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Stockholder' Equity | 12 Months Ended
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Dec. 31, 2022
Stockholder' Equity |
Stockholder' Equity | Note 8 – 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 $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 December 31, 2022, there are 50,000,000 shares of “blank check” preferred stock, but 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 December 31, 2022, there were 126,702,545 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 (“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 Note 6). Stock-based compensation Stock Options issued are part of the 2021 Equity Incentive Plan which reserved a total of 10,000,000 shares. The Company has issued a total of 4,052,000 stock options as of year ended December 2022, with 5,948,000 reserved options remaining during the year ended December 31, 2022 and 2021. The Company recorded stock-based compensation of $610,741 and $204,217, respectively, related to common stock issued or vested options to employees and various consultants of the Company, of which $549,435 and $190,136 was charged as general and administrative expenses and $61,306 and $14,081 as research and development expenses in the accompanying consolidated statements of operations during the years ended December 31, 2022 and 2021, respectively Stock Options Stock option activity for the year ended December 31, 2022 and 2021 is summarized as follows:
|  | Options |  |  | Weighted Average Exercise Price |  |  | Aggregate Intrinsic Value |  |  | Weighted Average Remaining Contractual Life (Years) |
Options outstanding at December 31, 2020 |  |  | 12,180,500 |  |  |  | 0.20 |  |  | $ | 7,795,520 |  |  |  | 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 |  |  | $ | 30,504,000 |  |  |  | 5.62 |
Granted |  |  | 1,415,000 |  |  |  | 2.88 |  |  |  | — |  |  |  | — |
Exercised |  |  | (25,352 | ) |  |  | 1.67 |  |  |  | — |  |  |  | — |
Expired/forfeit |  |  | (937,648 | ) |  |  | 0.67 |  |  |  | — |  |  |  | — |
Options outstanding at December 31, 2022 |  |  | 12,752,000 |  |  |  | 0.62 |  |  | $ | 28,543,370 |  |  |  | 5.09 |
Total unrecognized compensation associated with these unvested options is approximately $2,056,259 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 |
|  | 2022 |  |  | 2021 |
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected life |  | 5.28 – 6.10 Years |  |  | 5.49 – 6.25 Years |
Expected volatility |  | 34.37-39.18 | % |  | 38.39-38.67 | %
Risk-free interest rate |  | 1.44-4.30 | % |  | 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 $0.30 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 were to 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 consolidated 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. Terry Merrell, a member of the Company’s Board of Directors, has sole voting and dispositive power over the securities held by MB Holdings Inc. As of December 31, 2022, 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, 2022 was $450,000 based on the market price of our common stock of $2.86 per share, which was the Company’s closing per share common stock price as reported on Nasdaq as of December 31, 2022. During 2022, no warrants were issued or exercised. As of December 31, 2022, there are 1,250,000 outstanding warrants. A summary of warrant activity as of December 31, 2022, 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 |  |  | 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 |
Issued |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance at December 31, 2022 |  |  | 1,250,000 |  |  |  | 2.50 |  |  | $ | 450,000 |  |  |  | 1.96 |

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