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Stockholder Equity
 12 Months Ended
Dec. 31, 2021
Stockholder Equity  
6. Stockholder Equity

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 $.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 436,782 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 $409,005. 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 30, 2021, 412,853 shares of Series D Preferred stock were converted into 20,642,667 shares of common stock. As of December 31, 2021, there were 27,272 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 December 31, 2021, there were 125,317,746 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 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).

 

In December 2021, the Company raised $5,000,000 through a private placement and sale of 2,500,000 shares of Common Stock which were issued to investees as part of the capital raise.

 

During the year ended December 31, 2021, the Company issued 4,958,833 shares of common stock, in connection with the exercise of warrants and options and received cash proceeds of $1,284,848.

 

Stock-based compensation

 

During the year ended December 31, 2021 and 2020, the Company recorded stock-based compensation of $204,217 and $6,657, respectively, related to common stock issued or vested options to employees and various consultants of the Company, of which $190,136 and $328 was charged as general and administrative expenses and $14,081 and $6,329 as research and development expenses in the accompanying consolidated statements of operations during the years ended December 31, 2021 and 2020, respectively

 

Stock Options

 

Stock option activity for the year ended December 31, 2021, is summarized as follows:

 

 

 

Shares

 

 

Weighted

Average

Exercise Price

 

 

Aggregate

Intrinsic Value

 

 

Weighted

Average

Remaining

Contractual

Life (Years)

 

Options outstanding at December 31, 2019

 

 

12,180,500

 

 

 

0.20

 

 

$4,750,395

 

 

 

5.59

 

Granted

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Expired/forfeit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options outstanding at December 31, 2020

 

 

12,180,500

 

 

 

0.20

 

 

$4,750,395

 

 

 

4.59

 

Granted

 

 

2,885,000

 

 

 

1.20

 

 

 

—

 

 

 

—

 

Exercised

 

 

(225,500)

 

 

0.19

 

 

 

—

 

 

 

—

 

Expired/forfeit

 

 

(2,540,000)

 

 

0.17

 

 

 

—

 

 

 

—

 

Options outstanding at December 31, 2021

 

 

12,300,000

 

 

 

0.37

 

 

$4,521,310

 

 

 

5.62

 

 

Stock option unvested activity for the year ended December 31, 2021, is summarized as follows:

 

 

 

Options

 

Options Unvested at December 31, 2019

 

 

—

 

Granted

 

 

—

 

Vested

 

 

—

 

Expired/forfeit

 

 

—

 

Options Unvested at December 31, 2020

 

 

—

 

Granted

 

 

2,885,000

 

Vested

 

 

(379,817)

Expired/forfeit

 

 

(40,000)

Options Unvested at December 31, 2021

 

 

2,465,183

 

Total unrecognized compensation associated with these unvested options is approximately $1,136,921 which will be recognized over a period of four years.

 

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:

 

 

 

For the years ended

 

 

 

2021

 

 

2020

 

Dividend yield

 

 

0.00%

 

 

—

Expected life

 

5.49 – 6.25 Years

 

 

—

 

Expected volatility

 

38.39- 38.67

%

 

 

—

Risk-free interest rate

 

0.87– 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 was 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 year ended December 31, 2021, the warrants were exercised resulting in the issuance of 3,783,333 shares of common stock and proceeds of $1,134,499. As of December 31, 2021, there were 1,250,000 warrants outstanding which relate to the Series 1 offering executed in December 2021, where investors were offered a warrant for every two common shares purchased during the offering at an exercise price of $2.50 per share. The intrinsic value of all outstanding warrants as of December 31, 2021 was $437,500 based on the market price of our common stock of $2.85 per share.

 

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:

 

 

 

For the years ended

 

 

 

2021

 

 

2020

 

Dividend yield

 

 

0.00%

 

 

—

 

Expected life

 

1 - 3 Years

 

 

 

—

 

Expected volatility

 

42.39% - 45.24%

 

 

 

—

 

Risk-free interest rate

 

0.600% - 0.795%

 

 

 

—

 

A summary of warrant activity during the year ended December 31, 2021, is as follows:

 

 

 

Shares

 

 

Weighted

Average

Exercise Price

 

 

Aggregate

Intrinsic Value

 

 

Weighted

Average

Remaining

Contractual

Life (Years)

 

Balance at December 31, 2019

 

 

950,000

 

 

 

0.11

 

 

$690,500

 

 

 

1.44

 

Issued

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Balance at December 31, 2020

 

 

950,000

 

 

 

0.11

 

 

$690,500

 

 

 

0.44

 

Issued

 

 

5,033,333

 

 

 

0.85

 

 

—

 

 

 

—

 

Exercised

 

 

(4,733,333)

 

 

0.26

 

 

 

—

 

 

 

—

 

Balance at December 31, 2021

 

 

1,250,000

 

 

 

2.50

 

 

$437,500

 

 

 

2.96