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, 20202021

Commission File No. 000-27866

PowerVerde, Inc.

(Exact name of registrant as specified in its charter)

(305) 670-3370(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, 2020,2021, the last business day of the issuer’s most recently completed second fiscal quarter: $2,152,000.$45,785,090.

As of March 9, 2021,1, 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, 20202021

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 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 held 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. 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 rankine cycle technology. The design

 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.converted basis).

An initial prototype ofSubsequent to the motor was createdMerger, 374Water is focused on being a cleantech and tested in early 2002, and, based on positive test results, Messrs. Barker and Konrad concludedsocial impact company providing a disruptive technology 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. The Company has since abandoned this style of expander and is nowaddresses imminent environmental pollution challenges. We are focused on a new planetary or quad rotor style expander or motor.

Based on data learned from these earlier prototypes, PowerVerde has manufactured, retrofitted or purchased from third party manufacturers, different expandersera of sustainable waste stream management that promotes circular economy initiatives and related generation equipment. The Company has been testing these devices on a more powerful and advanced organic rankine cycle (ORC) system referredenables organizations to as the Liberator. The Company has 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 source (waste heat) as a fuel source, expanding a working fluid thereby driving the expander/generator, while the 100kW system (without ORC) uses wasted energy (pressure) from natural gas pipeline or 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.healthy environment that sustains life.

In November 2011, we entered into a binding letter of intent for the acquisition of all of the membership interests in Cornerstone Conservation Group LLC, (“Cornerstone”). The acquisition was consummated pursuant 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.

As consideration for the Cornerstone acquisition, we issued (i) a total of 2,250,000 restricted shares of our common stock to Cornerstone’s members, Bryce Johnson (“Johnson”), Paul Kelly (“Kelly”) 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 and $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 continued to operate our laboratory and test the Liberator within Mr. Johnson’s facility, where several infrastructure upgrades were completed. See Item 2 “Properties.”

Certain of our non-combustion expanders are fueled by heat (waste heat), via an ORC related system, and create a pressure source powering the PowerVerde expander/generator while emitting zero carbon emissions or waste stream byproducts. The other PowerVerde system, designed to operate on wellhead or natural gas pipeline infrastructure, lacks the ORC component, but includes a pressure cycle known as the Wet Steam Cycle (WSC) using our licensed planetary-style expander. This latter system uses wasted latent energy (pressure) inherent in “city gate” letdowns or wellheads as its pressure source.

Our ORC system requires:

Our WSC system requires:

We have builtdeveloped proprietary waste stream treatment systems based on Supercritical Water Oxidation (SCWO). The term used for the process is AirSCWO^TM. SCWO leverages the unique properties of water in its supercritical phase (above 374^oC and tested221 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 25/50kW ORCtechnology is shifting the landscape 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 the AirSCWO^TM systems to our strategic partner in the US, Merrell Bros., Inc., that have the facilities and we believe thatcapability to rapidly ramp-up manufacturing volumes and also support system modifications and deployment as required per market and clients. We envision in the overall design meets or exceeds performance metrics when comparedfuture applying an outsourced manufacturing model in a few territories, and may consider establishing our own manufacturing capability in geographies where this is needed to the industry at large. We have, however, remained challenged withadequately grow our inability to thus far generate the continuous hours of operation that we believe necessary for commercial quality expectations.market share.

PowerVerde has respondedThe systems are supplied to its difficulties in producing commercially viablemultiple 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 specific market and territory. In some cases, the systems or stand alone energy systems by focusing on expanders for non-traditional sources suchmay be white labelled and sold as high temperature/high pressure applications, including supercritical or near supercritical conditions. Within this fieldpart of interest PowerVerde designed and patented a unique wet steam cycle (WSC) process that uses steam or supercritical gas instead of refrigerants but at conditions well beyond that offered by commercially available systems.broader solution package.

In late 2017, PowerVerde was introduced to a project funded by the BillHuman Capital and Melinda Gates Foundation commonly referred to as the “Reinventing the Toilet Project”. The foundation is focused on global sanitation improvements. One of the foundation-supported projects, ongoing for the previous six years, involves a technology being developed at Duke University. This technology consists mainly of a chemical reaction called supercritical water oxidation (SCWO). The concept requires a unique reactor or bioreactor that converts any organic matter such as fecal sludge into pathogen-free water and mineral ash. This bioreactor trademarked AirSCWO, utilizing compressors and pumps, is energy intensive. However, the reaction itself is exothermic, meaning it gives off heat during the reaction. The caloric value (heat content) of the fecal sludge is the source of this heat release. If this heat release is captured and converted into electricity the AirSCWO’s parasitic energy requirements may be offset or eliminated or may even result in net electricity produced. In the latter example the bioreactor, designed for processing municipal fecal sludge and other organic waste, becomes an electrical-generating machine producing free electricity as a byproduct.Culture

AfterWe currently employ seven full-time employees and ten consultants on a highly competitive global search, as we announcedfull or part-time basis. Our current projections are to increase the workforce to twelve full-time employees in April 2018, PowerVerde was selected by Duke to develop the residual heat-to-power system to work2022 and forty full-time employees in conjunction with the bioreactor. We have begun the engineering and design process. Our selection was likely influenced by our focus on high temperature and pressure expanders and consistent with our WSC design. We believe the SCWO application is an excellent fit for our new product goal of providing expanders and systems capable of operating at elevated operating conditions where competition is limited.2023.

To maintainWe recognize and value our focus of designing small energy systems, typically under 500 kilowattspeople as our most important asset in achieving our strategic goals and usually utilizing non-turbine expanders, we have madegrowing a decision to transition intogreat company. We are working towards a specialty engineering company. Our focus is now directed on applications where our ability to designhuman resources strategy that will help drive the right culture, leadership, talent management, performance, reward and operate at elevated conditions gives us a substantial competitive edge. We believe that price points are less important when necessity meets reality, or where resourcesrecognition, personal development, and options are scarce. As such PowerVerde has partnered with 374Water Inc. (“374Water”), a newly formed for-profit corporation, spun out of Duke University, hoping to revolutionize the way municipal fecal sludge is processed. 374 Celsius is the temperature at which water becomes supercritical, hence the name 374Water. In its supercritical state water becomes a dense gas. PowerVerde is currently and exclusively designing expanders capableways of working at near supercritical conditions involving high temperature and pressure for this project.

On November 6, 2019, PowerVerde and 374Water entered into a memorandum of understanding (the “MOU”) regardingvital to ensure the Company achieves its strategic relationship between the parties whereby they intended for PowerVerde to provide the complete heat recovery system, includinggoals whilst our people benefit from an advanced expander, for 374Water’s SCWO system. The MOU was conditioned upon 374Water raising sufficient equity capital by March 31, 2020; however, the deadline was extended by the parties to December 31, 2020. Part of the contemplated funding was to be used to purchase two nominal 60 kW expanders from PowerVerde at a price to be agreed upon, which was expected to be approximately $500,000. In addition, upon closing of the financing, 374Water was to issue equity to PowerVerde in the form of restricted stock and stock options.

On September 20, 2020, the MOU was superseded by a Binding Letter of Intent for merger (the “LOI”) signed by PowerVerde and 374Water. Subject to the terms and conditions set forth in the LOI, 374Water will merge into a newly- formed wholly-owned subsidiary of PowerVerde (the “Sub”), with the Sub as the surviving corporation (the “Merger”). Upon closing of the Merger, PowerVerde will issue new shares of PowerVerde stock to 374Water shareholders such that 374Water shareholders will own approximately 60% of the combined company, and PowerVerde shareholders will own approximately 40%. The Merger is subject to adjustments for liabilities, and the closing is contingent on the achievement of certain milestones and satisfaction of conditions by both parties prior to closing, including the raising of at least $6.25 million of additional equity capital pursuant to a private placement, by March 31, 2021.

As of the date of this Report, PowerVerde is holding $1,636,545 in escrow for purposes of the private placement. There can be no assurance that PowerVerde will be able to raise the balance of the necessary funds or consummate the Merger. Similarly, there can be no assurance that if the Merger is consummated the transaction will yield a profitable business for PowerVerde.

On April 15, 2017, we entered into an assembly agreement with Liberty Plugins, Inc. (“Liberty”) to assemble Liberty’s Hydra electronic vehicle charging systems and ship completed Hydras to Liberty’s facility in Santa Barbara, California (the “Liberty Agreement”). Liberty has agreed to pay $1,000 for each Hydra assembled. As of December 31, 2020, we have built and shipped 132 Hydras.exceptional experience.

Our previous main source of funding,focus areas in creating a working environment that draws out the Biotech IP license contract, expiredbest in March 2018. We received our final installment of Biotech IP revenue inemployees and allows them to fulfil their potential and support the second quarter of 2018,Company to attain its goals are as follows:

Our recruitment strategy is based on royalties accruedidentifying top talent, predominantly via existing networks and referrals, and offering competitive remuneration packages that combine salary, benefits and equity. As we move forward our recruitment strategy will expand to wider platforms allowing outreach to a wider audience. In the immediate future, we will use an outsourced human resources firm, and as we grow, within 2022, embed a human resources function into the Company. We intend to apply a wide range of retention initiatives that include rewarding high-performance, and opening opportunities for progression and career development. Identification of high-performing talent will be linked to succession planning and development of the future-workforce will be embedded in employee professional development schemes.

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 first quarteropportunity to conduct performance reviews supported by transparent data and open conversation.

We are dedicated to embedding Diversity and Inclusion (D&I) as an important part of 2018 indeveloping our culture through delivery of innovative initiatives and internal workshops, ensuring that D&I policies touch on all aspects of the amountCompany 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 $159,094. Going forward, unlessorganisational aims and untilpriorities, 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 successfully commercializeattract and retain top talent in a financially sustainable way.

All of our Systemshuman resource initiatives will be supported by key performance indicators to monitor their effectiveness and generate positive cash flow from operations, through the 374Water Merger or otherwise, we will have to rely on privately-raised equity and/or debt capital to fund our operations. Theregain insight into gaps that can be no assuranceaddressed quickly and ensure our overall human resource strategy is adapted as required and maintained to a high degree.

Markets and Industries

                Due to the nature of the technology and its ability to treat effectively diverse waste streams, applicable to different industries, the markets that wethe Company serves are broad. The Company’s technology provides a unique value proposition promoting its adoption across markets, and includes but is not limited to:

                One of our key markets is the sludge 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 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 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.

                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 market for municipal and industrial sludge treatment. Moreover, escalating energy costs from conventional sources prompts the use of biogas which in turn is expected to trigger the municipal sludge treatment market in the near future.

The 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 those 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 between 5%-8%.

                The trends that are transforming these markets, and dictating a more robust and sustainable approach to waste stream 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 ablepredominantly driven by sales of current systems in the identified key markets, leading to raisecustomer base expansion, with the necessarymunicipal 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 commercially reasonable terms. If we are unableclients’ preferences and limitations. We envisage that in some cases public private partnerships (PPPs) will be established, particularly when selling to do so, we will have to cease operations.

Employeespublic 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 CEO Richard Davisproduct 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 our President Daniel Bogar, we currently have one full-time employee: Mark Prinz based in Scottsdale, Arizona. Mr. Prinz was hired in 2011.waste management applications. Our chief engineer, Hank Leibowitz, was hired pursuantintention is to maintain a part-time consulting agreement in October 2012. Mr. Leibowitz has been designated our chief design engineer. See Item 11. “Executive Compensation/ Employment Agreements.”

Patentshealthy R&D budget to attain this goal.

Messrs. BarkerInorganic 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 Konrad together obtained U.S. Patent No. 6,840,151M&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 “push-push type fluid pressure actuated motor,” which was issued on January 11, 2005. On June 6, 2007, Messrs. Barkermodular and Konradcontainerized system. These are compact and the Company’s predecessor, PowerVerde, LLC, permanently and exclusively assigned to PowerVerde all rights to the patent and the other intellectual property relating to the PowerVerde systems. On July 16, 2008, Messrs. Barker 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. Thereprefabricated so they can be no assurancecost effectively shipped, installed, and operated within the footprint of an existing plant.  We are currently offering a six (6) wet tons per day throughput capacity system and a thirty (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 solution package, ancillary equipment that these patents will be issued or maintained.is required to pre-treat the inlet waste stream and 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 performance.

                We offer two purchase options as follows:

In late 2010, we began filing several provisional patents covering our new organic pressure-driven cycle technology. In January 2011, we hiredaddition, the inventorCompany will offer after sales agreements for supply of this technology, Keith Johnson, as 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.parts, maintenance and repairs.

Pursuant to the Cornerstone acquisition, we acquired all rights 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 inventorTechnology and assigned to Cornerstone 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 Application No. 62/172,616, filed on June 8, 2015 for “a system and method using high temperature sources [such as gas well flaring] in Rankine cycle power systems.” There can be no assurance that this patent, which we expect to use in connection with our WSC system, will be issued or maintained. 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.

Government Regulations and Incentives

Regulatory proposals to limit greenhouse gases remain 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 economic conditions 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.

We have applied and continue to apply for federal grants, loans and/or other programs designed to assist development of renewable “green” energy sources, and we have previously retained specialized consultants to assist in this endeavor; however, we have not been successful in these ongoing efforts, and there can be no assurance that we will ever receive any governmental assistance.

CompetitionIntellectual Property

We face substantial competitionhave designed an offensive intellectual property strategy to ensure we maintain a competitive edge in this space. We currently have filed five (5) provisional patents that cover crucial process operational aspects and improve 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 will allow moving to full non-provisional patent application by November 2022, with the intention of filing a PCT application.

Collaborations

                We have 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 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. We also face substantial competition from sustained low prices for oil and natural gas. 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, www.powerverdeinc.comwww.374water.com shortly after they are filed with, or furnished to, the SEC.

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

Our financial condition and results of operations may be negatively affected by public health crises such as the ongoing coronavirus pandemic.

Severe financial market and economic disruptions may occur in response to public health epidemics, and the U.S. and global economies are suffering huge negative impacts as a result of the ongoing coronavirus pandemic. The rapid spread of the coronavirus, and the fear associated with this pandemic, along with the negative impact on economic growth and financial markets generally, may have a material adverse effect on the demand for our systems in the U.S. and abroad. If our customers and/or sources of financing are materially adversely affected by the pandemic and the accompanying economic crisis, our financial condition and results of operations could be materially adversely affected. Moreover, our operations and productivity could be negatively affected if our employees or agents are quarantined as the result of exposure to coronavirus or another contagious illness. The extent to which the coronavirus crisis impacts us will depend on future developments, which are highly uncertain at this time and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus, its economic and social impact and the measures taken to contain or treat the coronavirus, among others.

Increases in interest rates, or tightening of the supply of capital in the volatile 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, increases in interest 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 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.any applicable subsequent quarter.

ReducedWe may take advantage of these reporting exemptions until we are no longer an “emerging growth incompany.” 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 the reduction, eliminationmore and when we become a “larger accelerated filer,” have a public float of $700 million or expirationmore or we issue more than $1 billion of government subsidies, economic incentives and other support for renewable energy-sourced electricity applications could reduce demand for our systems.non-convertible debt over a three-year period.

ReducedUnder the JOBS Act, emerging growth incompanies can also delay adopting new or the reduction, eliminationrevised 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 expiration of government subsidies, economic incentivesrevised accounting standards 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.

We anticipate that our systems and their installationtherefore, 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. Insufficient funds may require us to delay or scale back our activities or to cease operations. Our sole source of material revenues has been Biotech IP licensing fees. Our license agreement expired in March 2018, when the underlying patents expired, and our final royalty payment, for royalties accrued in the first quarter of 2018, was received in the second quarter of 2018.

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 2011 sale to a former European distributor, 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 in recent years, and in particular the sharp drop in these prices in early 2020, 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.

We do not own any real property. On January 1, 2012 our Board of Directors 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. 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 have not used this facility since January 2018, as our engineer has done his work during this period from a facility at his home. The Scottsdale facility remains available on an as-needed basis based on our good relationship with Mr. Johnson, who remains a major PowerVerde shareholder. We are also exploring the possibility of using testing and/or manufacturing facilities located in Europe in the event that the 374Water Merger is consummated.

None.

ITEM 3.LEGAL PROCEEDINGS.

None.

ITEM 4.MINE SAFETY DISCLOSURES.

Not applicable.

PART II

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

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.

In December 2019, we issued a convertible promissory note in the principal amount of $25,000 to a related party in connection with the Merger with PowerVerde, 374Water closed on a loan inprivate 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 same amount.settlement of a $50,000 liability for Preferred Stock shares. The note is toPrivate Placement proceeds will be paid in one principal payment, along with any unpaid interest by December 31, 2022. Interest is payable semiannually at 10%.used for working capital, primarily for development, manufacture and commercialization of 374Water Inc.’s Air SCWO Nix systems. The notePreferred Stock has a stated value of $15 per share, is convertible into common stock at a price of $.20 per share through December 31, 2020, $.30 per share from January 1, 2021 through December 31, 2021, and $.40 per share from January 1, 2022, throughhas voting rights based on the maturity date of December 31, 2022. On December 4, 2020, the note along with accrued interest totaling $26,072 was converted into 130,362underlying shares of common stock. Upon liquidation of the Company, the Preferred Stockholders have liquidation preference before any assets can be distributed to common stockholders. All of the Preferred Stock was sold pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.

In 2020, the Company issued convertible promissory notesDecember 2021, 374Water closed on a private placement of 2,500,000 shares of Common 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 assist in the aggregate principal amountCompany’s efforts of $886,000, of which $125,000 is due to related parties and stockholders and $761,000 is due to nonrelated parties. The notes are to be paid in one principal payment, along with any unpaid interest by December 31, 2023. Interest is payable semiannually at 10% on June 30 and December 31. The notes are convertible into common stock at a price of $.20 per share through December 31, 2020, $.30 per share from January 1, 2021 through December 31, 2021, and $.40 per share from January 1, 2022 through the maturity date of December 31, 2023.towards meeting Nasdaq uplisting requirements.

Issuer Purchases of Equity Securities

During the year endedAs of December 31, 2020,2021, the Company purchaseddid not have any purchases of equity securities from George Konrad, the Company’s founder and former CEO and Director (“Konrad”) all of Konrad’s 4,027,408 shares of Company common stock (the “Shares”), representing 12.7% of the Company’s issued and outstanding common stock, for an aggregate price of $300,000 ($.074 per share). The Company raised the funds used for the purchase of the shares through a private placement of convertible notes to related parties, stockholders and non-related accredited investors.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

Revenue from royalties and assembly services with a related party are unrelated to our planned operations. Royalties are recognized as earned in the period the sales to which the royalties relate occur. Manufacturing assembly services with a related party are recognized as revenue when the assembled product is shipped to the customer. Revenues recognized under these agreements amount to 100% of total revenues for the years ended December 31, 2020 and 2019.

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, 20202021 and 2019,2020 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 applicability to thermaldevelopment and formerly natural gas pipeline operations.commercialization of 374Water’s supercritical water oxidation (SCWO) systems. We have abandonedgenerated $48,100 and $86,570 in revenue from manufacturing assembly services and from consulting and advisory services during 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 research and development efforts, uncertainties 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, as a result of 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

Yearsyears ended December 31, 2021, and 2020, and 2019

We had no revenues in 2020 other than $40,000 from assembly revenues under the assembly agreement with our one customer, Liberty Plugins Inc. In 2019, we generated $24,000 in assembly revenues. In both years,respectively. This year, we had substantial expenses due to our ongoing research and development activities and efforts to commercialize our systems, as well as substantial administrative expenses associated with our status as a public company. Our research and development expenses decreased by $104,360 (47.7%) in 2020 compared to 2019, and our general and administrative expenses increased by $106,295 (48.9%). The increaseto $1,095,382 during the year ended December 31, 2021, as compared to $17,483 in generalthe same period of 2020, primarily because of increased insurance costs, payroll expenses due to hiring employees and administrativestock-based compensation expenses. Our professional fees increased to $343,862 during the year ended December 31, 2021, as compared to $8,791 in the same period of 2020, primarily because of increased legal fees and accounting fees relating to the 374Water Merger and our status as a public company. Our research and development expenses iswere $375,032 during the year ended December 31, 2021, as compared to $57,718 in the same period of 2020, primarily due tobecause of the increase in legal feesengineering expenses following the 374Water 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 warrants to a strategic partner in the second quarter of 2021 as part of compensation for the manufacturing, supply and employee salaries. Our interest expense increased by $101,986 (306%) due to the higher balanceservice of notes outstanding in 2020. Our net loss increased by 3.6% in 2020.AirSCWO products. Substantial net losses will continueare expected until we are able to successfully commercialize and market our 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, from 2012-18 we received material amounts of Biotech IP licensing fees. As of December 31, 2020,2021, we had a working capital deficit of $237,593 as$11,263,270 compared to a working capital deficit of $63,638 as of$10,572 at December 31, 2019.2020. This decreaseincrease in working capital occurred in April 2021, and is due primarily to increased operating expenses financed through related and nonrelated party convertible notes payable.

Our Biotech IP license agreement expired in March 2018 due to the expirationgross proceeds of our underlying patents. Consequently, we have no further material source of revenues. We are generating some revenue by using our employee to provide part-time skilled manufacturing services to a third party under the Liberty Agreement; however, we expect this arrangement to generate no more than $4,000 per month. This arrangement generated revenues of $40,000 in 2020 and $24,000 in 2019.

Our proposed Merger with 374Water, which is scheduled to close on March 31, 2021, would be based on our raising a minimum of $6.25 million in net proceeds through$6,551,745 from the sale of Series D Convertible Preferred Stock, convertible into common stock atthe receipt of $1,134,999 of proceeds from the exercise of a pricewarrant, and the gross proceeds of $.30 per share. We believe that this funding will be sufficient to fund our post-Merger business plan; however, there can be no assurance that we will timely raise the required equity capital, that the Merger will be consummated, or if consummated the Merger will generate profitable operations for the Company. As of the date of this Report, we are holding $1,636,545 in escrow for purposes of$4,999,975 from the private placement requiredin December 2021 for the Merger.sale of Common Stock.

We continue to seek funding from private equity and debt investors, as we need to promptly raise substantial additionalbelieve that these funds will satisfy our working 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

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020.2021. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that as of December 31, 2020,2021, 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 2020the 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 joined the corporate finance departmentsolicitation 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 (“MAS”), assuming the newly-created position of managing director of corporate finance. In 2005 Mr. Davis resigned from MAS and ceased working as an investment banker. Since 2016, Mr. Davis has focused principally on his work as CEO of PowerVerde.

Daniel T. Bogar. Mr. Bogar is an executive with decades of experience in managing, growing and financing companies. From 1987-2000 he served in various management positions with Cellstar Corporation, a pioneer provider of cellular telephone service, in Miami, Florida, and Mexico City, Mexico. In his last position with Cellstar, Mr. Bogar served as President of the Americas region from 1999-2000. From 2000-2009, he served as Managing Director of Stanford Group Holdings (“Stanford”), a wealth management firm based in Houston, Texas. Mr. Bogar served as President/COO of American Green Technology, Inc./Vida Shield (“AGT”), a South Bend, Indiana manufacturer of LED industrial lighting products and anti-microbial lighting products, from inception in 2009 until 2018. Since 2019, Mr. Bogar has served as an adjunct professor of management at the McCoy School of Business, Texas State University, San Marcos, Texas.

On December 18, 2013, the SEC entered a final decision against Mr. Bogar finding that, in connection with his work on behalf of Stanford, which collapsed in 2009, he violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(c)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC found Mr. Bogar liable as a result of gross negligence but not willful fraud. Mr. Bogar, his family and friends suffered substantial losses as a result of their investments in Stanford’s securities. Pursuant to the SEC decision, Mr. Bogar was ordered (a) to cease and desist from committing or causing any violations or future violations of the relevant securities laws; (b) barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and prohibited, permanently, from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter; (c) to disgorge $1,555,485.75, plus prejudgment interest; and (d) to pay a civil money penalty of $260,000.

On August 28, 2018, certain noteholders of AGT unaffiliated with AGT’s majority shareholder Ushio America Inc. (“Ushio”) filed an involuntary chapter 11 petition against AGT in the U.S. Bankruptcy Courtproxies for the Southern District of Texas. The petition was granted on October 2, 2018. AGT had run out of cash due to Ushio’s refusal to provide further funding and refusal to extend the maturity of prior financing by Ushio which was secured by AGT’s intellectual property (“IP”) and other assets. On December 18, 2018, the court appointed a trustee for AGT, and on July 11, 2019, the court granted the trustee’s motion to convert the case to a Chapter 7 liquidation.

On October 30, 2019, the trustee filed an adversary complaint against Ushio and its affiliates alleging fraud, breach of fiduciary duty and other claims. In essence the trustee alleges that Ushio and its affiliates acted in bad faith in connection with their investment in and control of AGT for the purpose of misappropriating AGT’s IP and other assets. Ushio denies the allegations.

John L. Hofmann. Mr. Hofmann became our Chief Financial Officer in August 2011. Since December 2017, he has been a partner in the accounting firm of KSDT and Company, Miami, Florida (“KSDT”). Previously, he was president of J L Hofmann & Associates, P.A., Coral Gables, Florida (“JLHPA”), where he provided financial consulting and accounting services to select clientele since 1990. JLHPA and KSDT have 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 may 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.

Advisory Board Members

In March 2010, our Board of Directors created an Advisory BoardCompany’s 2022 Proxy Statement 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 2019. 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 April 2020, we have not paid any cash compensation to officers or directors in such capacity. Since becoming PowerVerde officers, Messrs Davis and Hofmann have received as compensation only grants of options and warrants.

Employment Agreements

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 vested in equal installments every six months thereafter until fully vested, provided that Mr. Prinz was 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 LLC (“WHS”), $7,500 per month. In connection with this consulting agreement, we issued to (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.

On September 1, 2019, we hired Daniel Bogar to serve as our President, reporting to the CEO. As compensation, Mr. Bogar received a fully-vested non-qualified option to purchase 1,000,000 shares of our common stock at an exercise price of $.10 per share, with an expiration date of June 30, 2026. In addition, Mr. Bogar will receive an annual salary of $90,000 beginning on the closing of a private financing with gross proceeds of at least $1,000,000; however, we will be permitted to defer the salary to the extent required to maintain solvency.

On September 1, 2020, we entered into one-year employment agreements with Messrs. Bogar and Davis at an annual salary of $90,000 each; however, we are permitted to defer payment of the salary to the extent required to maintain solvency.

May 2018 Option Issuance

On May 30, 2018, our Board of Directors agreed to extend all outstanding management and non-employee stock options and warrants (covering 5,975,000 shares) to a common expiration date of June 30, 2026 and adjust the exercise prices to $0.12. The 2,300,000 warrants were cancelled and the 3,675,000 options were terminated and reissued with the adjusted terms. The reissued options included options held by Mr. Davis (2,400,000 shares), Mr. Hofmann (1,200,000 shares) and WHS (1,000,000 shares).

On May 30, 2018, the Company also issued new, immediately vested stock options with an exercise price of $0.12 and an expiration date of June 30, 2026, to: Mr. Davis for 1,300,000 shares; WHS for 500,000 shares; and Mr. Hofmann for 800,000 shares.

We may also issue to our officers and directors further 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 9, 2021, 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 9, 2021, we had 27,878,060 shares outstanding.

¹ Mr. Johnson resigned as an officer and director in March 2013. Includes 900,000 shares represented by currently exercisable warrants.

² These shares were owned by our co-founder Fred Barker and his wife Cindy Barker as joint tenants until Mr. Barker’s death in August 2020. Mr. Barker resigned as an officer and director in January 2015.

³ Mr. Davis’ shares include: 3,700,000 shares represented by currently exercisable options, 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.

⁴ All of these shares are represented by currently exercisable options.

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

⁶ Includes 6,700,000 shares represented by currently exercisable options.

See Item 11. “Executive Compensation.”

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

From July 2010 until December 2017, the accounting firm J.L. Hofmann & Associates, P.A. (“JLHPA”), whose principal is our CFO John L. Hofmann, provided financial consulting and accounting services to the Company. In December 2017, J.L. Hofmann & Associates, P.A. merged with Kabat, Schertzer, De La Torre, Taraboulos & Co, LLC (“KSDT”). The Company paid $53,395 and $37,334 to KSDT for its services in the years ended December 31, 2020 and 2019, respectively.

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 2021.

The firm of D. Brooks & Associates Certified Public Accountants was designated by our Board of Directors to audit the consolidated financial statements of our company for the fiscal years ended December 31, 2020. The following table summarizes the aggregate fees billed or to be billed to us by our independent registered accounting firms D. Brooks and Associates CPAs, PA, and Cherry Bekaert LLP for the fiscal years indicated:

Principal Accountant Fees and Service

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

The aggregate fees billed or expectedinformation required by this Item is set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Company’s 2022 Proxy Statement to be billed by KSDT 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, 20202021 and 2019 were approximately $2,000.is incorporated herein by reference.

PART IVITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this Item is set forth under the heading “Review, Approval or Ratification 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 filed with the SEC within 120 days after December 31, 2021 and is incorporated herein by reference.

ITEM 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 SubsidiarySubsidiaries

Annual Report on Form 10-K

Year Ended December 31, 20202021

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
and PowerVerde,Stockholders

374Water Inc. and subsidiaries

Durham, North Carolina

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of PowerVerde,374Water Inc. and subsidiaries (the Company)“Company”) as of December 31, 2020,2021, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2020,2021, and the related notes to(collectively, the consolidated financial statements (collectively referred to as the consolidated financial statements)“financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020,2021, and the results of its operations and its cash flows for the year ended December 31, 2020,2021, 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 discussed in Note 2 to the consolidated financial statements, the Company has incurred operating losses, has incurred negative cash flows from operations and has an accumulated deficit. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the consolidated financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our 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 audit in accordance with the standards of the PCAOB. 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. 

D. Brooks and Associates CPAs, P.A.

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

Palm Beach Gardens, Florida
March 9, 2021

4440 PGA Blvd, Suite 104 ■ Palm Beach Gardens, Florida 33410 ■ Main Office : 561.429.6225 ■ Fax : 561.282.3444

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
PowerVerde, Inc. and Subsidiary

Coral Gables, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of PowerVerde, Inc. and Subsidiary (the “Company”) as of December 31, 2019, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the Company has historically incurred net losses and negative operating cash flows. As of December 31, 2019, the Company had an accumulated deficit of $12,572,714. These 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 that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our 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 PCAOB. 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 consolidated 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 consolidated 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 consolidatedfinancial statements. We believe that our audit 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 financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the years ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred operating losses, has incurred negative cash flows from operations and has an accumulated deficit. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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.

/s/Cherry Bekaert LLP

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 from 2010 through 2019.since 2020.

Palm Beach Gardens, Florida

March 29, 2021

Coral Gables, Florida

April 14, 2020

POWERVERDE, INC. AND SUBSIDIARY

374 Water Inc. and Subsidiaries

FOR THE YEARS ENDED DECEMBERConsolidated Balance Sheet

As of December 31, 2021 and December 31, 2020 AND 2019

CONSOLIDATED BALANCE SHEETS

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

POWERVERDE, INC. AND SUBSIDIARY

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

CONSOLIDATED STATEMENTS OF OPERATIONS

374 Water Inc. and Subsidiaries

Consolidated Statement of Operations

For the years ended December 31, 20202021 and 2019December 31, 2020

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

POWERVERDE, INC. AND SUBSIDIARY

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

374 Water Inc. and Subsidiaries

Consolidated Changes in Stockholders’ Equity

For the years ended December 31, 20202021 and 2019December 31, 2020