UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

For the Quarterly Period ended September 30, 20172022

Commission file number: 000-27866

POWERVERDE, INC.

(Exact name of Registrant as specified in its charter)

420 S. Dixie Highway701 W Main Street, Suite 4-B410

Coral Gables, FL 33146Durham, NC 27701

(Address of principal executive offices)

(305) 666-0024(919) 888-8194

(Registrant’s telephone number including area code)

(Former name, former address and former fiscal year, if changed since last report)Securities registered pursuant to Section 12(b) of the Act:

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.

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 November 14, 20171, 2022, the issuer had 31,750,106126,680,895 shares of common stock outstanding.

Index to Form 10-Q

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'' 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.

PART I FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

PowerVerde,374Water Inc. and SubsidiarySubsidiaries

Condensed Consolidated Balance Sheets

September 30, 20172022 (Unaudited) and December 31, 20162021

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

PowerVerde,

374Water, Inc. and SubsidiarySubsidiaries

Condensed Consolidated Statements of Operations

For the three and nine months ended September 30, 20172022 and 20162021

(Unaudited)

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

PowerVerde,

374Water Inc. and SubsidiarySubsidiaries

Condensed Consolidated Statements of Cash FlowsChanges in Stockholders’ Equity

For the three and nine months ended September 30, 20172022 and 20162021

(Unaudited)

For the three and nine months ended September 30, 2022

For the three and nine months ended September 30, 2021

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

PowerVerde,374Water Inc. and SubsidiarySubsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2022 and 2021(Unaudited)

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2017

Note 1 – Condensed ConsolidatedNature of Business and Presentation of Financial Statements

Description of the Company

374Water Inc., f/k/a PowerVerde, Inc. (the “Company”) is a Delaware corporation formed in March 2007. The Company was formed to develop, commercialize, and market a series of unique electric generating power systems designed to produce electrical power with zero emissions or waste byproducts, based on a patented pressure-driven expander motor and related organic rankine cycle technology.

On April 16, 2021, 374Water Inc. (f/k/a PowerVerde, Inc.) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 374Water Inc., a privately held company based in Durham, North Carolina, (“Private 374Water”) and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde (“Sub”). The parties entered into the Agreement pursuant to their Binding Letter of Intent dated September 20, 2020.

Pursuant to the merger contemplated by the Merger Agreement (the “Merger”), on April 16, 2021, Sub merged into Private 374Water, with Private 374Water as the surviving corporation. In connection with the Merger, all Private 374Water shares were canceled and the Company issued to the former Private 374Water shareholders a total of 62,410,452 shares of the Company common stock. Immediately following the Merger, Private 374Water changed its name to 374Water Systems Inc and PowerVerde changed its name to 374Water Inc. After the Merger, the former Private 374Water stockholders owned 64.2% of the Company’s issued and outstanding common stock and 53.8% of the Company’s issued and outstanding voting stock which includes the Preferred Stock. The Merger was accounted for as a reverse acquisition (See Note 4). On April 16, 2021, as a result of the closing of the Merger Agreement (see Note 4), the equity of the consolidated entity is the historical equity of 374Water Inc (“374Water”) retroactively restated to reflect the number of shares issued by the Company in the reverse recapitalization.

Nature of Business

The Company’s current mission is to support a clean and healthy environment to sustain life. The Company plans to use what it believes to be cutting-edge science to recover resources from the waste our society generates and keep drinking water clean. The Company’s customers will include businesses and local governments that the Company believes will make the sustainable development goals a reality. On February 1, 2022, the Company sold its first AirSCWO system to Orange County Sanitation District of Fountain Valley, California.  Revenues to date have been from sale of the Company’s first AirSCWO system and from testing, consulting, and advisory services procedures for our customers. 

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 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 PowerVerde,374Water Inc. (“PowerVerde,”374 Water," “we,” “us,” “our,” or the “Company”) as of and for the year ended December 31, 2016.2021 filed with the Securities and Exchange Commission (“SEC”) on March 1, 2022. The results of operations for the three and nine months ended September 30, 2017,2022, 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 PowerVerde,374Water Inc., formerly known as Vyrex Corporation (the “Company”), and PowerVerde Systems, Inc., formerly known as PowerVerde, Inc., its374Water Systems Inc, and 374Water Sustainability Israel LTD, each a wholly-owned subsidiary.subsidiary of 374 Water. Intercompany balances and transactions have been eliminated in consolidation. These interim financial statements reflect the acquisition of the Company’s wholly-owned subsidiary, 374Water Systems Inc., which was consummated on April 16, 2021, as more fully disclosed in Note 4 and the creation of 374Water Sustainability LTD, an Israeli wholly-owned subsidiary on March 3, 2022 and having no activity until the second quarter of 2022.

We have financed our operations since inception through the sale of debt and equity securities and through Biotech IP licensing revenues. As of September 30, 2017, we had a working capital deficit of $128,270 compared to a working capital deficit of $272,120 at December 31, 2016. This improvement in working capital is due primarily to reductions in notes payable to related parties, accounts payable and accrued expenses resulting from positive operating cash flows during this period.

We expect 2017 Biotech IP revenues to approximate the 2016 levels; however, there can be no assurance that this revenue level will be achieved. Further, our contract which provides our Biotech IP revenues expires in March 2018, and we will therefore be without a source of working capital at that time unless we can generate material revenues from operations and/or the Liberty Agreement or raise substantial additional capital, as to which there can be no assurance. See Note 9 – Commitments and Contingencies

In order to meet our obligations under the $150,000 balance (as of October 2017) of our secured notes payable to related parties due April 30, 2018 (the “Notes”), which are collateralized by our Biotech IP receivables, we intend to apply most of the Biotech IP revenues received in 2017 and 2018 toward payment of the interest and principal due on the Notes, after reserving the minimum amount necessary to maintain our operations. We intend to reduce our salary and consulting fee expenses until the Notes are paid in full, and we are also commencing a new source of revenue by using our employee to provide part-time skilled manufacturing services to a third party pursuant to the Liberty Agreement.

We continue to seek funding from private debt and equity investors, as we need to promptly raise substantial additional capital in order to finance our plan of operations. There can be no assurance that we will be able to raise the necessary funds on commercially acceptable terms if at all. If we do not raise the necessary funds, we may be forced to cease operations.

Note 32 – Summary of Significant Accounting Policies

Nature of Business

The Company is devoting substantially all of its present efforts to establish a new business involving the developmentCash and commercialization of clean energy electric power generation systems,Cash Equivalents and none of its planned principal operations have commenced. However, royalties from licenses unrelated to planned principal operations continue to be recognized as revenue. The license will expire in March 2018, after which no further royalty revenues are expected.

Cash EquivalentsMarketable 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 no cash equivalents as of September 30, 2022, and December 31, 2021. 

The Company held marketable securities as of September 30, 2022 as noted in the following table:

Accounts Receivable

Accounts receivablereceivables consist of balances due from royalties in connection with the license agreement with VDF FutureCeuticals, Inc.service revenues. The Company monitors accounts receivable and provides allowances for doubtful accounts when considered necessary. AtAs of September 30, 2017,2022 and December 31, 2021, there were $35,480 and $0, outstanding accounts receivable, were considered to be fully collectible. Accordingly,respectively. As of September 30, 2022 and December 31, 2021, there was no allowance for doubtful accounts was provided.recorded. 

NotesUnbilled Receivable

Note receivable consistsUnbilled  receivables consist of balances that are unconditionally due to the Company for services already rendered except for physical invoicing and the passage of time.  Invoicing requirements vary by customer contract, but all unbilled revenues from Liberty Plugins, Inc in connection with the manufacturing assembly agreement dated April 15, 2017.are billed within one year.  At September 30, 2017, notes receivable2022 and December 31, 2021, there were considered to be fully collectible.$129,120 and $0, outstanding unbilled receivables, respectively.

Revenue RecognitionEquipment

Revenue from royalty and assembly agreements unrelated to the Company’s planned operationsEquipment is recognized in accordance with the terms of the specific agreements. Revenues recognized under these agreements amount to 100% of total revenues for the nine months ended September 30, 2017 and 2016. The Company does not expect any significant impact of the adoption of the standard on our financial statements based on the current sources of revenue.

Property and Equipment

Property and equipment are statedrecorded at cost, less accumulated depreciation.cost. Depreciation is computed using the straight-line method over theand an estimated useful liveslife of the related assets. Expendituresthree years. Expenses for major betterments and additions are capitalized, while replacement, maintenance and repairs which do not extendare charged to expense as incurred. The Company’s depreciation expense for the lives of the respective assets, are expensed as incurred.

Impairment of Long-Lived Assets

Impairment losses are recorded on long-lived assets (property, equipment, licensethree months and intellectual property) used in operations when impairment indicators are present and the undiscounted expected cash flows estimated to be generated by those assets are less than the carrying value of such assets. No impairment losses have been recognized during the nine months ended September 30, 2017 or 2016.2022 was $650 and $1,374, respectively. 

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.

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 September 30, 2022, and 2021, there were no events or changes in circumstances requiring an impairment analysis.

Revenue Recognition and Concentration

The Company follows the revenue standards of ASC Topic 606 - “Revenue from Contracts with Customers”. The core principle of Topic 606 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.  Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from the completion of the equipment build for each customer as the inputs are measured against the cost to build the product. 

The Company’s performance obligations will be satisfied overtime as the specialized equipment is built for the customer.  Based on the Company’s contracts, the Company will have a single performance obligation (build and install of the product). The Company will primarily receive fixed consideration for sales of products.

The majority of revenues for the three months ended September 30, 2022 were generated from the sale of the first AirSCWO system.  For the three months and nine months ended September 30, 2021, the Company did not have any ordinary revenue. All revenue generated as of September 30, 2021 was unrelated to the sale of an AirSCWO unit.

Stock-based Compensation

The Company has accounted for stock-based compensation under the provisions of ASC(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.

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). All outstanding warrants as of December 31, 2016 and September 30, 2017 were classified as equity.

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 September 30, 2022, and December 31, 2021.

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.

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 $172,760$726,602 and $282,339$269,796 for the nine months ended September 30, 20172022, and 2016,2021, respectively.  The Company’s research and development costs are expensed in the period in which they are incurred. Such expenditures amounted to $118,253 and $115,936 for the three months ended September 30, 2022, and 2021, respectively. 

Earnings (Loss)Loss Per Share

Earnings (loss)Loss per share is computed in accordance with FASB ASC Topic 260, “Earnings per Share”. Diluted earnings per share is computed by dividing net income (loss)loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. Certain common stock equivalents were not included in the earnings (loss)loss per share calculation as their effect would be anti-dilutive.   Warrants exercisable for4,175,000There were no dilutive shares and options for 5,750,500 shares were excluded from weighted average common shares outstanding on an anti-diluted basis.as of September 30, 2022.

Financial instrumentsInstruments

The Company carries cash, and cash equivalents, accounts receivable, note receivable, accounts payable and accrued expenses, and notes payable, 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. The Company also carries notes payable to related parties at historical cost less discounts from warrants issued as loan financing costs. The fair value of such notes is significantly similar to the face value of the notes ($200,000).

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, useful lives of intangible assets, and valuation allowance against deferred tax assets.

Note 4 – Recent Accounting Pronouncements

Refer to the consolidated financial statements and footnotes thereto included in the PowerVerde, Inc. Annual Report on Form 10-K for the year ended December 31, 2016 for recentAll other newly issued but not yet effective accounting pronouncements. Other pronouncements have been issued butdeemed to be not applicable or immaterial to the Company.

Note 3 – Liquidity, Capital Resources and Going Concern

As of September 30, 2022, the Company does not believe that their adoption will have a significant impact on the financial position or resultshad working capital of operations.

Note 5 – Intellectual Property and License Agreement

Intellectual Property partially consists$8,602,631 compared to working capital of technology acquired from the purchase$11,263,270 at December 31, 2021.  As of 100% of the membership interests of Cornerstone Conservation Group LLC (“Cornerstone”) on March 30, 2012 for $659,440. Accumulated amortization with respect to this intellectual property was $659,440 at September 30, 2017 and December 31, 2016.

On June 30, 2015,2022, the Company entered intohad an Assignment Agreement with VyrexIP Holdings Inc., a company owned by Company shareholder Edward Gomez, for the purchaseaccumulated deficit of intellectual property. The net price of these assets was comprised of a down payment of $16,116 and a $58,436 promissory note to the seller due July 15, 2016, partially offset by assignment by the seller to the Company of a $38,000 promissory note due November 14, 2015, issued by the seller’s licensee Epalex Corporation, a company of which Mr. Gomez is chairman and a major stockholder. This note was paid in full as of March 31, 2016. Accumulated amortization with respect to this intellectual property was $27,414 and $18,276 at September 30, 2017 and December 31, 2016, respectively.

On June 1, 2016, the Company entered into a ten-year License Agreement with Helidyne LLC to utilize the Helidyne intellectual property in the manufacturing of planetary rotor expanders and the incorporation of same in the Company’s distributed electric power generation systems. The license agreement also grants the Company an exclusive license to sell the expanders whether manufactured by Helidyne or by the Company. The Company’s royalty obligation begins on the earlier of the commercialization of the product or three years from the effective date of the agreement. Once the royalty obligation begins, the minimum annual royalty is $50,000 for the first six years, and $100,000 for the remainder of the agreement.

$6,159,975. For the nine months ended September 30, 20172022, the Company had a net loss of $2,999,959 and 2016, amortization expense was $16,638 and $12,460, respectively, and accumulated amortizationused $2,598,193 of net cash in operations for the intangible assets of intellectual property and license agreement was $700,176 at September 30, 2017.

Future amortization of the intangible assets of intellectual property and license agreement was as follows asperiod. As of September 30, 2017:

Note 6 – Stockholders’ Deficiency

Warrants

A summary2021, the Company had working capital of warrants issued, exercised and expired during$6,800,773 compared to working capital of $10,572 at December 31, 2020.  As of September 30, 2021, the Company had an accumulated deficit of $2,488,224. For the nine months ended September 30, 2017 is as follows:2021, the Company had a net loss of $2,492,817 and used $1,053,591 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 – Acquisition of 374Water, Inc. f/k/a PowerVerde Inc.

Agreement and Plan of Merger

In connection with the Merger, (see Note 1), the Company closed on a private placement of 440,125 shares of Series D Convertible Preferred Stock (the “Preferred Stock”) with a par value of $0.0001, yielding gross proceeds of $6,551,745 (the “Private Placement”) and the settlement of a $50,000 liability for Preferred Stock shares. The Private Placement proceeds will be used for working capital, primarily for development, manufacture and commercialization of the Company’s AirSCWO systems. The Preferred Stock has a stated value of $15 per share, is convertible into common stock at $.30 per share and has voting rights based on the underlying shares of common stock. Upon liquidation of the Company, the Preferred Stockholders have liquidation preference before any assets can be distributed to common stockholders. All of the Preferred Stock was sold pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. As of September 30, 2017,2022, there were no shares of Preferred Stock issued and outstanding.

As a result of the optionsMerger, the issuance of the Preferred Stock, the former Private 374Water shareholders owned 65.8% of the Company’s issued and outstanding common stock and exercisable had53.8% of the Company’s issued and outstanding voting stock (which includes the Preferred Stock on an intrinsicas converted basis).

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 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”) simultaneous with the Merger. In connection with the License Agreement, 374Water also executed an equity transfer agreement with Duke pursuant to which Duke received a small number of shares of common stock (see Note 5).

As a result of the Merger Agreement, for financial statement reporting purposes, the business combination between 374Water Inc. and 374Water was treated as a reverse acquisition and recapitalization for accounting purposes with 374Water deemed the accounting acquirer and 374Water Inc. deemed the accounting acquiree under the acquisition method of accounting in accordance with FASB (“ASC”) Section 805.

The following assets and liabilities were assumed in the transaction:

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 $18,250.$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 8). Intangible assets are comprised of the following as of September 30, 2022 and December 31, 2021:

Amortization expense for the nine months ended September 30, 2022 and 2021, was $48,678 and $15,787, respectively.

Estimated future amortization expense as of September 30, 2022:

Note 6 – Stockholder’ Equity

The Company is authorized to issue 1,000,000 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 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 shares of Series D Convertible Preferred Stock (the “Preferred Stock'') with a par value of $0.0001, yielding gross proceeds 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 common stock. Upon liquidation of the Company, the Preferred Stockholders have a liquidation preference before any assets can be distributed to common stockholders. All of the Preferred Stock were sold pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act 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 common stock.  As of September 30, 2022, there were no shares of Preferred Stock issued and 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 September 30, 2022, there were 126,680,895 shares of common stock issued and outstanding.

On April 16, 2021, as a result of the closing of the Merger Agreement (see Note 7 – 4), the equity of the consolidated entity is the historical equity of 374Water Inc (“Private 374Water”) retroactively restated to reflect the number of shares issued by the Company in the reverse recapitalization.

Pursuant to the Merger, all Private 374Water shares were canceled and the Company issued to the former Private 374Water stockholders a total of 62,410,452 shares of the Company’s common stock.

On April 16, 2021, the Company issued a small number of shares of common stock estimated to have a fair value of $1,073,369 as consideration for the grant of a license to the Company (see Notes 5 and 8).

During the nine months ended September 30, 2022, the Company issued 1,363,149 shares of common stock from the conversion of 27,272 Preferred Stock shares.