UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 20152021

Commission File No. 000-27866

PowerVerde, Inc.

(Exact name of registrant as specified in its charter)

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

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 preceding 12 months (or for such 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. □☐ Disclosure not contained.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.

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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and ask prices of such stock equity, as of June 30, 2015,2021, the last business day of the issuer’s most recently completed second fiscal quarter: $4,100,000.$45,785,090.

As of March 30, 2016,1, 2022, the number of outstanding shares of common stock, $0.0001 par value per share, of the registrant was 31,750,106.126,680,895.

DOCUMENTS INCORPORATED BY REFERENCE

None.

PowerVerde, Inc.

Portions of the registrant’s definitive proxy statement relating to its 2022 annual meeting of stockholders (the “2022 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2022 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the year to which this report relates.

374WATER INC.

Annual Report on Form 10-K

Year Ended December 31, 20152021

INDEX

JUMPSTART OUR BUSINESS STARTUPS ACT DISCLOSURE

PART IWe qualify as an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act by the Jumpstart Our Business Startups Act (the “JOBS Act”). An issuer qualifies as an “emerging growth company” if it has total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year, and will continue to be deemed an emerging growth company until the earliest of:

GeneralAs an emerging growth company, we are exempt from various reporting requirements. Specifically, we are exempt from the following provisions:

Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.

PART I

Vyrex Corporation (“Vyrex” or the “Company”) was incorporated in Nevada in 1991 and operated as a research and development stage company seeking to discover and develop pharmaceuticals, nutraceuticals and cosmeceuticals for the treatment and prevention of respiratory, cardiovascular and neurodegenerative diseases and conditions associated with aging (the “Biotech Business”). The Biotech Business was unsuccessful and, as a result, the Company ceased material operations relating to that business in October 2005; however, the Company retained its intellectual property rights and contract rights relating to that business (the “Biotech IP”). On October 17, 2005, the Company reincorporated in Delaware.ITEM 1.BUSINESS.

On February 11, 2008, Vyrex, PowerVerde, Inc. (“PowerVerde”) and Vyrex Acquisition Corporation (“VAC”), a wholly-owned subsidiary of Vyrex, all Delaware corporations, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, on February 12, 2008, VAC merged with and into PowerVerde, with PowerVerde remaining as the surviving corporation and a wholly-owned subsidiary of Vyrex (the “Merger”). As consideration for the Merger, as of the closing of the Merger, each issued and outstanding share of common stock of PowerVerde was converted into the right to receive 1.2053301 shares of the common stock of Vyrex and each share of VAC was converted into one share of PowerVerde common stock. As a result of the Merger, the former shareholders of PowerVerde hold 95% of the common stock of Vyrex.General

On August 6, 2008, at a special meeting of shareholders, Vyrex’s name was changed to “PowerVerde,374Water, Inc.” Simultaneously, the name of our operating company, PowerVerde, Inc. (the “Company”, was changed to “PowerVerde Systems, Inc.”

In March 2009, we sold all of the Biotech IP other than existing licensing contract rights to Dr. Edward Gomez, a pre-Merger investor in PowerVerde and now a shareholder of the Company. In exchange for the assignment of the Biotech IP to him, Dr. Gomez agreed to (i) pay all future costs and expenses relating to the Biotech IP, including, but not limited to, patent fees, license fees and legal fees, and (ii) pay to the Company 20% of all net revenues received from the sale and/“374Water”, “We”, or licensing of any of the Biotech IP.

Please note that the information provided below relates to the combined company after the Merger. Since our operations after the Merger consist solely of PowerVerde operations, except where the context otherwise requires, references throughout this Report hereafter to “PowerVerde,” “we,” “us,” “our” and the “Company” will mean or refer to PowerVerde’s business and operations.

The Company“Our”) is a Delaware corporation formed in March 2007 by George Konrad and Fred Barker, who remain our two largest stockholders. Mr. Konrad served as an officer and director of the Company until October 2012. Mr. Barker served as an officer and director until January 2015. See Item 10 “Directors, Executive Officers and Corporate Governance.”which was incorporated on September 8, 2005. The Company was initially formed in order to further 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 pressure-drivenrankine cycle components. The designtechnology.

 On April 16, 2021, 374Water Inc. (f/k/a PowerVerde, Inc.) entered into an Agreement and Plan of Merger (the “Merger”) with 374Water, Inc., a privately held company based in Durham, North Carolina, (“374Water Private Company”) and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde. Subsequent to the merger, 374Water Inc. became the surviving entity.

As a result of the motor was conceived by Mr. Barker in January 2001. Mr. Barker previously had a working relationship with Mr. KonradMerger, the former 374Water Private Company shareholders own 65.8% of our issued and enlisted Mr. Konradoutstanding common stock and his manufacturing expertise, together with Mr. Barker’s own engineering expertise, to co-develop53.8% of our issued and outstanding voting stock (which includes the motor. As a research and development company, we have tested and continue to test other style driverspreferred stock on an as well.

An initial prototype of the motor was created and tested in early 2002, and, based on positive test results, Messrs. Barker and Konrad concluded that the concept could lead to a commercial product. A new design was developed in early 2007, which resulted in a motor that produced more torque and horsepower, as well as being easier to mass produce. The prototype was tested extensively, and substantial tooling and engineering with CAM/CNC programming was completed at the facility of Mr. Konrad’s company, Arizona Research and Development (“ARD”), for the possibility of an eventual mass production model.converted basis).

BasedSubsequent to the Merger, 374Water is focused on data learned from these earlier prototypes, PowerVerde has manufactured three 25/50kW motorsbeing a cleantech and additional next generation motors or drivers as well. The Company has been testing these devicessocial impact company providing a disruptive technology that addresses imminent environmental pollution challenges. We are focused on a more powerfulnew era of sustainable waste stream management that promotes circular economy initiatives and advanced organic pressure-driven cycle (OPDC) referredenables organizations to as the Liberator. During 2009, the Company also built and tested a 100kW pressure-driven motor at another machining and manufacturing facility, Global Machine Works, in Arlington, WA. These two related but distinct systems are designed for two different markets. The 25/50kW system uses low-grade heat (waste heat) as a fuel source, expanding a working fluid thereby driving the motor/generator, while the 100kW system (without organic rankine cycle (“ORC”) or organic pressure driver cycle (“OPDC”) systems), uses wasted energy (pressure) from natural gas pipeline and wellhead infrastructures to drive the motor/generatorachieve sustainability goals and create electric power. In early 2010,green impact. Our vision is a world without waste and our Board of Directors created two separate product lines: waste heat/solar organic rankine cycle powered systems;mission is to preserve a clean and gas pipeline/wellhead waste energy recovery systems. Because the markets and customers for these two systems are entirely different and the design and manufacturing are geographically separate, we believehealthy environment that this bifurcation will result in a more streamlined and efficient business structure. The development of the natural gas pipeline system has been suspended due to our decision to dedicate our limited human and financial resources to commercialize our waste heat/solar thermal system, which we believe has more near term potential.

In January 2011, we entered into a Binding Letter of Intent for European Distribution (the “BLOI”) with Newton Investments BV, a Dutch corporation based in Leeuwarden, Netherlands (“Newton”). Pursuant to the BLOI, Newton purchased one Liberator system for a discounted price of $130,000, which was delivered in July 2011. In September 2011, we entered into a definitive License Agreement with Newton as contemplated by the BLOI. Under the Agreement, Newton was designated, for a period of 10 years, to be the exclusive manufacturer and distributor of our proprietary emissions-free electrical power generation systems (the “Systems”) in the 27 countries which are currently members of the European Union, subject to Newton achieving minimum sales of at least 100 Systems per year, beginning in the second year of the Agreement. Pursuant to the Agreement, we were entitled to a royalty equal to 20% of the gross sale price of each System sold by Newton. We authorized Newton to manufacture our Systems under a strict licensing agreement with a Dutch foundry and machine shop, Autonational BV, based in Ijlst, Netherlands, and capable of producing hundreds of units per year. Of the 27 European Union nations, we focused initially on the Netherlands, Belgium, Germany and the Scandinavian countries.

Despite our initial optimism, the PowerVerde driver (motor) failed to demonstrate sufficient capacity for the uninterrupted hours of operation required for commercial performance. Due to the ongoing technical problems, Newton did not sell any of our Systems and, in August 2014, Newton terminated the License Agreement.sustains life.

We have addresseddeveloped proprietary waste stream treatment systems based on Supercritical Water Oxidation (SCWO). The term used for the pending technical issues,process is AirSCWO^TM. SCWO leverages the unique properties of water in its supercritical phase (above 374^oC and we believe221 Bar) to convert organic matter to energy and safe products that by year end 2016 we willcan be recovered and used. The AirSCWO^TM systems are essentially waste stream agnostic and able to delivertreat a commercial device capablevariety of operationcomplex, hazardous and non-hazardous waste streams, opening up opportunities for 25,000 hours (almost three years) without major mechanical failure. There can be no assurance, however,multiple applications in diverse market verticals on an international scale. Most pertinently, the technology is shifting the landscape in addressing environmental challenges that, these technical issues will be resolveduntil now, have been considered unsurmountable (due to science/engineering or that any of our Systems will ever be commercially viable.cost barriers), one good example being the global PFAS crisis.

In November 2011, we entered into

We currently outsource manufacturing the AirSCWO^TM systems to our strategic partner in the US, Merrell Bros., Inc., that have the facilities and capability to rapidly ramp-up manufacturing volumes and also support system modifications and deployment as required per market and clients. We envision in the future applying an outsourced manufacturing model in a binding letter of intent for the acquisition of all of the membership interestsfew territories, and may consider establishing our own manufacturing capability in Cornerstone Conservation Group LLC, Scottsdale, Arizona (“Cornerstone”). The acquisition was consummated pursuantgeographies where this is needed to a definitive agreement executed in March 2012. Cornerstone’s main asset is its proprietary Combined Cooling, Heating and Power (“CCHP”) technology, which utilizes waste heat from commercial and residential heating, ventilation air conditioning and refrigeration (“HVACR”) systems. Cornerstone also has substantial experience and technology relating to geothermal or ground source heat pumps.adequately grow our market share.

As consideration forThe systems are supplied to multiple market verticals, and our revenue model includes both capital equipment sales and long-term service agreements based on throughput and capacity (Waste Purchase Agreements). Our market penetration strategy is combined of direct client and channel partner sales routes, depending on the Cornerstone acquisition, we issued (i)specific market and territory. In some cases, the systems may be white labelled and sold as part of a total of 2,250,000 restricted shares of our common stock to Cornerstone���s members, Bryce Johnson (“Johnson”), Paul Kelly (“Kelly”)broader solution package.

Human Capital and Vincent Hils (“Hils”) in the amounts of 1,575,000, 337,500 and 337,500 shares, respectively, (ii) 10,000 restricted shares to a Cornerstone employee, and (iii) three-year warrants to purchase 150,000 shares each to Johnson and Kelly at exercise prices of $2.00-$4.00 per share. In November 2011, Johnson joined our Board of Directors, and in January 2012 we moved our operations to a facility in Scottsdale, Arizona, owned by Johnson. See “Item 2 - Properties.” Johnson also became our chief operating officer in January 2012. Johnson resigned from his officer and director positions in March 2013. As a result of Johnson’s resignation, Management decided to impair the goodwill entirely as of December 31, 2012. We continue to operate our laboratory and test the Liberator within Mr. Johnson’s facility, where several infrastructure upgrades have been completed. There can be no assurance that our good relationship with Mr. Johnson regarding use of his facility will continue. See Item 2 “Properties.”Culture

We believecurrently employ seven full-time employees and ten consultants on a full or part-time basis. Our current projections are to increase the workforce to twelve full-time employees in 2022 and forty full-time employees in 2023.

We recognize and value our people as our most important asset in achieving our strategic goals and growing a great company. We are working towards a human resources strategy that Cornerstone’s technology is complementarywill help drive the right culture, leadership, talent management, performance, reward and recognition, personal development, and ways of working vital to PowerVerde’s platform and existing markets – mainly throughensure the conversion of thermal energy into electric power generation. While we believe that the Cornerstone acquisition brings substantial opportunities for synergy, there can be no assurance that the acquisition will prove successful.Company achieves its strategic goals whilst our people benefit from an exceptional experience.

Our focus forareas in creating a working environment that draws out the remainder of 2016 is to commercialize our waste heat power systemsbest in our Phoenix facility for eventual commercial deployment. We planemployees and allows them to completefulfil their potential and support the Company to attain its goals are as follows:

Our recruitment strategy is based on identifying top talent, predominantly via existing networks and referrals, and offering competitive remuneration packages that combine salary, benefits and equity. As we move forward our development and testing by mid-year 2016 and haverecruitment strategy will expand to wider platforms allowing outreach to a market-ready system by year end; however, there can be no assurance thatwider audience. In the immediate future, we will meet this timetable or ever haveuse an outsourced human resources firm, and as we grow, within 2022, embed a market-ready system.human resources function into the Company. We continue discussions with certain manufacturersintend to apply a wide range of integrated componentsretention initiatives that include rewarding high-performance, and service providers in the oil/natural gas industries, methane plants, as well as with electric utility companiesopening opportunities for progression and government entities. There can be no assurance that any manufacturing, distribution or marketing agreementscareer development. Identification of high-performing talent will be successfully consummated or executed or that welinked to succession planning and development of the future-workforce will ever achieve material sales.be embedded in employee professional development schemes.

Employees

We are setting clear standards with respect to generating an open and transparent working environment in which everyone has a voice. This will invoke effective personal development discussions and provide the opportunity to conduct performance reviews supported by transparent data and open conversation.

We currently have one full-time employee: Mark Prinz basedare dedicated to embedding Diversity and Inclusion (D&I) as an important part of developing our culture through delivery of innovative initiatives and internal workshops, ensuring that D&I policies touch on all aspects of the Company from recruitment practices to company behaviour/operating frameworks. These policies will also be reviewed periodically as required and updated accordingly.

Moving forward we intend to deliver a total reward strategy which appropriately supports achievement of organisational aims and priorities, and will help position us as an employer of choice which employees value and understand. This will undergo periodical review to ensure we are able to attract and retain top talent in Scottsdale, Arizona. Mark was hired in 2011. Our chief engineer, Hank Leibowitz, was hired pursuanta financially sustainable way.

All of our human resource initiatives will be supported by key performance indicators to monitor their effectiveness and gain insight into gaps that can be addressed quickly and ensure our overall human resource strategy is adapted as required and maintained to a part-time consulting agreement in October 2012.high degree.

PatentsMarkets and Industries

Messrs. Barker and Konrad together obtained U.S. Patent No. 6,840,151 for a “push-push type fluid pressure actuated motor,” which was issued on January 11, 2005. On June 6, 2007, Messrs. Barker and Konrad and the Company’s predecessor, PowerVerde, LLC, permanently and exclusively assigned to PowerVerde all rights                Due to the patentnature of the technology and its ability to treat effectively diverse waste streams, applicable to different industries, the other intellectual property relating tomarkets that the PowerVerde systems. On July 16, 2008, Messrs. BarkerCompany serves are broad. The Company’s technology provides a unique value proposition promoting its adoption across markets, and Konrad filed U.S. Patent application No. 61/081,298 for a “system to produce electricity using waste energy in natural gas pipelines.” This application was assigned to the Company; however, it was abandoned in 2009 because we decided to replace it with a new and improved provisional patent application regarding the natural gas pipeline technology. Mr. Barker filed on behalf of PowerVerde a new provisional patent application regarding this technology on April 7, 2010. On October 17, 2008, Mr. Konrad and Mr. Brian K. Gray filed U.S. Patent application No. 12/253,580 for a “low temperature organic rankine cycle system.” This application was assigned to the Company. There can be no assurance that these patents will be issued or maintained.includes but is not limited to:

In late 2010, we began filing several provisional patents covering

                One of our new organic pressure-driven cycle technology. In January 2011, we hiredkey markets is the inventorsludge treatment market, which includes both municipal and industrial sludge. Sludge is the semi solid by-product obtained from wastewater treatment. When it is produced from the treatment of this technology, Keith Johnson,domestic sewage it is considered municipal sludge whilst sludge obtained as by-product from industrial chemicals and waste treatment is referred to as industrial sludge. Activated sludge is the most commonly applied biological treatment process for the treatment of municipal sewage. It generates a specialist in advanced pressure-driven systems. He has assigned to PowerVerde his patent application in this field, U.S. Patent Application 61/424,249 filed on December 17, 2010. There can be no assurance that these patents will be issued or maintained.final residue also known as biosolids as it mainly consists of biological solids. Sludge and biosolids management is a key part of any wastewater treatment process.

Pursuant                The global demand for municipal and industrial sludge treatment is expected to generate revenue of above $9 Billion by end of 2026, growing at a Compound Annual Growth Rate (CAGR) of around 5.7% between 2020 and 2026 (Research and Markets Report, August 2020). Growing population has resulted in increased volume of sludge which drives the Cornerstone acquisition, we acquired all rightsmarket for municipal and industrial sludge treatment. Moreover, escalating energy costs from conventional sources prompts the use of biogas which in turn is expected to U.S. Patent Application No. 12,749,416 filed on March 29, 2010, entitled “Solar Photovoltaic Closed Fluid Loop Evaporation Tower.” This application was filed by Bryce Johnson as inventor and assigned to Cornerstonetrigger the municipal sludge treatment market in connection with the acquisition. There can be no assurance that this patent will be issued or maintained.

On June 25, 2015, our consultant Hank Leibowitz assigned to PowerVerde his U.S. Patent No. 62/172,616, issued on June 8, 2015 for a system and method using high temperature sources in Rankine cycle power systems. We have agreed to pay Mr. Leibowitz a 2% royalty for any and all revenues of products and/or project sales by us based on this patent.

We expect to file additional patent applications pertaining to our advanced organic pressure driven cycle later in 2016. There can be no assurances that we will be able to do so or that any patents will be issued based on these applications.

Product Descriptionnear future.

The 2007 advanced generation PowerVerde motor,municipal sludge market is expected to comprise approximately 40% of the Company’s revenue, particularly due to its size, regulatory drivers related to emerging contaminants, evolving land application limitations/restrictions and ever-increasing sludge volumes that require treatment (Sludge at WWTPs: Global Trends of Treatment and Disposal/Reuse, The World Bank 2019). However, additional high value markets are being addressed and will contribute to the Company’s revenue and thereby help fuel its growth plans. Table 1 below shows a non-exhaustive list of target markets, their subsegments, and the relevant applications associated with its related organic rankine cycle (ORC) system, produced 10kWthose markets.

Table1: Representative target markets, their subsegments and applications

                The markets shown represent multi billions in Total Addressable Market (TAM) value, with typical 5-year CAGRs of net power. Our subsequent larger 25/50kWbetween 5%-8%.

                The trends that are transforming these markets, and dictating a more robust and sustainable approach to waste heat/solar design was a next generation system. This system was designedstream management are derived from recognition by waste generators, waste operators, government and society that they are key social, environmental and economic benefits to be gained by moving waste up the waste management hierarchy, towards prevention, reuse, recycling and recovery. The drivers that are facilitating adoption of our technology include but are not limited to: population growth and urbanization, increasing quantity/complexity of waste streams, climate change, carbon economics, resource scarcity, corporate sustainability targets, commodity prices, energy security and tightening regulations (Global Industrial Waste Water Systems Market Survey Report, December 2021).

Strategy

                Our growth strategy includes a blend of routes, including but not limited to:

Organic Growth

                The Company’s growth over the next two years will be predominantly driven by sales of current systems in the identified key markets, leading to customer base expansion, with the municipal market expected to generate a significant portion of the Company’s revenue. The initial geographical focus will be North America and Canada, the UK, and EMEA. Our business model includes direct sales to end-users and indirect sales via channel partners. In some markets revenue will be generated from a mix of capital equipment sales and a Waste Purchase Agreement (WPA) which is a paid service for waste treatment. The latter will be offered through a financing arm which will be established within 2022 and target direct end-user engagement. The financing systems to be sold via service agreements will lower barriers to entry in our key markets and facilitate more rapid expansion of our client base. Examples of models to be used can include, but are not limited to: Build-Operate-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT), depending on clients’ preferences and limitations. We envisage that in some cases public private partnerships (PPPs) will be established, particularly when selling to public utilities, and addressing projects in developing geographies.

In addition, we are planning during the next two to three years to conduct further product development and expand our product portfolio that will facilitate entrance into new subsegments where particularly high strength waste streams require treatment. This is most relevant to some industrial manufacturing, defense, and waste management applications. Our intention is to maintain a healthy R&D budget to attain this goal.

Inorganic Growth

                Strategic partnerships will form an ongoing key growth strategy. Strategic partners being considered that we are currently engaging with include:

                A mid-term growth strategy, includes licensing agreements and M&As of Small Business Enterprises (SBEs) to increase functionality of our systems (such as implementation of IOT platforms for full process digitization) and to increase supply chain reliability and efficiency for ancillary process equipment that is required for full integration of systems (i.e., pumps, valves, filters, dewatering equipment etc.).

Products and Services

                We sell AirSCWO™ as a modular and containerized system. These are compact and prefabricated so they can be cost effectively shipped, installed, in single- or multiple-stacked units for businesses, factories, or any waste heat or solar application such as schools, hospitals, ships and other usersoperated within the footprint of electric power. These non-combustion motorsan existing plant.  We are fueled by heat (waste heat), via an ORC relatedcurrently offering a six (6) wet tons per day throughput capacity system and create a pressure source poweringthirty (30) wet tons per day throughput capacity system in 2023. A two hundred (200) wet tons per day throughput capacity system is to be designed between FY 2024 and 2025.

                In some cases, on an as-needed basis, we will sell, as part of the PowerVerde motor/generator while emitting zero carbon emissions orsolution package, ancillary equipment that is required to pre-treat the inlet waste stream byproducts. The other PowerVerdeand post-treat a product stream, depending on the application. For example, to meet the AirSCWO^TM inlet requirements (i.e., water %, total dissolved solids, etc.) sometimes a pre-treatment “bolt-on” process is implemented to ensure our system was designed to operate on wellhead or natural gas pipeline infrastructure and lacks the ORC component, but uses wasted latent energy (pressure) inherent in “city gate” letdowns or wellheads as its pressure source. This project (well head or natural gas pipeline applications) has been suspended so that we can focus exclusively on waste heat applications. To this end we anticipate and have designed systems that will be scaled even larger in the future.performance.

Our ORC system requires:                We offer two purchase options as follows:

We have builtIn addition, the Company will offer after sales agreements for supply of parts, maintenance and tested the 25/50kW ORC systems, and we believe that the overall design meets or exceeds performance metrics when compared to the industry at large. We have, however, remained challenged with our inability to thus far generate the continuous hours of operation that we believe necessary for commercial quality expectations. We continue to work toward our goal of a system capable of 25,000 hours (almost three years) of continuous operation. Meanwhile, we believe that we have made great strides in the evolution of the Liberator waste heat energy system and expect to achieve a successful test by year end 2016. There can be no assurance, however, that our ongoing technical issues will be resolved or that any of our Systems will ever be commercially viable.repairs.

Government RegulationsTechnology and Incentives

We believe that the time may be right for the PowerVerde systems. Regulatory proposals to limit greenhouse gases are under consideration, particularly in Europe. One such measure would be a carbon tax placed on fuels in proportion to their carbon content. Another would be a tax on oil. Yet another would be a “cap and trade” system. All of these would drive up the price of electricity from fossil fuel sources, yet have no impact on carbon-free renewable sources such as those offered by us; however, due to the weak economy in the United States and Europe and strong political opposition, there can be no assurance that any of these measures will be implemented.

Governments, utilities, businesses, and consumers alike are acutely aware of the negative effects of pollution and use of fossil fuels. Fossil fuel-based emissions contribute to serious health and environmental conditions such as acid rain, particulate pollution, nitrogen deposition, and global climate change. Consequently, government agencies in the United States and Europe at the national, state/provincial and local levels have implemented and proposed various economic incentives in the form of tax credits, rebates, deductions, accelerated depreciation and other subsidies designed to enhance the use of energy-efficient and clean power sources. We believe that these incentives will have a substantial positive impact on demand for the PowerVerde systems; however, there can be no assurance that, even with these incentives, our systems will be economically competitive or that the incentives will continue to be available.Intellectual Property

We have applied and continuedesigned an offensive intellectual property strategy to apply for federal grants, loans and/or other programs designed to assist development of renewable “green” energy sources, andensure we have previously retained specialized consultants to assistmaintain a competitive edge in this endeavor; however, wespace. We currently have not been successful in these ongoing efforts,filed five (5) provisional patents that cover crucial process operational aspects and there can be no assuranceimprove system efficiencies and performance, including a provisional patent to cover a next-generation AirSCWO^TM system for high strength waste stream treatment. We are allocating R&D resources to support data generation that we will ever receive any governmental assistance.allow moving to full non-provisional patent application by November 2022, with the intention of filing a PCT application.

CompetitionCollaborations

We face substantial competitionhave an exclusive manufacturing agreement in place with Merrell Bros Inc., which is based in Kokomo, Indiana, and is a nationwide biosolids management company helping municipalities, industries and agricultural operations successfully manage and recycle biosolids. They also serve as a channel partner to facilitate our market penetration and expansion plans in the US by opening up their existing client base.

                We have a Sponsored Partnership Agreement with Duke University that provides access to Duke’s world-class research capabilities, building on our own R&D expertise and strengthening our core development activities when needed.

                We have an exclusive partnership agreement with Environmental Services Company Ltd., who is based in Israel, to act as our channel partner for treating hazardous waste streams in Israel.

Marketing

                Our approach is through information, education, and thought leadership. This is because business purchase decisions are based more on bottom-line revenue impact. Return on investment (ROI) is a primary focus for corporate decision makers.

                We perform a business-to-business style of marketing of our products and services. We conduct marketing campaigns are aimed at any individual(s) with control or influence on purchasing decisions. This can encompass a wide variety of titles and functions, from numerous other companies, most of whom have financial and other resources substantially greater than ours. Our competition is worldwide, ranging from solo inventors and small businessesentry-level end-users all the way up to major utilitythe C-suite.

                We deploy conventional, yet highly creative demand generation marketing tactics including the following:

Clients

                Our clients include channel partners (EPCs, technology integrators, waste service providers, operations service providers, NGOs) and end-users which include utilities (private and public), industrial manufacturing facilities (i.e., pharmaceutical, chemical, food & beverage, semi-conductor etc.), waste management and environmental remediation companies (that own/operate waste disposal sites, landfills, incineration sites etc.), agricultural companies, and multinational corporations, allgovernmental entities (i.e., MODs).

Government Regulations

Our operations and AirSCWO units may be subject to various United States federal, state and local and, in the case of whomour Israel operations, Israeli laws and regulations and requirements governing the protection of the environment, public health and safety, and other matters. For example, the construction and operation of our AirSCWO units may require obtaining air permits from various states or, alternatively, obtaining a formal determination from a state that a permit is not required. We may also be required to obtain state and local treatment works approval to install our AirSCWO units if a unit is connected to a system which is permitted pursuant to the United States National Pollutant Discharge Elimination Systems Act. In the event our AirSCWO units are attemptingused to design, developtreat metals, the resulting mineral stream may constitute heavy meals under the United States Resource Conservation and market cleanRecovery Act (the “RCRA”) and efficient methods forrequire separation and regulated disposal if such heavy metals were deemed to be hazardous waste under the generationRCRA. If the operators of our AirSCWO units are treating hazardous waste, they may be required to obtain special hazardous waste technician training. Additionally, we are currently evaluating whether our AirSCWO units may be regulated pursuant to the United States Occupational Safety and delivery of electricity. This competition is expectedHealth Act and thereby be subject to increase due to pressures arising from high prices of fossil fuels, environmental concernsinspections thereunder. We intend that our operations and the increased availability of governmental incentives and subsidies. These competitors may prove more successful in offering similar products and/or may offer alternative products which prove superior in performance and/or more popular with potential customers than our products. Our ability to commercialize our products and grow and achieve profitability in accordance with our business plan will depend on our ability to satisfy our customers and withstand increasing competition by providing high-quality products at reasonable prices. There can be no assurance that weAirSCWO units will be able to achieve or maintain a successful competitive position.in material compliance with, and in many cases surpass, minimum standards required by applicable laws and regulations.

Where You Can Find Additional Information

The Company is subject to the reporting requirements under the Exchange Act. The Company files with, or furnishes to, the SEC quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports and will furnish its proxy statement. These filings are available free of charge on the Company’s website,http://www.powerverdeenergy.com www.374water.com shortly after they are filed with, or furnished to, the SEC.

The SEC maintains an Internet website,http://www.sec.gov,, that contains reports, proxy and information statements and other information regarding issuers.

The current general economic and market conditions and the volatility and disruption in the financial and capital markets has impacted us and could materially and adversely affect our business and financial results in future periods.

The United States economy continues to suffer from unfavorable economic conditions, including a weak recovery from a severe recession in the general economy, accompanied by large federal and state budget deficits and an increasing national debt. These negative conditions could persist or become even worse. These poor economic conditions continue to make it very difficult for us to raise the capital we need to complete the development and testing of our products so that we can begin sales. In the event that we are able to begin sales of our products, poor economic conditions may adversely affect our business and our financial condition and results of operations by extending the length of the sales cycle and causing potential customers to delay, defer or decline to make purchases of our products due to limitations on their capital expenditures and the adverse effects of the economy and the credit markets on them.

The weak economy is projected by many economic experts to continue or deteriorate further throughout 2016 or longer. These conditions may make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities. We cannot predict the timing, strength or duration of this current weak economy or of a subsequent stronger economic recovery, or the effects thereof on our customers and our markets. Our results of operations may be negatively impacted in future periods and experience substantial fluctuations from period to period as a consequence of these factors, and such conditions and other factors affecting capital spending may affect the timing of orders from major customers. These factors could adversely affect our ability to meet our capital requirements, support our working capital requirements and growth objectives, maintain our existing or secure new financing arrangements, or otherwise materially and adversely affect our business, financial condition and results of operations.

An increase in interest rates or lending rates or tightening of the supply of capital in the global financial markets could make it difficult for end-users to finance the cost of a PowerVerde system and could reduce the demand for our products and/or lead to a reduction in the average selling price for our products.Emerging Growth Company

We believe that,are also an “emerging growth company” as defined in the eventJumpstart Our Business Startups Act of 2012, or “JOBS Act.” As long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not an “emerging growth company,” like those applicable to a “smaller reporting company,” including, but not limited to, a scaled down description of our business in SEC filings; no requirements to include risk factors in Exchange Act filings; no requirement to include certain selected financial data and supplementary financial information in SEC filings; not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements that we file under the Exchange Act; no requirement for Sarbanes-Oxley Act Section 404(b) auditor attestations of internal control over financial reporting; and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved. We are able to commercialize our products, many of our end-users will depend on debt financing to fund the initial capital expenditurealso only required to purchase and install a PowerVerde system. As a result, an increase in interest rates or lending rates could make it difficultfile audited financial statements for our end-users to secure the financing necessary to purchase and install PowerVerde systems on favorable terms, or at all and thus lower demand and reduce our net sales. Due to the overall economic outlook, our end-users may change their decision or change the timingprevious two fiscal years when filing registration statements, together with reviewed financial statements of their decision to purchase and install PowerVerde systems. In addition, we believe that a significant percentage of our end-users will install PowerVerde systems as an investment, funding the initial capital expenditure through a combination of equity and debt. An increase in interest rates and/or lending rates could lower an investor’s return on investment in PowerVerde systems, or make alternative investments more attractive relative to PowerVerde systems, and, in each case, could cause these end-users to seek alternative investments. A reduction in the supply of project debt financing or equity investments could reduce the number of our projects that receive financing and thus lower demand for PowerVerde systems.

Reduced growth in or the reduction, elimination or expiration of government subsidies, economic incentives and other support for renewable energy-sourced electricity applications could reduce demand for our systems.

Reduced growth in or the reduction, elimination or expiration of government subsidies, economic incentives and other support for renewable-sourced electricity may result in the diminished competitiveness of our systems relative to conventional and non-renewable sources of energy, and could materially and adversely affect our business.

Electric utility companies or generators of electricity from fossil fuels or other renewable energy sources could also lobby for a change in the relevant legislation in their markets to protect their revenue streams. Reduced growth in or the reduction, elimination or expiration of government subsidies and economic incentives for renewable electricity generation applications, especially those in our target markets, could impede our sales efforts and materially and adversely affect our business, financial condition and results of operations.

Existing regulations and policies and changes to these regulations and policies may present technical, regulatory and economic barriers to the purchase and use of our renewable electricity generation systems, which may significantly reduce demand for our systems.

The market for electricity generation products is heavily influenced by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the United States and in a number of other countries, these regulations and policies have been modified in the past and may be modified again in the future. These regulations and policies could deter end-user purchases of our systems.any applicable subsequent quarter.

We anticipate that our systemsmay take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We can remain an “emerging growth company” for up to five years. We would cease to be an “emerging growth company” prior to such time if we have total annual gross revenues of $1 billion or more and their installationwhen we become a “larger accelerated filer,” have a public float of $700 million or more or we issue more than $1 billion of non-convertible debt over a three-year period.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Sarbanes/Oxley Act

Except for the limitations excluded by the JOBS Act discussed under the preceding heading “Emerging Growth Company,” we are also subject to the Sarbanes-Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and regulation in accordancestrengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. It is difficult to track the requirements of individual statesthe Sarbanes/Oxley Act will substantially increase our legal and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to our systems may result in significant additional expenses to us and our potential customers and, as a result, could cause a significant reduction in demand for our systems.accounting costs.

Risks Related to Our Business

We need to raise substantial additional capital to fund our business.

We will need to raise promptly substantial additional funds. Without such additional funds, we may have to cease operations. We will require substantial additional funding for our contemplated research and development activities, commercialization of our products and ordinary operating expenses. Adequate funds for these purposes may not be available when needed or on terms acceptable to us, especially due to the ongoing weak economy. Insufficient funds may require us to delay or scale back our activities or to cease operations. Our sole source of material revenues is Biotech IP licensing fees.

We face substantial competition in our industry, and we may be unable to attract customers and maintain a viable business.

We face substantial competition from numerous other companies, most of whom have financial and other resources substantially greater than ours. Our competition is worldwide, ranging from solo inventors and small businesses all the way to major utility companies and multinational corporations, all of whom are attempting to design, develop and market clean and efficient methods for the generation and delivery of electricity. This competition is expected to increase due to pressures arising from high prices of fossil fuels, environmental concerns and the availability of governmental incentives and subsidies. These competitors may prove more successful in offering similar products and/or may offer alternative products which prove superior in performance and/or more popular with potential customers than our products. Our ability to commercialize our products and grow and achieve profitability in accordance with our business plan will depend on our ability to satisfy our customers and withstand increasing competition by providing high-quality products at reasonable prices. There can be no assurance that we will be able to achieve or maintain a successful competitive position.

Our success is dependent on the services of our key management and personnel.

Our success will depend in large part upon the skill and efforts of our key personnel hired or who may be hired, including our chief engineer, Hank Leibowitz, and our system specialist, Mark Prinz. Loss of any such personnel, whether due to resignation, death, and disability or otherwise, could have a material adverse effect on our business. In addition, Mr. Leibowitz does not intend to work for PowerVerde on a full-time basis, as he has substantial other business activities. He intends to dedicate the time he deems appropriate to meet PowerVerde’s needs; however, there can be no assurance that he will be willing or able to dedicate such time and attention as would maximize PowerVerde’s chances for success.

We have a limited operating history.

We have only a limited operating history. We have yet to generate any material revenues from our systems, as we have sold only one system, in a discounted sale to Newton, and the commercial value of our products is uncertain. There can be no assurance that we will ever be profitable. Further, we are subject to all the risks inherent in a new business including, but not limited to: intense competition; lack of sufficient capital; loss of protection of proprietary technology and trade secrets; difficulties in commercializing its products, managing growth and hiring and retaining key employees; adverse changes in costs and general business and economic conditions; and the need to achieve product acceptance, to enter and develop new markets and to develop and maintain successful relationships with customers, third party suppliers and contractors.

We may have difficulty in protecting our intellectual property and may incur substantial costs to defend ourselves in patent infringement litigation.

We rely primarily on a combination of trade secrets, patents, copyright and trademark laws, and confidentiality procedures to protect our proprietary technology, which is our principal asset.

Our ability to compete effectively will depend to a large extent on our success in protecting our proprietary technology, both in the United States and abroad. There can be no assurance that (i) any patents that we have applied or apply for will be issued, (ii) any patents issued, including our existing U.S. Patent No. 6,840,151, on which our current products are based, will not be challenged, invalidated, or circumvented, (iii) that we will have the financial resources to enforce our patents or (iv) the patent rights granted will provide any competitive advantage. We could incur substantial costs in defending any patent infringement suits or in asserting our patent rights, including those granted by third parties, and we might not be able to afford such expenditures.

We have limited protection over our trade secrets and know-how.

Although we have entered into confidentiality and invention agreements with our key personnel, there can be no assurance that these agreements will be honored or that we will be able to protect our rights to our non-patented trade secrets and know-how effectively. There can be no assurance that competitors will not independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

We may be unable to obtain required licenses from third-parties for product development.

We may be required to obtain licenses to patents or other proprietary rights from third parties. If we do not obtain required licenses, we could encounter delays in product development or find that the development, manufacture or sale of products requiring these licenses could be prevented.

The reduction, elimination or unavailability of contemplated government incentives may force our business plan to be changed and may materially adversely affect our business.

Our business plan relies to a significant extent on the availability of substantial federal, state and local governmental incentives for the development, production and purchase of energy-saving, environmentally-friendly products such as our systems. These incentives include, among others, tax deductions, tax credits, rebates, accelerated depreciation and government loans, grants and other subsidies. There can be no assurance that some or all of these incentives will not be substantially reduced or eliminated, nor can there be any assurance that any currently proposed incentives will actually take effect. Similarly, we have never received, and there can be no assurance that we will ever receive, any government loans, grants or other subsidies.

Lower energy prices may hinder our ability to attract customers and become profitable.

Our products are energy-efficient electric generators which compete primarily with conventional fossil fuel-generated electricity produced and delivered by conventional utility companies. The significant decreases in the prices of oil and natural gas since mid-2014 have materially adversely affected our competitive position. If sustained, these lower fossil fuel prices and the corresponding lower cost of fossil fuel-generated electricity could materially adversely affect our business.

We may be unable to purchase materials and parts on commercially reasonable terms from suppliers.

If we are able to commercialize our systems, our success will depend to a large extent on our ability to obtain a reliable supply of materials and parts from our suppliers on commercially reasonable terms. This may not prove possible due to competition, inflation, shortages, international crises, adverse economic and political conditions and business failures of suppliers or other reasons.

Our insurance may not provide adequate coverage.

Although we maintain general and product liability, property and commercial crime insurance coverage which we consider prudent, there can be no assurance that such insurance will prove adequate in the event of actual casualty losses or broader calamities such as terrorist attacks, earthquakes, financial crises, economic depressions or other catastrophic events, which are either uninsurable or not economically insurable. Any such losses could have a material adverse effect on PowerVerde.

We may be unable to obtain or maintain insurance for our commercial products.

The design, development and manufacture of our products involve an inherent risk of product liability claims and associated adverse publicity. There can be no assurance we will be able to maintain insurance for any of our proposed commercial products. Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms or at all. We are also exposed to product liability claims in the event the use of our proposed products result in injury.

Risks Related to Our Common Stock; Liquidity Risks

Our stock price is highly volatile.

The market prices for securities of emerging and development stage companies such as ours have historically been highly volatile, and our limited history has reflected this volatility. Difficulty in raising capital as well as future announcements concerning us or our competitors, including the results of testing, technological innovations or new commercial products, government regulations, developments concerning proprietary rights, litigation or public concern as to safety of potential products developed by us or others, may have a significant adverse impact on the market price of our stock.

We do not pay dividends on our common stock, and we have no intention to do so in the future.

For the near-term, we intend to retain remaining future earnings, if any, to finance our operations and do not anticipate paying any cash dividends with respect to our common stock.

There has been limited trading in our stock.

Our common stock is currently quoted on the OTCBB under the symbol “PWVI.” Since our February 2008 Merger with our predecessor Vyrex Corporation, our stock has been thinly traded, and no assurance can be given as to when, if ever, an active trading market will develop or, if developed, that it will be sustained. As a result, investors may be unable to sell their shares of our common stock at a fair price, if at all.

We may issue additional shares of our stock which may dilute the value of our stock.

Shares which we issue pursuant to private placements generally may be sold in the public market after they have been held for six months, pursuant to Rule 144. The sale or availability for sale of substantial amounts of common stock in the public market under Rule 144 or otherwise could materially adversely affect the prevailing market prices of our common stock and could impair our ability to raise additional capital through the sale of our equity securities.

We may issue shares of preferred stock that could defer a change of control or dilute the interests of holders of our common stock shareholders.

Our Board of Directors is authorized to issue up to 50,000,000 shares of preferred stock. The Board of Directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of preferred stock. The issuance of any series of preferred stock having rights superior to those of the common stock may result in a decrease in the value or market price of the common stock and further, they could be used by the Board of Directors as a device to prevent a change in control favorable to the Company. Holders of preferred stock to be issued in the future may have the right to receive dividends and certain preferences in liquidation and conversion rights. The issuance of such preferred stock could make the possible takeover of the Company or the removal of management of the Company more difficult, and adversely affect the voting and other rights of the holder of the common stock, or depress the market price of the common stock.

Our common stock is covered by SEC “penny stock” rules which may make it more difficult for you to sell or dispose of our common stock.

Since we have net tangible assets of less than $1,000,000, transactions in our securities are subject to Rule 15g-9 under the Exchange Act which imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses). For transactions covered by this Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. Consequently, this Rule may affect the ability of broker-dealers to sell our securities, and may affect the ability of shareholders to sell any of our securities in the secondary market.

The Commission has adopted regulations which generally define a “penny stock” to be any non-NASDAQ equity security of a small company that has a market price (as therein defined) less than $5.00 per share, or with an exercise price of less than $5.00 per share subject to certain exceptions, and which is not traded on any exchange or quoted on NASDAQ. For any transaction by broker-dealers involving a penny stock (unless exempt), the rules require delivery, prior to a transaction in a penny stock, of a risk disclosure document relating to the penny stock market. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in an account and information on the limited market in penny stocks.

FORWARD-LOOKING STATEMENTS

Prospective investors are cautioned that the statements in this Report that are not descriptions of historical facts may be forward-looking statements that are subject to risks and uncertainties. This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on the beliefs of our management as well as on assumptions made by and information currently available to us as of the date of this Report. When used in this Report, the words “plan,” “will,” “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project” and similar expressions, as they relate to PowerVerde,374Water, are intended to identify such forward-looking statements. Although PowerVerde374Water believes these statements are reasonable, actual actions, operations and results could differ materially from those indicated by such forward-looking statements as a result of the risk factors included in this Report or other factors. We must caution, however, that this list of factors may not be exhaustive and that these or other factors, many of which are outside of our control, could have a material adverse effect on PowerVerde374Water and our ability to achieve our objectives. All forward-looking statements attributable to PowerVerde374Water or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above.

ITEM 1B.UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.PROPERTIES.

None.

ITEM 3.LEGAL PROCEEDINGS.

None.

ITEM 4.MINE SAFETY DISCLOSURES.

Not applicable.

We do not own any real property. On January 1, 2012 our Board of Directors agreed to end the rental agreement with ARD and moved our operations to a 5,000 foot facility owned by our then-director and chief operating officer Bryce Johnson (who resigned in March 2013), located at 7595 E. Gray Rd., Scottsdale, Arizona. We believe that the facility will be adequate to satisfy our needs for at least the next year. From March 2012 to June 2013, we used the facility for a fee of $700 per month, which covered overhead costs. Since July 2013, this fee has not been charged. We believe that our relationship with Mr. Johnson, who remains a major PowerVerde shareholder, is good, and we believe that this good relationship will continue and allow us to use the facility on current terms for at least the next year; however, there can be no assurance that this will be the case as we do not have a signed lease.

On November 2, 2012, Keith Johnson, our former Chief Technical Officer, filed suit against our operating subsidiary PowerVerde Systems, Inc., in Maricopa County, Arizona, Superior Court. The suit included claims for breach of his employment agreement, for back pay and related claims. Mr. Johnson, whose salary was $12,500 per month, sought back pay of $37,500, reimbursement of expenses totaling approximately $5,012 and other unspecified damages. We believe that Mr. Johnson voluntarily terminated his employment in accordance with the agreement and that he has been paid in full. In an abundance of caution, we also gave Mr. Johnson 30 days’ notice of termination without cause pursuant to the employment agreement, with this notice to be effective only if the Court determines that his employment was not previously terminated by him. Mr. Johnson ceased working for the Company in early September 2012.PART II

In May 2014, the case was settled pursuant to our agreement to pay Mr. Johnson $30,088, with $5,088 due upon execution of the settlement agreement plus an additional $25,000 payable in installments of $12,500 each in July and August 2014. All of the settlement payments have been made, and the case is concluded.ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Notapplicable.

PART II

Our common stock trades on the Over-The-Counter Bulletin Board (“OTCBB”) under the symbol “PWVI.“SCWO.” The over-the-counter market quotations provided below reflect inter-dealer prices, without retail mark-ups, mark-down or commission and may not represent actual transactions. The following table sets forth the range of high and low sales prices on the OTCBB for the periods indicated.

Dividends

We have never declared or paid any cash dividends on our common stock, nor do we intend to declare or pay any cash dividends on our common stock in the foreseeable future. Subject to the limitations described below, the holders of our common stock are entitled to receive only such dividends (cash or otherwise) as may (or may not) be declared by our Board of Directors.

Recent Sales of Unregistered Securities

All of PowerVerde’s374Water’s sales of unregistered securities since inception have been made pursuant to private offerings to accredited investors. The sales set forth below were made pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. Except as otherwise noted below, no placement agent fees or commissions were paid on these offerings, and net proceeds were used for working capital.

Each Note investor receives simple interest at the rate of 10% per annum based on a 365-day year and actual days elapsed in the period for which such interest is payable. Accrued interest was payable semi-annually on June 30, 2013, December 31, 2013, June 30, 2014, and December 31, 2014. The entire principal balance of the Notes, together with all unpaid interest accrued thereon, was due and payable on December 31, 2014. The Notes are collateralized by our Biotech license fee revenues. We agreed to pay a $25,000 fee to the placement agent, Martinez-Ayme Securities, Inc. (“MAS”); however, in December 2013, this receivable was assigned by MAS to our Director and Chief Executive Officer Richard Davis and the amount due was reduced to $20,000 in exchange for payment to Mr. Davis of $4,000, which was paid in 2014. See Note 10 of Notes to Consolidated Financial Statements.

In the first quarter of 2013, we sold an additional $75,000 principal amount of Series A Secured Promissory Notes. In connection with these Notes, we issued warrants to purchase 75,000 shares of common stock concurrent with issuance of the Notes and we issued warrants to purchase an additional 75,000 shares in December 2013 at an exercise price equal to $.21 per share (the average price of the common stock during the 10 trading days prior to December 1, 2013).

In the fourth quarter of 2014, the Note Holders agreed to extend the maturity date of the Note principal balance to December 31, 2016. In connection with the Note extension, we revisedMerger with PowerVerde, 374Water closed on a private placement of 436,783 shares of Series D Convertible Preferred Stock (the “Preferred Stock”) with a par value of $.0001, yielding gross proceeds of $6,551,745 (the “Private Placement”) and the termssettlement 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 374Water Inc.’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 original warrants issued December 31, 2012, extendingCompany, the expiration date from December 31, 2015Preferred Stockholders have liquidation preference before any assets can be distributed to December 31, 2017 and the exercise price was reduced from $0.41 per share to $0.39 per share. We also revised the termscommon stockholders. All of the additional warrantsPreferred Stock was sold pursuant to extendan exemption from registration requirements under Regulation D and/or Section 4(2) of the expiration date to December 31, 2018, and the exercise price was reduced from $.21 per share to $0.17 per share.Securities Act of 1933, as amended.

In the first quarter of 2014, we raised gross proceeds of $240,000 throughDecember 2021, 374Water closed on a private placement of 2,400,000 unregistered2,500,000 shares of common stockCommon Stock (the “Common Shares”) with a par value of $.0001 and at a exercise price of $2.00 yielding $5,000,000. The private placement proceeds were raised to accredited investors at $.10 per share.assist in the Company’s efforts of towards meeting Nasdaq uplisting requirements.

In the second quarter of 2014, we raised gross proceeds of $75,000 through private placement of 750,000 unregistered shares of common stock to accredited investors at $.10 per share. We paid a 10% placement agent fee to MAS for this offering.

In the third quarter of 2014, we raised gross proceeds of $100,000 through private placement of 1,000,000 unregistered shares of common stock to accredited investors at $.10 per share.

Issuer Purchases of Equity Securities

During the years endedAs of December 31, 2015, and 2014, there were no2021, the Company did not have any purchases of equity securities repurchases by the Company.from stockholders.

ITEM 6.SELECTED FINANCIAL DATA.

Not required for smaller reporting companies.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.

Critical Accounting Policies

The consolidated financial statements of 374Water Inc., formerly known as PowerVerde, Inc. (“374Water Inc.,” “we,” “us,” “our,” or the “Company”) are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires our management to make estimates and assumptions about future events that effect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the consolidated financial statements.

Revenue Recognition

Licensing and royalty revenue from royalty agreements unrelated to the Company’s planned operations is recognized in accordance with the terms of the specific agreement. Revenues recognized under these agreements amount to 100% of total revenues for the years ended December 31, 2015 and 2014.

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, 20152021 and 2014,2020 were classified as equity. The Company utilizes the Black Scholes Model to complete valuation of warrants and uses the inputs for the Black Scholes Model including Risk Free Rate, Dividend yield, stock price, exercise price, term, and volatility. The Company uses other public company comparison for Volatility and pulls the risk-free rate from the federal treasury rates based on the term. The Company’s exercise price is pulled from the warrant agreement and the stock price is pulled from the market close on the day of issuance. The Company’s term for the warrants utilizes the simplified method for the calculation of the term.

Intellectual Property

Intellectual Property

The Company reviews 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. In the event of impairment, the Company would discount the future cash flows using its then estimated incremental borrowing rate to estimate the amount of the impairment.

Stock-based compensation.compensation

We account for stock-based compensation based on ASC Topic 718-Stock Compensation which requires expensing of stock options and other share-based payments based on the fair value of each stock option awarded. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model. This model requires management to estimate the expected volatility, expected dividends, and expected term as inputs to the valuation model.

Overview

From January 1991 until October 2005,374Water, Inc. (the “Company”, “374Water”, “We”, or “Our”) is a Delaware corporation which was incorporated on September 8, 2005. The Company was initially 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”) with 374Water, Inc., a privately held company based in Durham, North Carolina, (“374Water Private Company”) and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde.

As a result of the Merger, the former 374Water Private Company devoted substantially allshareholders own 65.8% of its effortsour issued and resources to researchoutstanding common stock and development related to its unsuccessful Biotech Business, in particular53.8% of our issued and outstanding voting stock (which includes the study of biological oxidation and antioxidation directedpreferred stock on an as converted basis).

Subsequent to the developmentMerger, 374Water is focused on being a cleantech and social impact company providing a disruptive technology that addresses imminent environmental pollution challenges. We are focused on a new era of potential therapeutic productssustainable waste stream management that promotes circular economy initiatives and enables organizations to achieve sustainability goals and create green impact. Our vision is a world without waste and our mission is to preserve a clean and healthy environment that sustains life.

We have developed proprietary waste stream treatment systems based on Supercritical Water Oxidation (SCWO). The term used for the treatmentprocess is AirSCWO^TM. SCWO leverages the unique properties of various diseaseswater in its supercritical phase (above 374 ^oC and conditions. In221 Bar) to convert organic matter to energy and safe products that can be recovered and used. The AirSCWO^TM systems are essentially waste stream agnostic and able to treat a variety of complex, hazardous and non-hazardous waste streams, opening up opportunities for multiple applications in diverse market verticals on an international scale. Most pertinently, the most recent years,technology is shifting the Company’s research focused mainly on targeted antioxidant therapeuticslandscape in addressing environmental challenges that, until now, have been considered unsurmountable (due to science/engineering or cost barriers), one good example being the global PFAS crisis.

We currently outsource manufacturing of the AirSCWO^TM systems to our strategic partner in the US, Merrell Bros., Inc., that have the facilities and nutraceuticals. capability to rapidly ramp-up manufacturing volumes and also support system modifications and deployment as required per market and clients. We envision in the future applying an outsourced manufacturing model in a few territories, and may consider establishing our own manufacturing capability in geographies where this is needed to adequately grow our market share.

The Company is a development stage company, has never generated any substantialsystems are supplied to multiple market verticals, and our revenue from productmodel includes both capital equipment sales and has relied primarilylong-term service agreements based on equity financing, licensing revenues,throughput and various debt instruments for its working capital. The Company has been unprofitable since its inception.capacity (Waste Purchase Agreements). Our market penetration strategy is combined of direct client and channel partner sales routes, depending on the specific market and territory. In some cases, the systems may be white labelled and sold as part of a broader solution package.

Following the cessationResults of material Biotech Business operations in October 2005, the Company turned its primary focus to seeking an appropriate merger partner for its public shell. This resulted in the February 2008 Merger with Vyrex. In March 2009, we assigned most of our Biotech intellectual property other than our rights under existing licensing agreements (the “Biotech IP”) to an investor in exchange for his agreement to pay all future expenses relatingOperations

Year Ended December 31, 2021, as Compared to the Biotech IP and to pay us 20% of any net proceeds received from future sale and/or licensing of the Biotech IP. We do not expect this arrangement to generate material revenues.Year Ended December 31, 2020

Since the Merger,inception, we have focused on the development, testing and testingcommercialization of our clean energy electric power systems, and since 2008 we havegeneration systems. Since the closing of the 374Water Merger, our business has been focused on their applicabilitydevelopment and commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We generated $48,100 and $86,570 in revenue from manufacturing assembly services and from consulting and advisory services during the years ended December 31, 2021, and 2020, respectively. This year, we had substantial expenses due to thermal and formerly natural gas pipeline operations. We have abandoned the pipeline opportunities in terms of focusing on the thermal applications. The Company’s business is subject to significant risks, including the risks inherent in our ongoing research and development activities and efforts uncertaintiesto commercialize our systems, as well as substantial administrative expenses associated with obtaining and enforcing patents and intense competition. See “Risk Factors.”

Except as specifically noted to the contrary, the following discussion relates only to PowerVerde since,our status as a result ofpublic company. Our general and administrative expenses increased to $1,095,382 during the Merger, the only historical financial statements presented for the Company in periods following the Merger are those of the operating entity, PowerVerde.

Results of Operations

Yearsyear ended December 31, 20152021, as compared to $17,483 in the same period of 2020, primarily because of increased insurance costs, payroll expenses due to hiring employees and 2014

During 2015, we continuedstock-based compensation expenses. Our professional fees increased to focus on upgrading$343,862 during the durabilityyear ended December 31, 2021, as compared to $8,791 in the same period of 2020, primarily because of increased legal fees and continued operations capability ofaccounting fees relating to the 374Water Merger and our Liberator Waste Heat System. We had no revenues in 2015 other than $529,861 in Biotech IP licensing fees,status as a 23.6% increase from $428,747 in licensing income for 2014.public company. Our research and development expenses increased by $263,794 (72.5%) in 2015were $375,032 during the year ended December 31, 2021, as compared to 2014, and our general and administrative expenses decreased by $229,425 (45.7%). The$57,718 in the same period of 2020, primarily because of the increase in engineering expenses was primarily duetofollowing the issuances374Water Merger. Our product development expenses were $1,399,833 during the year ended December 31, 2021, compared to no such expenses in the same period of 2020. This activity represents the issuance of stock optionswarrants to a strategic partner in the second quarter of 2021 as part of compensation for services.the manufacturing, supply and service of AirSCWO products. Substantial net losses will continueare expected until we are able to successfully commercialize and market our products,374Water systems, as to which there can be no assurance.

Liquidity and Capital Resources

In April 2021, in connection with the Merger, we raised approximately $6.6 million from the sale of Series D Preferred Stock and converted all of its convertible debt notes and accrued interest to shares of common stock. On December 17, 2021, the Company raised approximately $5 million from the sales of Common Stock.

We have financed our operations since inception principally through the sale of debt and equity securities. Also, since 2012 we have received material amounts of Biotech IP licensing fees. As of December 31, 2015,2021, we had a working capital deficit of $288,544 and as$11,263,270 compared to working capital of $10,572 at December 31, 2014, we had a working capital surplus of $78,580.2020. This decreaseincrease in working capital occurred in April 2021, and is due primarily to the note payable to related parties (issuedgross proceeds of $6,551,745 from the sale of Series D Convertible Preferred Stock, the receipt of $1,134,999 of proceeds from the exercise of a warrant, and the gross proceeds of $4,999,975 from the private placement in 2012) that is due on December 31, 2016.

During 2015, we received $529,861 in Biotech IP licensing fees alone.

By2021 for the endsale of 2015, we had spent all of our $4,736 opening cash balance, so that our year-end cash balance was only $5,601, while our accounts payable and accrued expenses were $41,951. As of the date of this Report, we have only enough cash to finance operations for approximately two months, until approximately May 2016.Common Stock.

We expect 2016 Biotech IP revenues to exceed the 2015 level; however, there can be no assurancebelieve that this revenue levelthese funds will be achieved. Further,satisfy 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 or raise substantial additional capital, as to which there can be no assurance.

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.needs for the next 12 months. There can be no assurance that these funds will be sufficient to finance our plan of operations and commercialize our systems or that we will be able to promptly raise theany necessary funds. If we do not promptly raise the necessaryadditional funds we may be forced to cease operations.on a commercially reasonable basis or at all. 

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements of the Company and other information required by this Item are set forth herein in a separate section beginning with the Index to the Financial Statements on page F-1.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company, under the supervision and with the participation of itsthe Company’s management, including the Chief Executive Officer and President,have evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the CompanyOur management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of financial statements.

All internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding of controls. Therefore, even effective internal control over financial reporting can provide only reasonable, and not absolute, assurance(as defined in Rule 13a-15(f) under the Exchange Act). Our management, with respect to financial statement preparation and presentation. Further, becausethe participation of changes in conditions, the effectiveness of internal controls over financial reporting may vary over time. Because of its inherent limitations, internal controls over financial reporting may also fail to prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our chiefour principal executive officer and chiefprincipal financial officer, assessedevaluated the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment,2021. Our management’s evaluation of our management usedinternal control over financial reporting was based on the criteria set forthframework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—An Integrated Framework (September 1992).Commission. Based on this evaluation, our management concluded that as of December 31, 2015,2021, our internal control over financial reporting was not effective.

The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which we identified in our internal control over financial reporting:

No Attestation Report

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no significant changesManagement noted that in internal controlresponse to the material weaknesses related to complex accounting and lack of segregation of duties, the Company hired Israel Abitbol, CFO, who operated as the full-time accountant on behalf of 374Water Inc., pre-merger. The Company utilized KSDT, a CPA firm to assist with the month-end close (MEC) process following the merger from April to June 2021. At the end of June 2021, a part-time contractor CPA was hired (Steven Dinkins) to assist with the MEC process of the accounting records. Beginning with July 2021, a MEC Checklist was created that allowed the consultant to sign-off as a preparer for records in QuickBooks (QB) as well as schedules and reports maintained outside of QB, and Israel Abitbol would conduct a detailed review of the checklist procedures. This process evolved over the year to include a formal sign-off on the review of the checklist. Beginning in September 2021, the Company hired King Consulting Group (KCG) to assist with the review and preparation of financial statements as well as additional supplemental review over complex accounting areas. For financial reporting, duringthis would have Steven Dinkins, consultant become the fourthinitial preparer and KCG be the initial reviewer of the drafted financial statement information to be used for the quarter (or for the year). KCG would prepare the draft copy of 2015the financial statements and supplemental schedules and allow Israel Abitbol, CFO, and Yaacov Nagar, CEO to review the draft and approval of the final copy. Before publishing, the financial statements are also reviewed by the Company Legal Counsel before the final submission to the SEC. We believe that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.postmerger actions fully addressed and remediated this material weakness.

Additionally, management noted that in response to the material weakness related to the lack of entity level controls due to ineffective Board of Directors and no Audit Committee, the Company is working to remediate the material weakness by December 31, 2022.  The Company noted that as part of this remediation process, the Board of Directors has expanded to a four member Board of Directors following the merger.  The four members of the board consist of Yaacov Nagar, CEO, Marc Deshusses, Head of Technology, Richard Davis, PowerVerde’s prior CEO, and Terry Merrell, CFO of Merrell Bros. Inc.  The Company had their first Board of Directors meeting on May 6, 2021.  The Board held 7 monthly meetings out of the 8 total months the Board was active during FY2021. As part of the Company’s uplisting to NASDAQ process, the Company is working on adding 3-4 Independent Board members and creating several Board committees, including Audit Committee.

ITEM 9B.OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The names of our officers and directors, as well as certain information about them arerequired by this Item is set forth below:

Richard H. Davis. Mr. Davis joined our Boardunder the headings “Directors, Executive Officers and Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in February 2008the Company’s 2022 Proxy Statement to be filed with the U.S. Securities and Exchange Commission (“SEC”) within 120 days after December 31, 2021 in connection with the Vyrex Merger, and he became Chief Executive Officer in August 2011. He received a B.S degree in economics from Florida State University in 1982. He joined First Equity Corporation (“First Equity”) in Miami that same year. First Equity operated as a regional full-service brokerage and investment bank. Mr. Davis’ duties included equity deal structure and brokerage-related activities. After First Equity was acquired in 2001, Mr. Davis joinedsolicitation of proxies for the corporate finance department of William R. Hough & Company (“Hough”), where he continued structuring equity finance and private acquisitions. Hough was acquired in 2004 by RBC Dain Rauscher (“Dain”), a global investment banking firm. Dain consolidated Hough’s corporate finance activities into its New York offices. Mr. Davis elected to remain in Miami and joined Martinez-Ayme Securities, assuming the newly-created position of managing director of corporate finance.

John Hofmann. Mr. Hofmann became our Chief Financial Officer in August 2011. He is president of J L Hofmann & Associates, P.A., Coral Gables, Florida (“JLHA”), which has provided financial consulting and accounting services to select clientele since 1990. JLHA has provided services to PowerVerde since July 2010. Mr. Hofmann also serves as Operating Partner of Taft Street Partners I, Ltd., providing consulting services and capital for commercial and residential real estate projects. Mr. Hofmann started his career working with multinational companies for ten years as a Senior Manager for PricewaterhouseCoopers LLP (“PwC”). While at PwC, he traveled extensively primarily working on international tax matters and issues concerning the Internal Revenue Service. Locally, Hofmann has worked with the Miami Dolphins, Carnival Cruise Line, Royal Caribbean Cruise Line, Resorts International and Terremark Worldwide. Mr. Hofmann earned his Bachelor of Science in Accounting at the University of Florida and obtained his Master of Science in Taxation from Florida International University. Mr. Hofmann became a Certified Public Accountant through the Florida Board of Accountancy in 1982. He is a member of the Florida Institute of CPAs.

Election of Directors

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted by our Certificate of Incorporation.

Our Board of Directors shall be elected at the annual meeting of the shareholders or at a special meeting called for that purpose. Each director shall hold office until the nextCompany’s 2022 annual meeting of shareholders and until the director’s successor is elected and qualified.incorporated herein by reference.

CommitteesITEM 11. EXECUTIVE COMPENSATION.

Our BoardThe information required by this Item is set forth under the heading “Executive Compensation” and under the subheadings “Board Oversight of Risk Management,” “Compensation of Directors, does not yet have any committees; however, we intend to establish an audit committee” “Director Compensation-2021” and a compensation/stock option committee“Compensation Committee Interlocks and Insider Participation” under the heading “Directors, Executive Officers and Corporate Governance” in the near future. Additional board members are anticipatedCompany’s 2022 Proxy Statement to be added in 2016.

Advisory Board Members

In March 2010, our Board of Directors created an Advisory Board to advise and recommend, on a non-legally-binding basis, certain directions or actions deemed to be beneficial to the Company’s success. The Advisory Board’s members may be shareholders or non-shareholders; however, each member represents a specific industry or vocation complementary to the Company’s anticipated markets, customers and technical needs. It is anticipated that the Advisory Board will meet once a year in person and meet by conference call quarterly. We expect to compensate the Advisory Board members with restricted stock and/or options; however, the compensation plan has not yet been established. The members of the Advisory Board are as follows:

All of the Advisory Board Members are PowerVerde shareholders.

Compliance with Section 16(a) of the Securities and Exchange Act of 1934

Under the securities laws of the United States, our directors, executive officers and any persons holding more than 10% of the Company’s common stock are required to report their initial ownership of the Company’s common stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for these reports have been established and the Company is required to identify in this Report those persons who failed to timely file these reports. All of the filing requirements were satisfied in 2015. In making this disclosure, we have relied solely on written representations of our directors and executive officers and copies of the reports that have been filed with the Commission.SEC within 120 days after December 31, 2021 and is incorporated herein by reference.

Code of Ethics

We have not adopted a code of ethics for our management because of the costs involved and our lack of resources and limited operations.

Through March 2016, we have not paid any compensation to officers or directors in such capacity. Since becoming PowerVerde officers, Messrs Davis and Hofmann have not received any salary or other cash compensation for services in that capacity except that, in June 2011, Messrs. Davis and Hofmann received three-year warrants to purchase 600,000 and 200,000 shares, respectively, of our common stock, at a price of $1.05 per share (the market price on the date of grant). In addition, in March 2013, Messrs Davis and Hofmann received five-year warrants to purchase 1,000,000 and 500,000 shares, respectively, of our common stock, at a price of $.30 per share (the market price on the date of grant). In March 2012, in exchange for his interest in Cornerstone, our then officer and director Bryce Johnson received 1,575,000 shares of our restricted common stock and three-year warrants to purchase 150,000 shares of our common stock at exercise prices of $2.00, $3.00 and $4.00 as to 50,000 shares each. Mr. Johnson resigned from his positions with PowerVerde in March 2013.

Employment Agreements

On April 7, 2011, in order to enhance our ability to raise capital and limit dilution of our stockholders, we entered into an agreement with our co-founder George Konrad, pursuant to which Mr. Konrad agreed to surrender to our treasury 4,500,000 shares of our common stock owned by him since inception in exchange for our (i) entering into an employment agreement with him; and (ii) agreeing to pay to his company, ARD, $200,000, representing the cost of certain equipment owned by ARD which was principally used by us.

Consequently, on April 7, 2011, we entered into a two-year employment agreement with Mr. Konrad, pursuant to which Mr. Konrad served as our President. Pursuant to this employment agreement, we paid Mr. Konrad a salary of $10,000 per month. The employment agreement contained standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

On August 19, 2011, we amended our agreement with Mr. Konrad dated as of April 7, 2011, relating to his surrender to the Company’s treasury of 4,500,000 shares of common stock (the “Original Agreement”). Pursuant to this amendment, we extended the due date for payment of $200,000 to be made to Mr. Konrad’s company, ARD, under the Original Agreement to on or before April 7, 2013.

On October 16, 2012, in order to enhance our ability to raise capital and limit dilution of our stockholders, as well as to satisfy our obligations to ARD for past services and Mr. Konrad under the agreement dated April 7, 2011 as amended August 19, 2011 (the “Initial Agreement”) and the employment agreement between Mr. Konrad and the Company dated April 7, 2011( the “Employment Agreement”), we entered into an agreement (the “Settlement Agreement”) with Mr. Konrad and ARD, pursuant to which Mr. Konrad agreed to surrender to our treasury 3,000,000 shares of our common stock owned by him in exchange for payment of $530,000. Of this amount, $130,000 was paid to ARD and $300,000 was paid to Mr. Konrad upon execution of the Settlement Agreement, and we agreed to pay $100,000 to Mr. Konrad in six consecutive monthly installments of $16,666.67 each due on the 16^th day of each month beginning November 16, 2012. In the event any part of the $100,000 balance remained unpaid six months after the date of the Settlement Agreement, Mr. Konrad had an option to convert some or all of the unpaid balance into shares of the Company’s common stock at a price of .0667 per share. The execution of the Settlement Agreement terminated both the Initial Agreement and the Employment Agreement, and neither party had any further obligations or liabilities under those agreements. In March 2014, our debt to Mr. Konrad was paid in full following his receipt of payments totaling $116,667 in 2013 and 2014.

Pursuant to the Settlement Agreement, Mr. Konrad resigned from his positions as President and Director of PowerVerde. He was not replaced in either position.

Effective June 15, 2011, we entered into an employment agreement with Mark P. Prinz, pursuant to which Mr. Prinz serves as a Project Engineer. Pursuant to this agreement, we paid Mr. Prinz a salary of $11,250 per month through June 2013. Based on an amendment effective July 1, 2013, his salary has been $7,500 per month since then. This agreement is terminable by either party without cause upon 30 days’ prior written notice. In connection with this employment agreement, we granted Mr. Prinz (i) a 10-year option to purchase 100,000 shares of our common stock at a price of $1.23 per share (the market price on the date of grant); and (ii) a 10-year option to purchase 100,000 shares of our common stock at a price of $2.00 per share. In each case, one-fourth of the option shares,i.e., 25,000 shares, vested as of the date of the employment agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that Mr. Prinz is still employed by us at the time and subject to PowerVerde achieving certain operational targets. Additionally, in connection with this employment agreement, Mr. Prinz assigned certain intellectual property rights to the Company. The employment agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

On October 25, 2012, we entered into a consulting agreement with Hank Leibowitz, the principal of Waste Heat Solutions, LLC and an expert with 39 years experience in the field of advanced energy systems. Pursuant to this consulting agreement, which is terminable by either party on 30 days’ notice, we pay to Mr. Leibowitz’s company, Waste Heat Solutions, $7,500 per month. In connection with this consulting agreement, we issued to Waste Heat Solutions (i) a fully vested 10-year option to purchase 500,000 shares of common stock at $.56 per share and (ii) a 10-year option, vesting six months from the contract date, i.e., on April 25, 2013, to purchase an additional 500,000 shares at $.56 per share. This consulting agreement contains standard confidentiality provisions, as well as standard non-competition and non-soliciting provisions which survive for two years following termination of the consultancy.

We may also issue to our officers and directors stock options on terms and conditions to be determined by our Board of Directors or designated committee.

Compensation of Directors

We have not yet determined a compensation plan for our directors. We intend to provide our directors with reasonable compensation for their services in cash, stock and/or options.

Indemnification of Directors and Officers

Our Certificate of Incorporation allows us to indemnify our present and former officers and directors and other personnel against liabilities and expenses arising from their service to the full extent permitted by Delaware law. The persons indemnified include our (i) present or former directors or officers, (ii) any person who while serving in any of the capacities referred to in clause (i) who served at our request as a director, officer, partner, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by) our Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii).

The following table sets forth certain information as of March 30, 2016, regarding the beneficial ownership of our common stock by (i) each of our directors and “named executive officers”; and (ii) all of our executive officers and directors as a group. To our knowledge, no other person beneficially owns more than 5% of our common stock. As of March 30, 2016 we had 31,750,106 shares outstanding.

¹Mr. Konrad resigned as President and Director in October 2012. At that time, he surrendered 3,000,000 shares of common stock to our Treasury.

² Mr. Johnson resigned as an officer and director in March 2013. Includes 150,000 shares represented by currently exercisable warrants.

³ Mr. Barker’s shares are owned by Mr. Barker and his wife as joint tenants. Mr. Barker resigned as an officer and director in January 2015.

⁴ Mr. Davis’ shares include: 2,400,000 shares represented by currently exercisable warrants, 114,033 shares owned by Mr. Davis’ wife, as to which he disclaims beneficial ownership, and 10,000 shares owned by Darby Shore Management, Inc., a Florida corporation (“Darby”), for which Mr. Davis is an officer, director and 25% shareholder. Mr. Davis may be deemed to have voting and investment power over these shares held by Darby.

⁵ All of these shares are represented by currently exercisable warrants.

⁶ Includes 3,600,000 shares represented by currently exercisable warrants.

See Item 11. “Executive Compensation.”

Mr. Barker resigned from his positions as an officer and director of the Company in January 2015.

Since July 2010, Mr. Hofmann’s accounting firm, J.L. Hofmann & Associates, P.A. (“JLHPA”) has provided financial consulting and accounting services to PowerVerde. We paid a total of $39,150 to JLHPA in 2015.

We do not have any independent directors, as our sole director Mr. Davis is an officer. We intend to seek qualified independent directors to serve on our Board of Directors by the end of 2016.

The firm of Cherry Bekaert LLP, Certified Public Accountants (“CB”) was designated by our Board of Directors to audit the consolidated financial statements of our company for the fiscal years ended December 31, 2015 and 2014. The following table summarizes the aggregate fees billed and expected to be billed to us by CB for the fiscal years ended December 31, 2015 and 2014, respectively:

Principal Accountant Fees and Service

Audit FeesITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The aggregate fees billedinformation required by this Item is set forth under the headings “Security Ownership of Certain Beneficial Owners and expectedManagement” and “Equity Compensation Plan Information” in the Company’s 2022 Proxy Statement to be billed by CB for professional services rendered for the fiscal years ended 2015 and 2014, respectively, including fees associatedfiled with the annual audit, the reviews of the consolidated financial statements included in our Forms 10-K, the reviews of the quarterly reports on Form 10-Q, fees related to filings with the SecuritiesSEC within 120 days after December 31, 2021 and Exchange Commission and consultations on accounting issues and the application on new accounting pronouncements were approximately $46,250 and $43,250, respectively.is incorporated herein by reference.

Tax FeesITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The aggregate fees billedinformation required by this Item is set forth under the heading “Review, Approval or expectedRatification of Transactions with Related Persons” and under the subheading “Board Committees” under the heading “Directors, Executive Officers and Corporate Governance” in the Company’s 2022 Proxy Statement to be billed by John L. Hofmann & Associates P.A. for tax compliance, tax advice and tax planning rendered tofiled with the Company for each of the fiscal years endedSEC within 120 days after December 31, 20152021 and 2014 were approximately $2,000.is incorporated herein by reference.

PART IVITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by this Item is set forth under the subheadings “Fees Paid to Auditors” and “Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accounting Firm” under the proposal “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s 2022 Proxy Statement to be filed with the SEC within 120 days after December 31, 2022 and is incorporated herein by reference.

PART IV

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

See Exhibit Index and Financial Statements Index, below.

PowerVerde,374Water Inc.
and Subsidiaries

Annual Report on Form 10-K

Year Ended December 31, 20152021

EXHIBIT INDEX

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this Report has beensignedby the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

PowerVerde, Inc. and Subsidiary

Annual Report on Form 10-K

Year Ended December 31, 2015

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
PowerVerde,

374Water Inc. and Subsidiarysubsidiaries

Coral Gables, FloridaDurham, North Carolina

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetssheet of PowerVerde,374Water Inc. and Subsidiary,subsidiaries (the “Company”) as of December 31, 2015 and 2014,2021, and the related consolidated statements of operations, changes in stockholders’ deficiency,equity, and cash flows for the years then ended. year ended December 31, 2021, and the related notes (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included considerationAs part of our audit, we are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An

Our audit also includesincluded performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidatedpresentation of the financial statement presentation.statements. We believe that our audits provideaudit provided a reasonable basis for our opinion.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

374Water, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of 374Water, Inc. (the Company) as of December 31, 2020, and the related statements of operations, stockholders’ deficit, and cash flows for the year ended December 31, 2020, and the related notes to the financial statements (collectively referred to as the financial statements).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of PowerVerde, Inc. and Subsidiarythe Company as of December 31, 2015 and 2014,2020, and the consolidated results of theirits operations and their consolidatedits cash flows for the years then ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As showndiscussed in Note 2 to the consolidated financial statements, the Company has incurred a net loss of $426,634operating losses, has incurred negative cash flows from operations and $565,913 in 2015has an accumulated deficit. These and 2014, respectively. As of December 31, 2015 the accumulated deficit was $11,659,311. Theseother factors and others discussed in Note 2, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relatingManagement’s plan regarding these matters is also described in Note 2 to the recoverability and classification of recorded assets, or the amount and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Cherry Bekaert LLP
Coral Gables, Florida
March 30, 2016

PowerVerde, Inc. and Subsidiary 

Consolidated Balance Sheets

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

PowerVerde, Inc. and Subsidiary

Consolidated Statements of Operations

For the years ended December 31, 2015 and 2014

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

PowerVerde, Inc. and Subsidiary 

Consolidated Statements of Changes in Stockholders’ deficiency

For the years ended December 31, 2015 and 2014

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

PowerVerde, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014

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

PowerVerde, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of Business

PowerVerde, Inc. (the “Company”) is a “C” Corporation organized under the Laws of Delaware with operations in Scottsdale, Arizona. The Company’s two founders, now its largest shareholders, have conceived and developed the use of a power systems patent. For several years the Company has been undertaking research and development on a power generating system based on the patent and related intellectual property, which it hopes to commercialize in the near future.

Note 2 – Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred recurring operating losses and negative cashflows from operations. Those factors, as well as uncertainty in securing additional funds for continued operations, create an uncertainty about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company continues to seek funding from private debt and equity investors, as it needs to promptly raise substantial additional capital above and beyond expected licensing revenue in order to finance its plan of operations. There can be no assurance that the Company will be able to promptly raise the necessary funds on commercially acceptable terms, if at all. If the Company does not raise the necessary funds, it may be forced to cease operations.Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

D. Brooks and Associates CPAs, P.A.

We have served as the Company’s auditor since 2020.

Palm Beach Gardens, Florida

March 29, 2021

374 Water Inc. and Subsidiaries

Consolidated Balance Sheet

As of December 31, 2021 and December 31, 2020

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

374 Water Inc. and Subsidiaries

Consolidated Statement of Operations

For the years ended December 31, 2021 and December 31, 2020

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

374 Water Inc. and Subsidiaries

Consolidated Changes in Stockholders’ Equity

For the years ended December 31, 2021 and December 31, 2020