future objective.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: 374Water Inc. operates in the cleantech and environmental services sector, specifically targeting organic waste destruction. This market is characterized by increasing demand driven by:

• Excessive costs and operational burdens of existing disposal practices.
• Desire for point-of-generation waste destruction.
• Outdated or inadequate waste disposal infrastructure.
• Increasing quantity and complexity of waste streams, particularly emerging contaminants like PFAS.
• Public health concerns and existing/anticipated State and Federal regulations.
• Liability threats from contaminants of emerging concern (CECs).
• Resource scarcity, corporate sustainability targets, climate change, and energy security. The global municipal water and wastewater treatment market was estimated at over $347 billion annually in 2024, growing at a CAGR of approximately 7.5%. The U.S. federal waste management market is estimated at $15 billion. The global industrial waste management market for specific sectors (O&G, Chemicals, Battery Recycling, Pharmaceuticals & Healthcare) is estimated at $144.5 billion in 2025, projected to grow at a CAGR of 6.74% over the next ten years.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Other SCWO Technology Providers: Companies offering similar supercritical water oxidation technologies.
• Other Emerging Technology Providers: Includes plasma and electrochemical oxidation technologies.
• Conventional Waste Management Solutions: Anaerobic digestion, landfilling, drying and incineration, lagoon and spray-fields, and lime stabilization.

Emerging Competitive Threats: The Company expects competition to intensify from new and existing competitors introducing additional and enhanced products and services, as well as potential new entrants and disruptive technologies.

Competitive Response Strategy: 374Water Inc. competes primarily based on its product offering, quality of service, and price. The Company's strategy involves continuous R&D to enhance throughput, durability, and operability of its AirSCWO technology, expand its application to new markets, and pursue strategic partnerships to extend market reach and accelerate adoption.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Market Development: A sustainable market for 374Water Inc.'s products may not develop or may take longer than anticipated, as the technology represents an emerging market. Customer acceptance and sufficient purchase volumes are uncertain.
• Technology Acceptance: The technologies used to treat sludge, biosolids, and wastewater have not been utilized on a full-scale commercial basis, and commercial viability is unproven.
• Competition: The markets are highly competitive, with existing and new competitors potentially introducing superior products, achieving greater market acceptance, or aggressively discounting services, which could impact pricing, profit margins, and market share.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on numerous global suppliers, including single-source direct suppliers, for materials and parts. This exposes the Company to potential component shortages, delays, and pricing fluctuations due to unforeseen business conditions, natural disasters, trade disruptions, or supplier solvency issues.
• Capacity Constraints: The Company needs to scale its AirSCWO systems to handle larger capacities of slurries and liquid wastes, which requires significant R&D and manufacturing expansion.
• Product Defects: Products may contain undetected defects or errors, leading to loss of revenue, reputational damage, market acceptance failure, diversion of resources, increased service costs, and potential costly litigation or liability claims (including product recalls, safety alerts, or substantial repair/replacement costs).
• Commercialization Risk: The technology remains in a research and development status, with tests conducted at limited or small commercial scale. Successful performance at competitive costs on a large-scale commercial basis is unproven.
• Permitting: Operations and expansion are subject to obtaining various U.S. federal, state, and local permits (e.g., air permits under the Clean Air Act, treatment works approval under NPDES, hazardous waste handling under RCRA). Delays or difficulties in obtaining permits could limit operations and growth.

Financial & Regulatory Risks

Market & Financial Risks:

• Capital Requirements: 374Water Inc. does not generate sufficient revenues to meet its capital requirements and will require substantial additional financing to fund operations and execute its business plan. There is substantial doubt about the Company's ability to continue as a going concern.
• Stock Price Volatility: The market price of the common stock has been highly volatile, with significant declines, and may continue to fluctuate, potentially impacting the ability to raise capital or attracting new investors.
• Project Execution: Financial results depend on successful execution of technically complex, multi-year projects, which are subject to risks like delays, cost overruns, scope changes, and unanticipated conditions, potentially leading to higher costs and liabilities. Regulatory & Compliance Risks:
• Environmental Regulations: Operations are subject to extensive environmental laws and regulations, including those related to climate change. Compliance requires increasing operating and capital expenditures, and violations could result in substantial fines or facility shutdowns.
• Hazardous Materials: Business activities involve the use, treatment, storage, and disposal of hazardous materials, creating risks of significant environmental liabilities, reputational damage, and strict liability for releases or contamination.
• Emerging Contaminants: Failure to effectively treat emerging contaminants (e.g., PFAS) could result in material liabilities, property damage, natural resource damage, personal injury claims, and increased regulatory scrutiny.
• Wastewater Operations Risks: Wastewater treatment entails risks of system failure or improper operation, leading to discharge of untreated or partially treated wastewater and potential environmental damage or injuries.
• Internal Control Weaknesses: Identified material weaknesses in internal control over financial reporting due to personnel limitations and changes, which may affect the ability to produce timely and accurate financial statements and could impact investor confidence and stock price.

Geopolitical & External Risks

Geopolitical Exposure:

• Trade Policies: U.S. trade policies, including tariffs and retaliatory tariffs, can adversely impact business by increasing costs of materials and R&D, and potentially disrupting supply chains. Natural Disasters:
• Catastrophic Events: Natural disasters (fires, hurricanes, floods, earthquakes), geopolitical events (civil unrest, terrorism), pandemics, or cyber-attacks could disrupt operations, damage properties, affect workforce availability, and impact financial performance.

Innovation & Technology Leadership

Research & Development Focus: 374Water Inc. prioritizes its research, development, and engineering (RD&E) activities to enhance the performance and expand the applications of its AirSCWO technology. Core Technology Areas:

• Throughput, Durability, Operability: Significant investment in improving these aspects to scale solutions and meet customer demands.
• Pre- and Post-Treatment Systems: Development of ancillary systems to optimize waste stream conditioning and enhance the value of system outputs (e.g., carbon dioxide utilization, minerals recovery, water purification, energy recovery).
• New Market Applications: Applying AirSCWO technology to new markets such as oil and gas, battery recycling, and pharmaceuticals.
• Fundamental Research: Ongoing research into new applications of the technology in existing and new markets. Innovation Pipeline: The Company's product roadmap includes aggressively scaling the design and operations of AirSCWO systems to capacities of 20+, 30+, 50+, and exceeding 100+ tons per day in the near- to mid-term.

Intellectual Property Portfolio: 374Water Inc. maintains a robust and growing intellectual property (IP) portfolio to protect its proprietary technology.

• Patent Strategy: Relies on patents, trade secret laws, and contractual safeguards. As of December 31, 2025, the Company has four pending U.S. non-provisional applications, six provisional filings, and three pending Patent Cooperation Treaty (PCT) applications. Additionally, three utility patent applications are in process, with plans for more filings in 2026.
• Licensing Programs: Holds a worldwide License Agreement with Duke University, granting rights to make, use, market, and sell certain licensed products and processes for water and waste treatment. Royalty payments are based on a percentage of licensed product sales and sublicensing fees.
• IP Litigation: The Company may incur substantial costs in obtaining patent coverage, defending against infringement suits, or asserting its patent rights.

Technology Partnerships:

• Strategic Alliances: Duke University is a key technology partner through the License Agreement for the underlying SCWO technology.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: 374Water Inc. has experienced significant management turnover, including changes in the Chief Executive Officer and Chief Financial Officer roles in late 2025 and early 2026. Daniel Bogar was appointed CEO on February 23, 2026, replacing Stephen J. Jones (Interim CEO from October 8, 2025), who had replaced Christian Gannon (CEO until October 8, 2025). Adrienne Anderson was appointed Interim CFO on March 2, 2026, replacing Russell Kline (terminated March 2, 2026). The General Counsel and Chief Administrative Officer also separated from the Company in late 2025 and early 2026, respectively. The Company's human resources strategy focuses on attracting, developing, and retaining high-performing talent and supporting leadership growth.

Board Composition: The Board of Directors includes Daniel Bogar, Chuck Weiser, Marc Deshusses, Stephen McKnight, Brad Freels, and James Pawloski. The Board considers cybersecurity risks as part of its risk oversight function and has delegated oversight of cybersecurity and other information technology risks to the Audit Committee.

Human Capital Strategy

Workforce Composition:

• Total Employees: As of December 31, 2025, 374Water Inc. employed 48 full-time employees and 7 contractors.
• Geographic Distribution: Not explicitly detailed beyond general operational locations.
• Skill Mix: Not explicitly detailed, but the Company emphasizes attracting and retaining high-performing talent.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Recruitment primarily relies on existing networks and referrals.
• Retention Metrics: Not explicitly disclosed, but retention initiatives include rewarding high-performance and opening opportunities for progression and career development.
• Employee Value Proposition: The Company aims to offer competitive remuneration packages (salary, benefits, equity) and foster a culture that supports employee growth and an exceptional experience.

Diversity & Development:

• Development Programs: Professional development schemes and leadership development are embedded in employee growth plans.
• Culture & Engagement: The Company is setting clear standards for an open and transparent working environment, including effective personal development discussions and performance reviews.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Not explicitly stated.
• Carbon Neutrality: Not explicitly stated.
• Renewable Energy: Not explicitly stated. 374Water Inc.'s core technology, AirSCWO, is designed to destroy organic wastes without creating waste byproducts, converting them into inert and recoverable resources (water, minerals, heat energy). This approach aims to address environmental challenges, reduce pollutants, and contribute to sustainable waste management practices.

Supply Chain Sustainability:

• Supplier Engagement: Not explicitly detailed.
• Responsible Sourcing: Not explicitly detailed.

Social Impact Initiatives:

• Community Investment: Not explicitly detailed.
• Product Impact: The AirSCWO technology is positioned to provide significant public health benefits by eliminating residual pollutants, reducing operational burdens, and mitigating liabilities associated with waste management, particularly for contaminants of emerging concern like PFAS.

Business Cyclicality & Seasonality

Demand Patterns: Not explicitly detailed in the filing. Planning & Forecasting: Not explicitly detailed in the filing.

Regulatory Environment & Compliance

Regulatory Framework: 374Water Inc.'s operations and AirSCWO systems are subject to various U.S. federal, state, and local laws and regulations concerning environmental protection, public health, and safety. Industry-Specific Regulations:

• Clean Air Act (CAA): Regulates air pollutant emissions, requiring permits for construction and operation of AirSCWO systems.
• National Pollutant Discharge Elimination Systems Act (NPDES): Governs the discharge of pollutants into navigable waters, potentially requiring treatment works approval if AirSCWO units are connected to NPDES-permitted systems.
• Resource Conservation and Recovery Act (RCRA): Imposes detailed requirements for handling, storage, treatment, and disposal of hazardous waste. If mineral streams from AirSCWO treatment of metals are deemed hazardous, they would be subject to RCRA.
• Occupational Safety and Health Act (OSHA): Regulates workplace safety, including hazard communication standards for materials used or produced in operations.
• International Compliance: Not explicitly detailed, but international expansion plans would necessitate compliance with multi-jurisdictional requirements.

Trade & Export Controls: Not explicitly detailed.

Legal Proceedings:

• Former CEO Complaint: A complaint filed by the former CEO in November 2024 alleging unpaid wages and a bonus was settled on April 2, 2025, for $335,000. All payments were remitted by December 31, 2025.
• Stockholder Class Action: A class action complaint was filed on March 18, 2026, in Delaware Court of Chancery, seeking to invalidate an exculpation provision for directors and officers in the Company's certificate of incorporation. The Company believes the complaint has no merit.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 0% for both 2025 and 2024, primarily due to a full valuation allowance recorded against deferred tax assets.
• Geographic Tax Planning: Pretax loss from continuing operations in 2025 was entirely U.S. Domestic ($20.98 million), with no foreign component.
• Tax Reform Impact: The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, extends most expiring TCJA provisions and reforms certain tax rules, including immediate expensing for domestic research and experimental expenditures. This legislation impacted deferred tax assets for capitalized R&E expenses and increased deferred tax assets for net operating losses.

Net Operating Losses (NOLs):

• Federal NOL carryforwards: Approximately $40.0 million as of December 31, 2025, and $23.1 million as of December 31, 2024, which carry forward indefinitely.
• State NOL carryforwards: Approximately $29.7 million as of December 31, 2025, and $18.3 million as of December 31, 2024, which carry forward indefinitely. The Company maintains a full valuation allowance against its net deferred tax assets due to uncertainty regarding their realization.

Insurance & Risk Transfer

Risk Management Framework: Not explicitly detailed in the filing beyond general statements about potential product liability. Insurance Coverage: 374Water Inc. may not be able to obtain product liability or other insurance to fully cover potential risks, and any claims exceeding coverage would be paid from cash reserves, adversely affecting financial condition. The Company's efforts to implement appropriate design, testing, and manufacturing processes may not prevent occurrences that could lead to liability.