XML 23 R12.htm IDEA: XBRL DOCUMENT v3.21.2
Stockholder’ Equity
 6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Stockholder’ Equity

Note 6 – Stockholder’ Equity

  

The Company is authorized to issue 50,000,000 preferred stock shares and 200,000,000 common stock shares both with a par value of $.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 $.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 $.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 Nix 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 a liquidation preference before any assets can be distributed to common stockholders. The current liquidation value is $6,601,745. 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. As of June 30, 2021, there were 440,125 shares of Series D 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 cumulate votes 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 June 30, 2021, there were 98,391,746 shares of common stock issued and outstanding.

 

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.

 

In connection with the Merger, 33,203,512 shares of common stock were issued to 374Water, Inc. (f/k/a PowerVerde, Inc.) stockholders.

 

Pursuant to the Merger, all 374Water shares were cancelled and 374Water, Inc. issued to the former 374Water stockholders a total of 62,410,452 shares of 374Water, Inc. common stock.

 

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

 

Stock-based compensation

 

During the six months ended June 30, 2021, and 2020, the Company recorded stock-based compensation of $25,567 and $0, respectively, related to common stock issued or vested options to employees and various consultants of the Company, of which $18,866 was charged as compensation and related expenses and $6,701 as research and development expenses in the accompanying condensed consolidated statements of operations.

 

Stock Options

 

Stock option activity for the six months ended June 30, 2021, is summarized as follows:

 

                    
   Shares  Weighted Average Exercise Price  Aggregate Intrinsic Value  Weighted Average Remaining Contractual Life (Years)
Options outstanding and exercisable at December 31, 2020   12,180,500    0.20   $4,750,395    4.63 
Issued   2,467,000    1.06    —    — 
Exercised   (225,500)   0.19    —    — 
Expired/forfeit   (1,850,000)   0.64    —    — 
Options outstanding and exercisable at June 30, 2021   12,572,000    0.30   $3,815,590    5.96 

 

 

During the period ended June 30, 2021, the Company granted to employees and outside consultants of the Company for services to be rendered options to purchase 2,467,000 shares of the Company’s common stock at an exercise price ranging from $0.45 to $1.67. Those options vest over service periods ranging from March 2021 to July 2025 and have an expiration date ranging from March 2024 to June 2031. Those options were estimated to have a grant-date fair value ranging from $0.41 to $0.67. The majority of these options begin vesting starting July 1, 2021. Total unrecognized compensation associated with these unvested options is approximately $1,018,000 which will be recognized over a period of four years.

 

During the period ended June 30, 2021, a total of 225,500 stock options were exercised resulting in the issuance of 225,500 shares of common stock and proceeds of $42,845.

 

The fair value of these options granted were estimated on the date of grant, using the Black-Scholes option-pricing model with the following assumptions:

 

     
   June 30, 2021
Dividend yield   0.00%
Expected life   5.52 - 6.25 Years 
Expected volatility   38.39—38.46% 
Risk-free interest rate   0.99 - 1.07% 

 

Stock Warrants

 

In April 2021, pursuant to the binding Memorandum of Understanding dated as of March 30, 2021, between 374Water and MB Holding Inc. (the “MOU”), a warrant for the purchase of 3,783,333 shares of common stock at an exercise price of $.30 per share were issued to MB Holding Inc. as consideration for executing the MOU and was considered fully vested upon the execution of the MOU. These warrants expire in March 2022. Those warrants were estimated to have a grant-date fair value of $0.37 per warrant or aggregate fair value of $1,399,833 which has been presented as product development expense on the condensed statements of operations.

  

During the period ended June 30, 2021, 950,000 warrants were exercised resulting in the issuance of 950,000 shares of common stock and proceeds of $107,500.

The fair value of those warrants granted were estimated on the date of grant, using the Black-Scholes option-pricing model with the following assumptions:

 

      
   June 30, 2021
Dividend yield   0.00%
Expected life   1 Year 
Expected volatility   42.39%
Risk-free interest rate   0.06%

 

 

A summary of warrant activity during the six months ended June 30, 2021, is as follows:

 

                     
   Shares  Weighted Average Exercise Price  Aggregate Intrinsic Value  Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2020    950,000    0.11   $690,500    0.44 
Issued    3,783,333    0.30    —      
Exercised    (950,000)   0.11           
Balance at June 30, 2021    3,783,333    0.30   $8,134,167    0.75