UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

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

EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

Commission File No. 000-27866

(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, 2021, the last business day of the issuer’s most recently completed second fiscal quarter: $45,785,090.

As of February 28, 2022, the number of outstanding shares of common stock, $0.0001 par value per share, of the registrant was 126,680,895.

CHERRY BEKAERT LLP    Raleigh, North Carolina    (PCAOB ID 677) 

 EXPLANATORY NOTE

Table of Contents

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Executive Officers and Directors

The following table and biographies that follow sets forth the name, age, position and description of the business experience of individuals who serve as our executive officers and directors as of the date of this filing:

Yaacov (Kobe) Nagar. Mr. Nagar is a co-founder of 374Water and patent inventor of the supercritical water oxidation AirSCWO system. He has been the Chief Executive Officer of 374Water from inception in July 2018. Mr. Nagar holds degrees in chemical engineering from Ben Gurion University (2001) and material engineering from Tel-Aviv University (2007) and thereafter held positions in the defense industry and renewable energy sectors in Israel, where he worked on developing fuel cell, CO2 sequestration and low energy chemicals technologies. He joined the Bill and Melinda Gates Foundation project at Duke University in 2017 to scale up and commercialize the SCWO technology. Mr. Nagar is the post-Merger CEO and Chairman of the Board of 374Water.

Israel D. Abitbol. Mr. Abitbol became our Chief Financial Officer in February 2022. Mr. Abitbol has served as the Company’s Head of Finance since January 2019. Prior to serving as the Company’s Head of Finance, Mr. Abitbol was an Auditor at BDO USA, LLP from June 2013 until April 2019. Mr. Abitbol is a senior finance executive with years of finance responsibilities and a consistent record of managing key financial processes contributing to successful business management. Mr. Abitbol is a Certified Public Accountant with a Bachelor of Science in Business Administration from the University of North Carolina at Chapel Hill and a Master of Accounting from Kenan-Flagler Business School. Mr. Abitbol is a member of the North Carolina Association of CPAs, and a member of the American Institute of CPAs.

Richard H. Davis. Mr. Davis joined our Board in February 2008 in connection with the Vyrex Merger, and served as the Chief Executive Officer from August 2011 to April 2021. 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 department of William R. Hough & Company (“Hough”), where he continued structuring equity finance and private acquisitions. Hough was acquired in 2004 by RBC Dain Rauscher (“Dain”), a global investment banking firm. Dain consolidated Hough’s corporate finance activities into its New York offices. Mr. Davis elected to remain in Miami and joined Martinez-Ayme Securities (“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. Mr. Davis is a Director of 374Water .

 Marc Deshusses. Dr. Deshusses is a co-founder of 374Water and patent inventor of the supercritical water oxidation AirSCWO system. He has served as the Chief Technology Officer of 374Water from inception in July 2018. Dr. Deshusses holds a Ph.D. in chemical engineering from the Swiss Federal Institute of Technology, Zurich (1994) and a BS in chemical engineering from the Swiss Federal Institute of Technology, Lausanne (1990). He is a professor of civil and environmental engineering at Duke University since 2008. Previously, he was a professor of civil and environmental engineering and department chair at the University of California Riverside from 1994 - 2008. He is a world-renowned researcher in biofiltration, odor, and novel waste-to-energy technologies. Dr. Deshusses has been the principal investigator for the supercritical water oxidation development project at Duke University since 2013. Dr. Deshusses is head of technology and a Director of 374Water. 

Terry Merrell. Mr. Merrell is a co-founder of Merrell Bros. Inc. (“Merrell”), Kokomo, Indiana, where he has served as the Chief Financial Officer since inception in 1982. He also is the founder of Cross America, Inc. which is a non-profit organization where he has served as President since 2018. He also serves as Elder at Upper Deer Creek Church. He has developed several technologies related to the biosolids management and disposal industry and currently has a patent pending status on some of these technologies

Family Relationships

There are no family relationships among any of 374Water’s directors or executive officers.

Director Independence

Our board of directors has undertaken a review of the composition of our board of directors, our committees and the independence of each director. Based upon information requested from and provided by each director concerning their background, employment and affiliations, including family relationships, the board of directors has determined that none of our current board of directors are “independent” as that term is defined under applicable SEC rules.

Committees of the Board of Directors

We currently do not have an audit committee, compensation committee and nominating and corporate governance committee of our board of directors. However, we do plan to form such committee in the future once we have a sufficient number of “independent” directors.

Code of Ethics

We are committed to high standards of ethical conduct and professionalism and have adopted a Code of Ethics. The Code of Ethics applies to all our directors, all our officers (including our principal executive officer and principal financial officer), employees and select consults and it will set forth our policies and expectations on a number of topics including avoiding conflicts of interest, confidentiality, insider trading, protection of 374Water and customer property and providing a proper and professional work environment.

Advisory Board Members

In July 2021, our Board of Directors created an Advisory Board to advise and recommend, on a non-legally-binding basis, certain directions or actions deemed to be beneficial to the Company’s success. The Advisory Board’s members may be shareholders or non-shareholders; however, each member represents a specific industry or vocation complementary to the Company’s anticipated markets, customers and technical needs. It is anticipated that the Advisory Board will meet once a year in person and meet by conference call quarterly. The members of the Advisory Board are as follows:

ITEM 11. EXECUTIVE COMPENSATION.

Summary

The following table summarizes all compensation received by our named executive officer December 31, 2021 and 2020:

Employment Agreements

Yaacov (Kobe) Nagar, CEO. Mr. Nagar signed his employment agreement with the Company on April 16, 2021. The term is three years, with extensions at the agreement of the parties. His base salary is $200,000 per year. If he is terminated for cause, as defined in the agreement, or he leaves the employment of the Company on his own volition, Mr. Nagar shall receive salary and benefits that have accrued up to the date of termination. If he is terminated without cause or following a material change, as defined in the agreement, Mr. Nagar will receive salary through the date of termination), all stock options shall vest immediately and salary and healthcare benefits will continue for 24 months. Mr. Nagar also agreed to a 12 month non-compete / non-solicitation, and signed a separate Proprietary Information and Inventions Agreement with his employment agreement which assigns to the Company any intellectual property developed by him during his employment.

On January 26, 2022 the (“Effective Date”), the Company entered into a First Amendment to Employment Agreement (the “Nagar Amendment”) with Mr. Nagar to amend certain cash compensation provisions of the Employment Agreement the Company and Mr. Nagar entered into on April 16, 2021. Specifically, as of the Effective Date, the Nagar Amendment increased Mr. Nagar’s annual base salary from $200,000 to $250,000. Additionally, Mr. Nagar is now eligible to receive compensation as follows: (i) a one-time $33,000 bonus in the event the Company achieves net income for two consecutive fiscal calendar quarters for the period which is one year after the Initial Public Offering (the “Net Income Bonus”) and (ii) a one-time $67,000 cash bonus in the event the average closing price of the Company’s common stock over any consecutive three month period during the first year subsequent to the Initial Public Offering equals or exceeds one hundred and fifty percent (150%) the price per share at which the Company’s common stock is sold at the Initial Public Offering (the “Trading Price Bonus”). Both the Net Income Bonus and the Trading Price Bonus may be earned if both thresholds are achieved or either the Net Income Bonus or the Trading Price Bonus may be earned if only one of the thresholds is achieved. For the purposes of the Nagar Amendment, the “Initial Public Offering” means the date on which the Company’s common stock is initially listed for trading on any tier of the NASDAQ Stock Market, the New York Stock Exchange, the NYSE American, or any other national securities exchange.

Marc Deshusses, Head of Technology. Mr. Deshusses signed his employment agreement with the Company on April 16, 2021. The term is three years, with extensions at the agreement of the parties. His base salary is $60,000 per year. If he is terminated for cause, as defined in the agreement, or he leaves the employment of the Company on his own volition, Mr. Deshusses shall receive salary and benefits that have accrued up to the date of termination. If he is terminated without cause or following a material change, as defined in the agreement, Mr. Deshusses will receive salary through the date of termination), all stock options shall vest immediately and salary and healthcare benefits will continue for 24 months. Mr. Deshusses also agreed to a 12 month non-compete / non-solicitation, and signed a separate Proprietary Information and Inventions Agreement with his employment agreement which assigns to the Company any intellectual property developed by him during his employment.

Israel D. Abitbol, Chief Financial Officer. Mr. Abitbol currently does not have a written employment agreement. His current base salary is $156,000 per year.

Proprietary Information and Inventions Agreement

All officers, directors, and other key employees and consultants have signed a Proprietary Information and Invention Agreement (“PIIA”) with the Company that provides in material part the following:

Director Compensation

During 2021, we did not provide any cash or equity compensation to our non-employee directors for their service on our Board 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).

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

The following table sets forth information about beneficial ownership of our common stock as of April 29, 2022, (unless otherwise noted) by (i) each stockholder that has indicated in public filings that the stockholder beneficially owns more than five percent of the common stock, (ii) each of the Company’s directors and named officers and (iii) all directors and officers as a group. Except as otherwise noted, each person listed below, either alone or together with members of the person’s family sharing the same household, had, to our knowledge, sole voting and investment power with respect to the shares listed next to the person’s name.

_________________

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

In addition to the compensation arrangements with our directors and executive officers, including those discussed in the sections titled “Management” and “Executive Compensation,” the following is a description of each transaction since January 1, 2019 and each currently proposed transaction in which:

At December 31, 2021 and 2020, the Company has due $0 and 15,108, respectively, of advances received from stockholders of the Company for working capital. There is no formal agreement, these advances are non-interest bearing and due on demand. During the years ended December 31, 2021 and 2020, stockholders advanced $0 and 2,053 respectively, for working capital needs. Advancements were fully paid in fiscal year 2021.

Our previous CFO John L Hofmann is a member of the accounting firm Kabat, Schertzer, De La Torre, Taraboulos & Co, LLC (“KSDT”). The Company paid $43,205 and $0 to KSDT for its services in the year ended December 31, 2021 and 2020, respectively, and $0 of services rendered remain unpaid as of December 31, 2021.

Additionally, the Company entered into an agreement to fabricate and manufacture the units with Merrell Bros. Holding Company. As part of the agreement, the Company provided Terry Merrell a board of director position. As of December 31, 2021, Merrell Bros. own stock in excess of 5% of the outstanding common stock.

Related-Party Transaction Policy

In approving or rejecting any related party transactions, our audit committee will consider the relevant facts and circumstances available and deemed relevant to our audit committee, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

Historically, our entire board of directors has been responsible for approving related-party transactions and have considered the relevant facts and circumstances available and deemed relevant, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The transactions described above were approved by our board of directors.

Director Independence

Our board of directors has undertaken a review of the composition of our board of directors, our committees and the independence of each director. Based upon information requested from and provided by each director concerning their background, employment and affiliations, including family relationships, the board of directors has determined that none of our current board of directors are “independent” as that term is defined under applicable SEC rules.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

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. As of December 31, 2021, the Company engaged the firm Cherry Bekaert LLP to take over auditor services effective during the fourth quarter of 2021. 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 Fees

The aggregate fees billed or expected to be billed by BDO for tax compliance, tax advice and tax planning rendered to the Company for the fiscal years ended December 31, 2021 is approximately $10,000. For the year ended December 31, 2020 the Company paid Kabat, Schertzer, De La Torre, Taraboulos & Co, LLC (KSDT), a related party, approximately $10,000 for tax compliance, tax advice and tax planning during that period. John L. Hoffman, the Company’s former Chief Financial Officer, is a partner at KSDT.

PART IV

ITEM 15. EXHIBITS.

(a) Financial Statements

Consolidated Financial Statements are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022.

(b) Exhibits

The exhibits listed in the exhibit index of the Original Form 10-K and the exhibits listed in the exhibit index of this Amendment are filed with, or incorporated by reference in, this report.

(c) Financial Statement Schedules omitted

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized.

EXHIBIT INDEX

*Filed herewith