Executive Summary / Key Takeaways

• Disruptive Technology for a Global Crisis: 374Water is pioneering a scalable solution to the $450 billion global organic waste and "forever chemical" (PFAS) destruction market with its proprietary AirSCWO (Supercritical Water Oxidation) system, offering complete mineralization without harmful byproducts.
• Accelerating Commercialization and Revenue Growth: Following a strategic reorientation in 2024, the company is rapidly transitioning to a growth phase, evidenced by a 1786.5% surge in Q2 2025 service revenue year-over-year and a robust $1.8 billion pipeline of opportunities.
• Flexible Go-to-Market Strategy: SCWO is deploying a three-pronged waste destruction services (WDS) model – on-site permanent, off-site centralized TSDF partnerships, and on-site mobile fleets – alongside capital sales and leases, to capture diverse market needs.
• Strong Regulatory Tailwinds and Strategic Partnerships: Increasing environmental regulations, particularly around PFAS, and key partnerships like the Crystal Clean term sheet and DoD projects, are creating significant demand and validating SCWO's technology as an approved solution.
• Significant Growth Potential with Capital Needs: Management projects 2025 revenue of $2 million to $6 million, with a credible path to $250 million to $500 million in annual revenues within five years, though substantial additional capital will be required to fund this ambitious expansion.

The Dawn of a New Era in Waste Management

The global waste management landscape is at a critical juncture, grappling with an escalating crisis of organic waste and persistent pollutants like PFAS, often dubbed "forever chemicals." Traditional disposal methods—landfilling, incineration, and land application—are increasingly recognized as insufficient, merely relocating environmental liabilities rather than eliminating them. This backdrop sets the stage for 374Water Inc. (NASDAQ:SCWO), an industrial technology and services company poised to disrupt this $450 billion market with its groundbreaking AirSCWO system. The company's mission is clear: to provide scalable, effective waste destruction solutions that create and preserve a clean and healthy environment.

SCWO's journey began with the licensing of its core supercritical water oxidation technology from Duke University in 2021. The period of 2024 marked a pivotal strategic reorientation, focusing on ruggedizing and optimizing the AirSCWO system, upgrading pre- and post-treatment capabilities, and expanding destruction capabilities across various waste streams. This foundational work culminated in the relocation of operations to Orlando, Florida, in Q3 2024, enabling critical demonstrations and the commencement of AS1 and AS6 system manufacturing. Entering 2025, SCWO has accelerated its commercialization, securing its first waste destruction services (WDS) contract with the University of North Carolina at Chapel Hill Collaboratory, signing a WDS term sheet with Crystal Clean, and deploying systems for significant projects with the City of Orlando and the U.S. Department of Defense (DoD). These strategic moves, coupled with the addition of seasoned industry leaders to its Board, underscore SCWO's aggressive push into diverse market segments.

AirSCWO: A Technological Leap in Waste Destruction

At the heart of 374Water's investment thesis lies its proprietary AirSCWO system, a technological differentiator that sets it apart in a fragmented industry. This system harnesses the unique properties of water in its supercritical phase, which occurs above 374 degrees Celsius and 221 barometric pressure. When organic waste is injected into the AirSCWO system's proprietary tubular reactor and combined with supercritical water and ambient air, rapid oxidation or destruction of organic matter occurs within a matter of seconds.

The tangible benefits of this technology are compelling and quantifiable. The AirSCWO system is designed to efficiently destroy and mineralize a broad spectrum of non-hazardous and hazardous organic wastes, producing safe dischargeable water streams, safe mineral effluent, safe vent gas, and recoverable heat energy. Crucially, it eliminates recalcitrant organic wastes, including PFAS, without creating waste byproducts. Demonstrations have consistently achieved waste destruction results "north of 99.99%," often reaching "non-detect levels," meaning no trace elements were measurable, including for PFAS contaminants. This level of destruction significantly surpasses traditional methods that merely transfer pollutants. The system has also successfully eliminated LNAPL-based PFAS from groundwater samples for the U.S. Navy and consistently destroys PFAS in biosolids to non-detectable levels. The destruction process is "highly tunable," allowing for specific results tailored to different waste streams and customer preferences. This technological advantage provides SCWO with a strong competitive moat, enabling it to address complex waste streams that other solutions cannot, thereby solving critical environmental liabilities for its clients.

Strategic Market Penetration and Competitive Positioning

SCWO operates within a highly competitive landscape, facing both direct competitors in the SCWO field and indirect rivals offering alternative waste treatment technologies such as anaerobic digestion, landfilling, drying, incineration, lagoon and spray-fields, and lime stabilization. Larger, more diversified environmental services companies like Veolia Environnement (VIE), Suez (SEV), Waste Management Inc. (WM), and Clean Harbors Inc. (CLH) possess significant competitive advantages in terms of longer operating histories, greater scale, broader customer bases, and more established supplier relationships.

However, SCWO's proprietary AirSCWO technology provides a distinct competitive edge. While larger players offer comprehensive services, they often rely on conventional methods that fall short in the complete destruction of emerging contaminants like PFAS. SCWO's technology offers superior performance in contaminant destruction, potentially leading to lower long-term operating costs and reduced environmental footprints for specific applications. For instance, SCWO's ability to achieve >99.99% PFAS destruction to non-detect levels directly addresses a critical regulatory and public health challenge that traditional methods struggle with. This specialized capability allows SCWO to differentiate itself, particularly in niche, high-value applications where complete destruction is paramount.

The company's go-to-market strategy is intentionally diversified to leverage this technological advantage across three core markets: municipal, federal, and industrial, alongside strategic partnerships with Treatment, Storage, and Disposal Facilities (TSDFs). SCWO offers flexible procurement options: capital purchases, leases, and its increasingly dominant waste destruction services (WDS) model. The WDS strategy has three components:

• On-site permanent WDS: Long-term service contracts where SCWO operates units permanently at customer facilities.
• Off-site centralized TSDF WDS: A planned network of 8-10 TSDF facilities across North America, initially using AS6 units and later AS30s, based on revenue-sharing and system hosting models. The term sheet with Crystal Clean for a RCRA Part B TSDF facility in Ohio exemplifies this.
• On-site mobile WDS: A fleet of mobile AS1 and modularized AS6 systems for on-demand destruction at federal and industrial sites with sensitive waste.

This flexible approach allows SCWO to address varying customer operational and budgetary needs, from large municipalities desiring outright purchases to federal agencies and industrial clients preferring service models without significant upfront capital investment. The company's product roadmap includes four distinct AirSCWO models—AS1 (ultra-mobile), AS6 (mobile), AS30 (semi-permanent), and AS100+ (high-capacity, customizable)—each designed for specific capacity and mobility requirements. Management projects each mobile AS1 could generate over $2 million in annual revenue with a 2-2.5 year payback, while AS6 units could yield $3 million-$5 million in annual revenue with 30-50% margins. The AS30, once deployed, is estimated to generate $12 million-$20 million in recurring annual revenues with gross margins exceeding 50%, particularly with higher tipping fees for hazardous waste.

Financial Performance and Outlook: A Growth Inflection Point

374Water is at a pivotal inflection point, transitioning from a development-focused entity to a commercial growth company. This shift is clearly reflected in its recent financial performance. For the second quarter ended June 30, 2025, total revenue surged to $594,967, a remarkable increase from $36,821 in the prior-year quarter. This approximate $558,000 increase was primarily driven by a significant rise in service revenues, which jumped from $27,048 in Q2 2024 to $510,153 in Q2 2025—an astounding 1786.5% year-over-year growth. This was complemented by an increase in equipment revenues to $84,814 from $9,773. For the six months ended June 30, 2025, total revenues reached $1.14 million, up from $352,099 in the prior year, with service revenues leading the charge at $918,843 compared to $46,230.

Despite this revenue acceleration, the company reported a gross deficit of $276,366 in Q2 2025 and $138,083 for H1 2025, largely due to a $230,000 increase in the estimated accrued loss provision on an equipment contract. Operating expenses also increased, with total operating expenses rising 45% to $4.36 million in Q2 2025 and 69% to $8.29 million for H1 2025. This increase is primarily attributable to higher compensation and related expenses (up $1 million in Q2 2025) due to increased headcount in manufacturing, deployment, and R&D, as well as increased stock-based compensation. General and administrative expenses also rose due to increased depreciation from capitalized units, travel, and relocation costs as the company scales its operations. The net loss for Q2 2025 was $4.58 million, compared to $2.93 million in Q2 2024.

Management acknowledges that 2024 saw lower revenue due to fewer milestones but emphasizes that 2025 is poised to be its "best year for revenue." The company maintains a 2025 revenue guidance of $2 million to $6 million. More ambitiously, SCWO believes it is on a "credible path to achieving $250 million to $500 million in annual revenues in 5 years," driven by its $1.8 billion pipeline of identified opportunities. This outlook is predicated on successful execution of its WDS strategy, including the Crystal Clean (HCCI) partnership, ongoing DoD projects, and the deployment of its AS1, AS6, and future AS30 units.

Liquidity and Risks

As of June 30, 2025, 374Water had cash and cash equivalents of $2.15 million and working capital of $4.64 million, alongside an accumulated deficit of $36.67 million.

The company used $7.62 million in net cash from operations for the six months ended June 30, 2025. These conditions raise substantial doubt about its ability to continue as a going concern, necessitating additional debt or equity financing within the next twelve months. The company has been actively raising capital, including $11.39 million net proceeds from a November 2024 offering and $332,400 from an at-the-market (ATM) equity offering in H1 2025, with $14.60 million remaining available under the ATM. While management projects adequate cash for 2025 business plans, further capital will be required to fund its aggressive growth initiatives, posing a risk of substantial dilution to existing shareholders.

Beyond liquidity, SCWO faces several risks. The market for its products is still developing, and the commercial viability of treating hazardous wastes at scale remains unproven. Product defects, management's ability to execute its ambitious strategies, and reliance on government contracts and third-party suppliers are also significant concerns. The company has identified and is remediating material weaknesses in its internal controls over financial reporting. Furthermore, SCWO has experienced stock price volatility and Nasdaq listing challenges related to its minimum bid price, though it has secured a 180-day extension until January 12, 2026, and is exploring options like a reverse stock split. Management acknowledges these concerns, attributing stock price issues to shareholder exits, short selling, and Nasdaq eligibility, and is actively working to mitigate these factors.

Conclusion

374Water stands at the vanguard of environmental technology, offering a truly differentiated solution to a pressing global problem. Its proprietary AirSCWO system, with its proven ability to destroy complex organic wastes and PFAS to non-detect levels without creating harmful byproducts, positions the company as a critical player in the evolving waste management industry. The strategic pivot to a service-oriented model, coupled with a robust pipeline and strong regulatory tailwinds, suggests a compelling growth trajectory.

While significant capital requirements and the inherent risks of scaling a disruptive technology warrant careful consideration, SCWO's recent operational achievements and aggressive commercialization efforts indicate a company actively converting its innovative potential into tangible revenue. For discerning investors with a long-term horizon, 374Water represents an opportunity to invest in a company poised to revolutionize waste destruction, driving both environmental impact and substantial shareholder value as it scales towards its ambitious five-year revenue targets.