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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 (“374Water”) and 374Water Acquisition Corp., a newly-formed wholly-owned subsidiary of PowerVerde (“Sub”). The parties entered into the Agreement pursuant to their Binding Letter of Intent dated September 20, 2020.

 

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 (“Merrell”). The MOU establishes a framework for a contractual relationship for the commercial manufacturing and service of 374Water’s AirSCWO Nix systems. Pursuant to the MOU, MBH and its affiliates invested $1,135,000 in the Private Placement, purchasing 75,667 shares of Preferred Stock, and upon closing of the Merger, 374Water, Inc. assumed 374Water’s commitment to provide an option to MBH to purchase 3,783,350 shares of 374Water, Inc. common stock at $.30 per share. Asof the date of this filing, the options remain a commitment pending execution of the commercial manufacturing and service agreement.

  

 

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.