Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 14, 2021 | |
Document and Entity Information: | ||
Entity Registrant Name | 374WATER INC. | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Entity Central Index Key | 0000933972 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 97,216,246 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Entity Interactive Data Current | Yes | |
Entity File Number | 000-27866 | |
Entity Incorporation, State or Country Code | DE |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash | $ 30,052 | $ 95,386 |
Accounts -related party | 1,000 | 13,000 |
Prepaid expenses | 15,582 | 22,000 |
Total Current Assets | 46,634 | 130,386 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 198,991 | 76,381 |
Convertible notes payable to related parties and stockholders, net of debt discount and issuance costs | 195,817 | 194,422 |
Convertible notes payable, net of debt discount and issuance costs | 97,882 | 97,176 |
Total Current Liabilities | 492,690 | 367,979 |
Long Term Liabilities | ||
Convertible notes payable to related parties, net of debt discount and issuance costs | 29,124 | 20,536 |
Convertible notes payable, net of debt discount and issuance costs | 154,784 | 203,851 |
Total Long Term Liabilities | 183,908 | 224,387 |
Total Liabilities | 676,598 | 592,366 |
Stockholders' Deficit | ||
Common stock: 200,000,000 common shares authorized, par value $0.0001 per share, 40,966,290 common shares issued; 28,388,882 and 27,878,060 common shares outstanding at March 31, 2021 and December 31, 2020, respectively | 4,048 | 3,997 |
Additional paid-in capital | 13,541,849 | 13,431,536 |
Treasury stock, 12,577,408 and 8,550,000 shares at cost, respectively | (791,139) | (791,139) |
Accumulated deficit | (13,384,722) | (13,106,374) |
Total Stockholders' Deficit | (629,964) | (461,980) |
Total Liabilities and Stockholders' Deficit | $ 46,634 | $ 130,386 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
Assets | ||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common Stock, par value | $ 0.0001 | $ 0.0001 |
Common Stock, shares authorized | 200,000,000 | 200,000,000 |
Common Stock, shares issued | 40,966,290 | 40,966,290 |
Common Stock, shares outstanding | 28,388,882 | 27,878,060 |
Treasury stock | 12,577,408 | 8,550,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues [Abstract] | ||
Revenue-related party | $ 1,000 | $ 16,000 |
Operating Expenses | ||
Research and development | 34,398 | 34,939 |
General and administrative | 158,187 | 61,076 |
Total Operating Expenses | 192,585 | 96,015 |
Loss from Operations | (191,585) | (80,015) |
Other Income (Expenses) | ||
Gain on settlement of accounts payable | 3,800 | |
Interest expense | (90,563) | (11,648) |
Total Other Expenses, net | (86,763) | (11,648) |
Loss before Income Taxes | (278,348) | (91,663) |
Provision for Income Taxes | ||
Net Loss | $ (278,348) | $ (91,663) |
Net Loss per Share - Basic and Diluted | $ 0 | $ (0.01) |
Weighted Average Common Shares Outstanding - Basic and Diluted | 27,940,494 | 31,750,106 |
Condensed Consolidated Changes
Condensed Consolidated Changes in Stockholders' Deficit (Unaudited) - USD ($) | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Total |
Balance at Dec. 31, 2019 | $ 3,981 | $ 12,689,980 | $ (491,139) | $ (12,572,714) | $ (369,892) |
Balance, Shares at Dec. 31, 2019 | 31,750,106 | ||||
Net loss | (91,663) | (91,663) | |||
Balance at Mar. 31, 2020 | $ 3,981 | 12,689,980 | (491,139) | (12,664,377) | (461,555) |
Balance, Shares at Mar. 31, 2020 | 31,750,106 | ||||
Balance at Dec. 31, 2020 | $ 3,997 | 13,431,536 | (791,139) | (13,106,374) | (461,980) |
Balance, Shares at Dec. 31, 2020 | 27,878,060 | ||||
Conversion of note payable and accrued interest | $ 51 | 102,113 | 102,164 | ||
Conversion of note payable and accrued interest, Shares | 510,822 | ||||
Stock option issued to settle an accounts payable | 8,200 | 8,200 | |||
Net loss | (278,348) | (278,348) | |||
Balance at Mar. 31, 2021 | $ 4,048 | $ 13,541,849 | $ (791,139) | $ (13,384,722) | $ (629,964) |
Balance, Shares at Mar. 31, 2021 | 28,388,882 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash Flows from Operating Activities | ||
Net loss | $ (278,348) | $ (91,663) |
Adjustments to reconcile net loss to net cash provided (used) by operating activities: | ||
Amortization of debt issuance costs | 7,694 | 2,932 |
Amortization of debt discount | 53,928 | |
Gain on settlement of accounts payable | (3,800) | |
Changes in operating assets and liabilities | ||
Accounts receivable and prepaid expenses | 18,417 | (20,291) |
Accounts payable and accrued expenses | 136,775 | 53,888 |
Cash Used In Operating Activities | (65,334) | (55,134) |
Cash Flows from Financing Activities | ||
Proceeds from convertible notes payable, related parties | 100,000 | |
Payments for debt issuance costs | (8,000) | |
Cash provided by Financing Activities | 92,000 | |
Net Change in Cash | (65,334) | 36,866 |
Cash at Beginning of Period | 95,386 | 20,033 |
Cash at End of Period | 30,052 | 56,899 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid during the period for interest | ||
Cash paid during the period for income taxes | ||
Noncash Financing Activities | ||
Accounts payable settled with stock option | 8,200 | |
Conversion of convertible note payable and accrued interest | $ 102,164 |
Nature of Business and Presenta
Nature of Business and Presentation of Financial Statements | 3 Months Ended |
Mar. 31, 2021 | |
Financial Statements | |
Nature of Business and Presentation of Financial Statements | Note 1 – Nature of Business and Presentation of Financial Statements Nature of Business The Company is devoting substantially all of its present efforts to establish a new business involving the development and commercialization of clean energy electric power generation systems, and none of its planned principal operations have commenced. No material revenues from this planned principal operation have been generated since inception. Revenues to date have been from assembly services provided to one customer. Presentation of Financial Statements The accompanying unaudited condensed consolidated financial statements prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Annual Report of 374Water Inc, formerly known as PowerVerde, Inc. (“PowerVerde,” “we,” “us,” “our,” or the “Company”) as of and for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 9, 2021. The results of operations for the three months ended March 31, 2021, are not necessarily indicative of the results to be expected for the full year or for future periods. The condensed consolidated financial statements include the accounts of 374Water Inc, formerly known as PowerVerde, Inc. (the “Company”), and PowerVerde Systems, Inc., its wholly-owned subsidiary. Intercompany balances and transactions have been eliminated in consolidation. |
Liquidity, Capital Resources an
Liquidity, Capital Resources and Going Concern | 3 Months Ended |
Mar. 31, 2021 | |
Going Concern: | |
Liquidity, Capital Resources and Going Concern | Note 2 – Liquidity, Capital Resources and Going Concern The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As of March 31, 2021, we had a working capital deficit of $446,056 compared to a working capital deficit of $237,593 at December 31, 2020. This increase in the working capital deficit is due primarily to the maturity date of the convertible notes payable. As of March 31, 2021, the Company has an accumulated deficit of $13,384,722. For the three months ended March 31, 2021, the Company had a net loss of $278,348 and $65,334 of net cash used in operations for the period. Those factors create substantial doubt about the Company’s ability to continue as a going concern. Subsequent to March 31, 2021, as more fully disclosed in Note 11, the Company raised approximately $6.5 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. These events served to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern. Based on these events, the Company concluded it has the ability to continue as a going concern for at least the next 12 months and meet its financial obligations as they become due. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Policy Text Block [Abstract] | |
Summary of Significant Accounting Policies | Note 3 – Summary of Significant Accounting Policies Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company held no cash equivalents as of March 31, 2021 and December 31, 2020. Accounts Receivable and Concentration Accounts receivable consist of balances due from assembly services. The Company monitors accounts receivable and provides allowances when considered necessary. At March 31, 2021 and December 31, 2020, accounts receivable were considered to be fully collectible. Accordingly, no allowance for doubtful accounts was provided. At March 31, 2021 and December 31, 2020, accounts receivable were due from one related customer. Revenue Recognition and Concentration The Company follows the revenue standards of Financial Accounting Standards Board Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation. Royalties are recognized as earned in the period the sales to which the royalties relate occur. The Company has not yet generated any royalty revenues. Manufacturing assembly services are recognized as revenue when the assembled product is delivered to the customer and the Company has completed its performance obligations. Revenues for the three months ended March 31, 2021 and 2020 were generated from manufacturing assembly services and are from one related customer. Stock-based Compensation The Company has accounted for stock-based compensation under the provisions of Accounting Standards Codification (ASC) Topic 718 – “Stock Compensation” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the stock options. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. Accounting for Uncertainty in Income Taxes The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. There were no uncertain tax positions as of March 31, 2021 and December 30, 2020. Income Tax Policy The Company accounts for income taxes using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. Research and Development Costs The Company’s research and development costs are expensed in the period in which they are incurred. Such expenditures amounted to $34,398 and $34,939 for the three months ended March 31, 2021 and 2020, respectively. Earnings (Loss) Per Share Earnings (loss) per share is computed in accordance with FASB ASC Topic 260, “Earnings per Share”. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. Certain common stock equivalents were not included in the earnings (loss) per share calculation as their effect would be anti-dilutive. Warrants exercisable for 950,000 and 975,000 shares as of March 31, 2021 and March 31, 2020, respectively, were excluded from weighted average common shares outstanding on a diluted basis as well as options for 10,850,500 shares and 12,180,500 shares, respectively. Financial Instruments The Company carries cash, accounts receivable, accounts payable, accrued expenses and convertible notes payable, at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values due to their current nature. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2021 | |
Recent Accounting Prouncements | |
Recent Accounting Pronouncements | Note 4 – Recent Accounting Pronouncements In August, 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, “Debt-Debt with Conversion and other options” which simplifies the accounting for convertible debt instruments and convertible preferred stock. The ASU is effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact ASU 2020-06 could have on its financial statements. There are several other new accounting pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial position, operating results, or cash flows. |
Convertible Notes Payable to Re
Convertible Notes Payable to Related and Nonrelated Parties | 3 Months Ended |
Mar. 31, 2021 | |
Notes Payable to Related Parties | |
Convertible Notes Payable to Related and Nonrelated Parties | Note 5 - Convertible Notes Payable to Related Parties/Stockholders and Nonrelated Parties In January, March, and May 2019, the Company issued Convertible Notes Payable totaling $200,000 to related parties and stockholders and $100,000 convertible note payable to a nonrelated party. The notes are to be paid in one principal payment, along with any unpaid interest by December 31, 2021. Interest is payable semiannually at 10%. The notes are convertible into common stock at a price of $.20 per share through December 31, 2019, $.30 per share from January 1, 2020 through December 31, 2020, and $.40 per share from January 1, 2021 through the maturity date of December 31, 2021. In December 2019, the Company issued a Convertible Note Payable in the principal amount of $25,000 to a stockholder in connection with a loan in the same amount. The note is to be paid in one principal payment, along with any unpaid interest by December 31, 2022. Interest is payable semiannually at 10%. The note 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 through the maturity date of December 31, 2022. On December 4, 2020, the note along with accrued interest totaling $26,072 was converted into 130,362 shares of common stock. In March 2020, the Company issued a Convertible Note Payable in the principal amount of $100,000 to a nonrelated party in connection with a loan in the same amount. The note is to be paid in one principal payment, along with any unpaid interest by December 31, 2022. Interest is payable semiannually at 10%. The note 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 through the maturity date of December 31, 2022. On March 22, 2021, the note along with accrued interest totaling $102,164 was converted into 510,822 shares of common stock. In June 2020, the Company issued a Convertible Note Payable in the principal amount of $25,000 to a related party in connection with a loan in the same amount. The note is to be paid in one principal payment, along with any unpaid interest by July 31, 2023. Interest is payable semiannually at 10%. The note 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 through the maturity date of July 31, 2023. In the third quarter 2020, the Company issued Convertible Notes Payable totaling $511,000, of which $25,000 was with a stockholder and the remaining $486,000 was with nonrelated accredited investors in connection with loans for the same amount. 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. In the fourth quarter 2020, the Company issued Convertible Notes Payable totaling $250,000, of which $75,000 was with a related party and stockholder and the remaining $175,000 was with nonrelated accredited investors in connection with loans for the same amount. 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. Consequently, the Company has outstanding Convertible Notes Payable in an aggregate principal amount of $1,086,000 as of March 31, 2021, of which $325,000 are due to related parties and stockholders, and $761,000 are to nonrelated parties (collectively referred to as the “Notes”). See Note 12 for further related party transactions. The Convertible Notes Payable that were issued in the third and fourth quarter 2020 included a beneficial conversion feature, which is recorded as a discount against the Notes and amortized through the earlier of the conversion into common stock, or the maturity date. Amortization of the debt discount is reported as interest expense in the statements of operations. The total debt discount associated with the beneficial conversion feature for the year ended December 31, 2020 was $712,500. Total amortization associated with the beneficial conversion feature debt discount was $53,928 and $0 for the three months ended March 31, 2021 and 2020, respectively. Total debt issuance costs were $0 and $8,000 for the three months ended March 31, 2021 and 2020, respectively. Total amortization associated with the debt issuance costs paid was $7,694 and $7,254 for the three months ended March 31, 2021 and 2020, respectively. Convertible Notes Payable at March 31, 2021 and December 31, 2020 consisted of the following: March 31, December 31, 2021 2020 Current: Convertible notes payable to related parties and stockholders $ 200,000 $ 200,000 Less: Unamortized debt issuance costs 4,183 5,578 Total convertible notes payable to related parties and stockholders $ 195,817 $ 194,422 Convertible notes payable $ 100,000 $ 100,000 Less: Unamortized debt issuance costs 2,118 2,824 Total convertible notes payable, net $ 97,882 $ 97,176 Long Term: Convertible notes payable to related parties and stockholders $ 125,000 $ 125,000 Less: Unamortized debt discount - beneficial conversion feature 94,619 103,092 Unamortized debt issuance costs 1,257 1,371 Total convertible notes payable to related parties and stockholders $ 29,124 $ 20,537 Convertible notes payable $ 661,000 $ 761,000 Less: Unamortized debt discount - beneficial conversion feature 504,625 550,080 Unamortized debt issuance costs 1,591 7,069 Total convertible notes payable, net $ 154,784 $ 203,851 These notes and all accrued interest were converted to shares of common stock subsequent to March 31, 2021 (see Note 11). |
Warrants
Warrants | 3 Months Ended |
Mar. 31, 2021 | |
Warrants | |
Warrants | Note 6 – Warrants Warrants During September 2015, the Company issued five-year warrants to a stockholder for the purchase of 25,000 shares of common stock at an exercise price of $.12 per share as additional consideration for a $25,000 loan. On September 30, 2020, the stockholder exercised the warrant for 25,000 shares at $0.12 per share, totaling $3,000. During June 2016, the Company issued warrants to a stockholder for the purchase of 900,000 shares of common stock at an exercise price of $0.11 per share in consideration for the Company utilizing his facility space from January 2013 to December 2015. These warrants expire in June 2021. As of March 31, 2021, all of these warrants were outstanding. In July 2016, a warrant for the purchase of 25,000 shares of common stock at an exercise price of $.19 per share was issued to a stockholder as additional consideration for a $25,000 loan. These warrants expire in July 2021. As of March 31, 2021, all of these warrants were outstanding. In October 2016, another warrant for the purchase of 25,000 shares of common stock was issued to the same stockholder at an exercise price of $.15 per share as additional consideration for extending the maturity of the $25,000 loan for an additional 90 days. These warrants expire in October 2021. As of March 31, 2021, all of these warrants were outstanding. A summary of warrant activity during the three months ended March 31, 2021 is as follows: Shares Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (Years) Balance at December 31, 2020 950,000 0.11 $ 690,500 0.44 Issued — — — — Expired — — — — Balance at March 31, 2021 950,000 0.11 $ 462,500 0.19 |
Stock Options
Stock Options | 3 Months Ended |
Mar. 31, 2021 | |
Stock Options | |
Stock Options | Note 7 – Stock Options Stock option activity for the quarter ended March 31, 2021, is summarized as follows: Shares Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (Years) Options outstanding and exercisable at December 31, 2020 12,180,500 0.11 $ 4,750,395 4.63 Granted 20,000 0.45 3,000 — Expired/forfeited (1,350,000 ) 0.54 — — Options outstanding and exercisable at March 31, 2020 10,850,500 0.15 $ 4,892,855 4.51 On March 31, 2021, an option for 20,000 shares at an exercise price of $.45 per share was issued to Mr. Bryce Johnson in consideration of the Company’s use of his facility for which the Company owed Mr. Bryce Johnson $12,000. The accounts payable was settled in full with the issuance of the stock option with an estimated fair value of $8,200. The Company recognized a gain on the settlement as presented on the statements of operations (see Note 8). The significant assumptions relating to the valuation of the Company’s stock options granted during the three months ended March 31, 2021 were as follows: March 31, 2021 Dividend yield 0.00% Expected life 3 Years Expected volatility 1.02% Risk-free interest rate 0.35% There was no stock option compensation for the three months ended March 31, 2021 and 2020 and no unrecognized compensation expense associated with the options. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Stockholders' Equity | Note 8 – Stockholders’ Deficit On March 20, 2021, a stockholder converted a Convertible Note Payable in the principal amount of $100,000 along with accrued interest totaling $102,164 into 510,822 shares of common stock (see Note 5). On March 31, 2021, an option for 20,000 shares at an exercise price of $.45 per share was issued to Mr. Bryce Johnson in consideration of the Company’s use of his facility for which the Company owed Mr. Bryce Johnson $12,000. The accounts payable was settled in full with the issuance of the stock option with an estimated fair value of $8,200. The Company recognized a gain on the settlement as presented on the statements of operations (see Note 7). |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions | |
Related Party Transactions | Note 9 - Related Party Transactions 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 $11,825 and $9,300 to KSDT for its services in the three months ended March 31, 2021 and 2020, respectively, and $8,300 of services rendered remain unpaid as of March 31, 2021 which is included in accounts payable and accrued expenses. The Company’s consultant and shareholder Hank Leibowitz receives compensation of $7,500 per month, totaling $22,500 for the three months ended March 31, 2021 and 2020. At March 31, 2021, Mr. Leibowitz was owed accrued compensation of $67,500, which is included in accounts payable and accrued expense on the accompanying balance sheets. On April 15, 2017, the Company 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”). Initially, Liberty agreed to pay $1,000 for the first 10 Hydras assembled in a month, $750 per Hydra for the next 10 Hydras assembled per month and $500 per Hydra for each Hydra assembled above 20 per month. Revenue for these products is reflected in the revenue –related party on the Company’s consolidated statement of operations and amounted to $1,000 and $16,000 for the three months ended March 31, 2021 and 2020, respectively. The Liberty Agreement is subject to termination by either party on 30 days notice. The Company’s director and former CEO is a minority shareholder and member of the Board of Directors of Liberty. Therefore, transactions with Liberty have been disclosed as transactions with a related party. See Note 5 for convertible notes issued to related parties and stockholders. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 10 – Subsequent Events Agreement and Plan of Merger On April 16, 2021, 374Water Inc. (f/k/a PowerVerde, Inc.) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 374Water, Inc., a privately held company based in Durham, North Carolina, www.374Water.com Pursuant to the merger contemplated by the Merger Agreement (the “Merger”), on April 16, 2021 Sub merged into 374Water, with 374Water as the surviving corporation. In connection with the Merger, all 374Water shares were cancelled and 374Water, Inc. issued to the former 374Water shareholders a total of 64,012,734 shares of 374Water, Inc. common stock. Immediately following the Merger, 374Water changed its name to 374Water Systems Inc and PowerVerde changed its name to 374Water Inc. Also in connection with the Merger, PowerVerde closed on a private placement of 436,782 shares of Series D Convertible Preferred Stock (the “Preferred Stock”) with a par value of $.0001, yielding gross proceeds of $6,551,735 (the “Private Placement”). The Private Placement proceeds will be used for working capital, primarily for development, manufacture and commercialization of 374Water’s Air SCWO Nix systems. The Preferred Stock has a stated value of $15 per share, is convertible into common stock at $.30 per share and has voting rights based on the underlying shares of common stock. Upon liquidation of the Company, the Preferred Stockholders have liquidation preference before any assets can be distributed to common stockholders. The current liquidation value is $6,551,730. 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. As a result of the Merger, the issuance of the Preferred Stock and the post-Merger conversion of $1,086,000 principal amount of convertible notes and accrued interest of $31,241 (comprising all outstanding convertible notes and accrued interest) into 5,325,452 shares of PowerVerde common stock, the former 374Water shareholders own 65.8% of 374Water Inc’s issued and outstanding common stock and 53.8% of 374Water, Inc.’s issued and outstanding voting stock (which includes the Preferred Stock). In connection with the Merger, 374Water, Inc. entered into two-year employment agreements with 374Water founders Yaacov (Kobe) Nagar and Marc Deshusses, Ph. D. Mr. Nagar will serve as PowerVerde’s CEO, replacing Richard H. Davis, who resigned upon closing of the Merger. Mr. Nagar will receive an annual salary of $200,000. Dr. Deshusses will serve as PowerVerde’s Head of Technology on a part-time basis at a salary of $60,000 per year. Pursuant to the Merger, Messrs. Nagar and Deshusses were appointed to the PowerVerde Board of Directors, joining Mr. Davis, who remains as a Director. The patented technology underlying 374Water’s supercritical water oxidation (SCWO) units, which was developed principally through the efforts of Messrs. Nagar and Deshusses at the facilities of Duke University, Durham, North Carolina (“Duke”), where Dr. Deshusses is a professor, is licensed to 374Water pursuant to a worldwide non-exclusive license agreement with Duke executed on April 16, 2021 (the “License Agreement”). In connection with the License Agreement, 374Water also executed an Equity Transfer Agreement with Duke pursuant to which Duke received a small block of common stock in 374Water, which in turn was converted into PowerVerde shares pursuant to the Merger. On March 30, 2021, in anticipation of the Merger, 374Water entered into a Binding Memorandum of Understanding (the “MOU”) with MB Holding Inc. (“MBH”), an affiliate of Merrell Bros., Inc., a nationwide biosolids management company based in Kokomo, Indiana www.merrellbros.com As a result of the Merger Agreement, for financial statement reporting purposes, the business combination between 374Water Inc. and 374Water will be treated as a reverse acquisition and recapitalization for accounting purposes with 374Water deemed the accounting acquirer and 374Water Inc. deemed the accounting acquiree under the acquisition method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) Section 805-10-55. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Policy Text Block [Abstract] | |
Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company held no cash equivalents as of March 31, 2021 and December 31, 2020. |
Accounts Receivables | Accounts Receivable and Concentration Accounts receivable consist of balances due from assembly services. The Company monitors accounts receivable and provides allowances when considered necessary. At March 31, 2021 and December 31, 2020, accounts receivable were considered to be fully collectible. Accordingly, no allowance for doubtful accounts was provided. At March 31, 2021 and December 31, 2020, accounts receivable were due from one related customer. |
Revenue Recognition | Revenue Recognition and Concentration The Company follows the revenue standards of Financial Accounting Standards Board Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation. Royalties are recognized as earned in the period the sales to which the royalties relate occur. The Company has not yet generated any royalty revenues. Manufacturing assembly services are recognized as revenue when the assembled product is delivered to the customer and the Company has completed its performance obligations. Revenues for the three months ended March 31, 2021 and 2020 were generated from manufacturing assembly services and are from one related customer. |
Stock-based Compensation | Stock-based Compensation The Company has accounted for stock-based compensation under the provisions of Accounting Standards Codification (ASC) Topic 718 – “Stock Compensation” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the stock options. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. |
Accounting for Uncertainty in Income Taxes | Accounting for Uncertainty in Income Taxes The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. There were no uncertain tax positions as of March 31, 2021 and December 30, 2020. |
Income Tax Policy | Income Tax Policy The Company accounts for income taxes using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. |
Research and Development Costs | Research and Development Costs The Company’s research and development costs are expensed in the period in which they are incurred. Such expenditures amounted to $34,398 and $34,939 for the three months ended March 31, 2021 and 2020, respectively. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Earnings (loss) per share is computed in accordance with FASB ASC Topic 260, “Earnings per Share”. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. Certain common stock equivalents were not included in the earnings (loss) per share calculation as their effect would be anti-dilutive. Warrants exercisable for 950,000 and 975,000 shares as of March 31, 2021 and March 31, 2020, respectively, were excluded from weighted average common shares outstanding on a diluted basis as well as options for 10,850,500 shares and 12,180,500 shares, respectively. |
Financial instruments | Financial Instruments The Company carries cash, accounts receivable, accounts payable, accrued expenses and convertible notes payable, at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values due to their current nature. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. |
Convertible Notes Payable to _2
Convertible Notes Payable to Related Parties (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Notes Payable to Related Parties | |
Convertible Notes Payable | Convertible Notes Payable at March 31, 2021 and December 31, 2020 consisted of the following: March 31, December 31, 2021 2020 Current: Convertible notes payable to related parties and stockholders $ 200,000 $ 200,000 Less: Unamortized debt issuance costs 4,183 5,578 Total convertible notes payable to related parties and stockholders $ 195,817 $ 194,422 Convertible notes payable $ 100,000 $ 100,000 Less: Unamortized debt issuance costs 2,118 2,824 Total convertible notes payable, net $ 97,882 $ 97,176 Long Term: Convertible notes payable to related parties and stockholders $ 125,000 $ 125,000 Less: Unamortized debt discount - beneficial conversion feature 94,619 103,092 Unamortized debt issuance costs 1,257 1,371 Total convertible notes payable to related parties and stockholders $ 29,124 $ 20,537 Convertible notes payable $ 661,000 $ 761,000 Less: Unamortized debt discount - beneficial conversion feature 504,625 550,080 Unamortized debt issuance costs 1,591 7,069 Total convertible notes payable, net $ 154,784 $ 203,851 |
Warrants (Tables)
Warrants (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Warrants | |
Summary of warrants | A summary of warrant activity during the three months ended March 31, 2021 is as follows: Shares Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (Years) Balance at December 31, 2020 950,000 0.11 $ 690,500 0.44 Issued — — — — Expired — — — — Balance at March 31, 2021 950,000 0.11 $ 462,500 0.19 |
Stock Options (Tables)
Stock Options (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Stock Options | |
Stock Option | Stock option activity for the quarter ended March 31, 2021, is summarized as follows: Shares Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (Years) Options outstanding and exercisable at December 31, 2020 12,180,500 0.11 $ 4,750,395 4.63 Granted 20,000 0.45 3,000 — Expired/forfeited (1,350,000 ) 0.54 — — Options outstanding and exercisable at March 31, 2020 10,850,500 0.15 $ 4,892,855 4.51 |
Schedule of valuation assumptions | The significant assumptions relating to the valuation of the Company’s stock options granted during the three months ended March 31, 2021 were as follows: March 31, 2021 Dividend yield 0.00% Expected life 3 Years Expected volatility 1.02% Risk-free interest rate 0.35% |
Liquidity, Capital Resources _2
Liquidity, Capital Resources and Going Concern (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Going Concern Details Narrative | |||
Working capital deficit | $ 446,056 | $ 237,593 | |
Accumulated deficit | (13,384,722) | $ (13,106,374) | |
Net loss | (278,348) | (91,663) | |
Net cash used in operations | $ (65,334) | $ (55,134) |
Convertible Notes Payable to _3
Convertible Notes Payable to Related and Nonrelated Parties (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current: | ||
Convertible notes payable to related parties and stockholders | $ 200,000 | $ 200,000 |
Less: Unamortized debt issuance costs | 4,183 | 5,578 |
Total convertible notes payable to related parties | 195,817 | 194,422 |
Convertible notes payable to related parties | 100,000 | 100,000 |
Less: Unamortized debt issuance costs | 2,118 | 2,824 |
Total convertible notes payable | 97,882 | 97,176 |
Convertible notes payable to related parties and stockholders | 125,000 | 125,000 |
Less: Unamortized debt discount - beneficial conversion feature | 94,619 | 103,092 |
Less: Unamortized debt issuance costs | 1,257 | 1,371 |
Total convertible notes payable to related parties and stockholders | 29,124 | 20,537 |
Convertible notes payable | 661,000 | 761,000 |
Less: Unamortized debt discount - beneficial conversion feature | 504,625 | 550,080 |
Less: Unamortized debt issuance costs | 1,591 | 7,069 |
Total convertible notes payable, net | $ 154,784 | $ 203,851 |
Warrants (Details)
Warrants (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Warrants | |
Balance at beginning | shares | 95,000 |
Shares Issued | shares | 20,000 |
Shares Expired | shares | (1,350,000) |
Balance at end | shares | 95,000 |
Weighted Average Exercise Price Balance at beginning | $ / shares | $ .11 |
Weighted Average Exercise Price Balance at end | $ / shares | 0.11 |
Aggregate Intrinsic Value Balance at beginning | $ / shares | 690,500 |
Aggregate Intrinsic Value Balance at end | $ / shares | $ 462,500 |
Stock Options (Details)
Stock Options (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Shares | |
Begining Balance | shares | 12,180,500 |
Granted | shares | 20,000 |
Expired/forfeited | shares | 1,350,000 |
Ending Balance | shares | 10,850,500 |
Weighted Average Exercise Price | |
Options Outstanding, Begining Balance, Weighted Average Exercise Price | $ / shares | $ .11 |
Granted | $ / shares | .45 |
Expired/forfeited | $ / shares | .54 |
Options Outstanding, Ending Balance, Weighted Average Exercise Price | $ / shares | $ .15 |
Weighted Average Remaining Contractual Life (Years) | |
Options outstanding Begining | 4 years 7 months 17 days |
Options outstanding Ending | 4 years 6 months 3 days |
Stock Options-Valuation Assumpt
Stock Options-Valuation Assumptions (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Stock Options-valuation Assumptions | |
Dividend yield | 0.00% |
Expected life | 3 years |
Expected volatility | 1.02% |
Risk-free interest rate | 0.35% |