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Stockholder Equity
 3 Months Ended
Mar. 31, 2023
Stockholder Equity  
Stockholder' Equity

Note 7 – 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 $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 March 31, 2023, 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 March 31, 2023, there were 128,840,421 shares of common stock issued and outstanding.

In December 2022, the Company entered into an equity distribution agreement with an underwriter pursuant to which the Company may offer and sell shares of its common stock from time to time through the underwriter as its sales agent. Sales of common stock, if any, will be made at market prices by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company has no obligation to sell any shares of common stock under the equity distribution agreement, and may at any time suspend offers under the equity distribution agreement, in whole or in part, or terminate the equity distribution agreement.

 

During the three months ended March 31, 2023, a total of 2,137,876 shares of common stock have been sold pursuant to the equity distribution agreement resulting in a total of $8.35 million in proceeds, net of $0.11 million of commission fees and $0.05 million of accounting and legal fees. As of March 31, 2023, $91.5 million remained available under the Company’s at-the-market public facility, subject to various limitations.

 

Stock-based compensation

 

During the three months ended March 31, 2023, and 2022, the Company recorded stock-based compensation of $214,924 and $97,558, respectively, related to common stock issued or vested options to employees and various consultants of the Company. For the three months ended March 31, 2023, $189,283 was charged as general and administrative expenses and $25,641 as research and development expenses in the accompanying condensed consolidated statements of operations.  For the three months ended March 31, 2022, $93,868 was charged as general and administrative expenses and $3,690 as research and development expenses in the accompanying condensed consolidated statements of operations.

 

Stock Options

 

Stock option activity for the three months ended March 31, 2023 is summarized as follows:

 

 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Aggregate

Intrinsic

Value

 

 

Weighted

Average

Remaining

Contractual

Life (Years)

 

Options outstanding at December 31, 2022

 

 

12,752,000

 

 

$0.62

 

 

$28,543,370

 

 

 

5.09

 

Granted

 

 

273,000

 

 

 

3.09

 

 

 

—

 

 

 

—

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Expired/forfeit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options outstanding at March 31, 2023

 

 

13,025,000

 

 

 

0.67

 

 

$52,705,860

 

 

 

4.93

 

 

Stock option activity for the three months ended March 31, 2022 is summarized as follows:

 

 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Aggregate

Intrinsic

Value

 

 

Weighted

Average

Remaining

Contractual

Life (Years)

 

Options outstanding at December 31, 2021

 

 

12,300,000

 

 

$0.37

 

 

$30,504,000

 

 

 

5.62

 

Granted

 

 

360,000

 

 

 

3.33

 

 

 

—

 

 

 

—

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Expired/forfeit

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options outstanding at March 31, 2022

 

 

12,660,000

 

 

 

0.45

 

 

$45,576,000

 

 

 

5.39

 

 

Total unrecognized compensation associated with these unvested options is approximately $2,213,723 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:

 

 

 

March 31,

2023

 

 

March 31,

2022

 

Dividend yield

 

 

0.00%

 

 

0.00%

Expected life

 

5.45 – 5.79 Years

 

 

5.65 – 5.75 Years

 

Expected volatility

 

35.24 – 35.88

 %

 

37.73 – 39.18

 %

Risk-free interest rate

 

3.58 – 3.97

 %

 

1.44 – 2.12

 %

 

Stock Warrants

 

As of March 31, 2023, 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 March 31, 2023 was $2,775,000 based on the market price of our common stock of $4.72 per share, which was the Company’s closing per share common stock price as reported on Nasdaq as of March 31, 2023.

 

During the three months ended March 31, 2023, no warrants were issued or exercised. As of March 31, 2023, there are 1,250,000 outstanding warrants. 

 

 A summary of warrant activity during the three months ended March 31, 2023, is as follows:

 

 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Aggregate

Intrinsic

Value

 

 

Weighted

Average

Remaining

Contractual

Life (Years)

 

Balance at December 31, 2022

 

 

1,250,000

 

 

 

2.50

 

 

$450,000

 

 

 

1.96

 

Issued

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Balance at March 31, 2023

 

 

1,250,000

 

 

 

2.50

 

 

$2,775,000

 

 

 

1.72