Q3 2025 Company Update Presentation Transcript

Just hot off the press

last night—or yesterday—they finished another trial, which is the first trial in the eastern region of Saudi.

Here, we're doing a landscaping pilot and applied the first LNC treatment to initiate a project for Saudi Aramco, which is obviously a large governmental actor in Saudi Arabia. Overall, we see STC continuing to build a reputation as a technology and research leader, supporting Saudi Vision 2030, which is driving many greening initiatives across the kingdom.

So, that's the update from the Middle East. I’ll now hand over to our CFO, Leonard Chaparian, for the financial updates.

Thank you.

Thank you, Jan, and good morning to all of you.

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The figures are shared in detail in the financial report published earlier this morning. These key financial figures will be covered in more detail in the following slides. In Q3, Desert Control continued to make operational progress while maintaining tight cost control, and preparations for upcoming commercial deliveries advanced in both the US and the Middle East.

Total revenues remained limited, reflecting the early-stage nature of the market adoption and the time-based recognition of income under performance-linked contracts. Operating expenses increased compared to last quarter, mainly due to expanded US operations and ramp-up activities, while depreciation decreased, as certain legacy assets were fully written off. At the end of Q3, cash and financial assets stood at 8 million, prior to receiving the proceeds from the 75 million rights issue in early October.

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Revenue from sales in Q3 comes from licensing royalties. For further details, please refer to note two. Revenue remained modest, reflecting the US PACE contract structure, where income is recognized only after verified water savings.

The company expects revenue realization to begin in the fourth quarter, as customer validation milestones are achieved, and invoices commence under the PACE framework. Operating expenses increased; the increase primarily reflects higher field activity in the US, production scaling to support upcoming commercial deliveries, and continued investment in organizational capacity to enable future growth. The period also included approximately 2.5 million kroner in one-off restructuring costs, with limited remaining effects expected in the fourth quarter of 2025.

Excluding these temporary items, the underlying cost base remained broadly stable compared with prior periods, reflecting continued cost discipline.

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Total equity improved slightly year over year, supported by the fully subscribed 75 million kroner rights issue completed before quarter end, with cash received in October. Cash decreased during the quarter due to continued investment in product development, commercialization, and organizational growth, while the rights issue proceeds received after quarter end have significantly improved liquidity.

The proceeds strengthen the company's capital base and will fund operations well into the second half of 2026.

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Operating cash flow now reflects only continued operations, adjusted for depreciation and amortization, highlighting the group's disciplined, cash-focused approach in Q3 2025. Desert Control received 2.3 million in scatter fund grant funding from approved

R&D activities, up from 1.5 million in the same period last year.

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We have recently engaged consultants from EuroNEXT to collect information about our nominees. As required under the EU

Shareholder Rights Directive, we have already published an updated shareholder list that you can download on our web page. For more information, it will be available at desertcontrol.com/investors.

So, back to you, James, if you want to comment on this. Thanks, Leo.

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Yes, we wanted to bring this to all shareholders’ attention.

We had received requests from a couple of shareholders to look behind the nominee accounts, and we worked with EuroNEXT to discover more than 95 percent of the nominee shareholdings. I think the most interesting piece that comes out, if you look at the table, is that we have another large individual shareholder and a few other meaningful shareholders, and they are from the Middle

East or that part of the world.

I find it gratifying, with the Middle East being an important territory for us, to see that we're getting shareholder support in those markets. I think this is a sign of penetration, at least from a share-of-mind perspective, that we see there.

As Leo pointed out, this information is available on the website, but I was gratified to see the support coming from the Middle

East.

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I used these slides in the last quarterly report, and they're exactly the same.

I see the world developing as I did three months ago. I think the company is in a very high-potential place at this time. We have a lot of incoming inquiry.

We have new team members driving us forward. I think the wind remains at our back with regard to the benefits of water saving and soil health that we bring to the party. And, you know, we are still a very small company, as you're all aware, but I continue to be more worried at this point in time about our ability to make enough LNC to meet the demand than I do about the demand for

LNC.

So all of these things remain. Have we see the world?

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I used this slide last quarter also, and I note changes in my expectations with regard to the important milestones in the coming year and a half. Obviously, we're three months into it, and we are in fact seeing better execution in California.

I will answer this question during the Q&A because it has come in, and not surprisingly. We are in the final stages, I hope, of getting a contract negotiated with our contract manufacturer for new units. We are seeing interest at the golf course level and in the agricultural area. I really do believe, after a nice trip down there, that the guys in the Middle East are on the cusp of something big. I know we've felt that for a while, but it's palpable how much progress they're making in laying the groundwork, and I do believe that the use cases for LNC will continue to expand.

One of the things that is very important—and I hate to keep saying it—is focus, focus, focus. We are trying to build the science cases here in a very measured and thorough way, but I expect that we'll be finding new benefits from this product for years to come.

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So, you know, I could have concluded on the other page, but let me just say that six months into this, I am more convinced than ever that LNC will be an important part of the soil health armamentarium for growers who have very sandy soils. We are working hard every day to make that true.

We are working hard every day to do justice to the product by being able to make it in quantity and quality, to apply it in quantity and quality, and to meet customer demands—both for water savings and for nutrient use, and ultimately for yield, which, as I've said before, is important to everybody. Water is important to many of our customers that have high-cost water, for instance,

Woodland Hills. I’m very encouraged by what we see at Woodland Hills, and I think that will be a meaningful breakthrough for the company. I’m also encouraged by what I hear from the people we’re interviewing, because we are doing significant amounts of hiring, and people’s passion for this project internally is great.

It brings us to work every day, but it’s nice to see some of that passion reflected also in applicants. So, with that, I think we’re going to go to Q&A. Oh, let me add one last thing.

We are currently evaluating the right way to communicate with shareholders, and we want to communicate with shareholders in an open and transparent way, which I think we’ve tried to bring to the table. We are evaluating whether quarterly reporting is actually the right way to do that. It is a costly burden, both in actual kroner, where we spend a fair amount of money on it, and in the time that we take to get prepared for it. We are evaluating the potential to change our reporting to make it, frankly, more relevant. For a company at this stage, our financials are of interest, but I think what’s more of interest is what we’re seeing in the field, with the customers, and with the team.

So, with that, thank you for listening to some of that being repeated to you, and Ari, over to you with questions.

Thank you, James. I will stop sharing my screen now, so I am able to read all the questions. We have received some of them, and we can start now.

Q&A session (Summarized written recap of the questions and answers from the Q&A session)

Q: For which species (market segments) in USA, where Desert Control is present, is the business good for applying LNC taken current costs and obvious benefits into consideration?

A: You know, hopefully I've covered much of that in the course of the presentation, because I tried to. I think, and you see it in the customer demand, obviously turf in California, where water costs are high and turf is thirsty, is a target market that I think we've proven at this point.

On the agricultural side, I think we have very good results in date palms, and so we can argue that that's a proven crop type now, and obviously the focus is heavily on other tree crops, beginning with almonds, but I think we'll do trials, as I said in the letter, in pistachios and hopefully avocado in coming months. And so, it's that nexus of crop type, which permit crops are a thing, sandy soils, which are present in Arizona and Southern California, and then water scarcity or water price or both. So, I think that's a core question.

Q: Why are signing of additional golf resorts as PAYS or up front payment absent/delaying? The last ones (Berkeley and

Woodland) were almost a year ago.

A: So, right, so let me try and answer that in a few different ways.

So, obviously golf is a target market for us. In golf, some golf courses have a lot of money, some golf courses don't have very much money, and all golf courses that want to talk to us have high-cost water. And so, for us, the pay-as-you-save model is, as I said before, a great risk-sharing model, one in which we will ultimately receive more payment than we would with an upfront price.

I would expect that as we expand into golf, we're going to see some of both. And from a timing standpoint, look, we've been very upfront about it. The issues that we had at Woodland Hills in July and at PGA West in July slowed down the pipeline, but there continues to be incoming interest.

And so, I'm quite optimistic about golf for the spring of next year and then for the fall of next year, because as I said before, unfortunately, the golf business tends to be very concentrated in spring and fall.

Q: How close are you to concluding the agreement with PGA West, and does the discussion concern one course initially or a contract covering all 12 courses they own?

A: Right. So, let's talk about PGA West. I think we've talked about it before, but PGA West is a group of many courses out in Palm

Springs, Palm Desert, Palm whatever you want, all along the Coachella Valley. The work we've been doing, we're doing with PGA

West, is very much focused more on the research—is too weak a word—on the water savings in the future is probably a better thing.

At the current time, PGA West has an attractively priced water situation. They are very aware and that can change pretty substantially. I think this group is largely aware of something called the law of the river.

We've spoken to that before, which governs how water in the western part of the United States is distributed. It was put in place in 1926 and expires in 2026. And if you're in the American West and you use a lot of water, which PGA West does, you are concerned about your water use.

And so, our work with PGA West was very much on the insurance, if you will, side of that. PGA West is a very research-driven place. They have great superintendents and heads of agronomy.

And so, I expect that we'll be back at PGA West with our next trial sometime in the spring of next year. But we are certainly not on the cusp of signing a golf course or 10 golf course contract with PGA West. When and if PGA West finds itself in need of LNC, I would expect it would be pretty typical that we do a course or maybe two and they'd see how it goes.

So, I'd hate to take any hopes out of the PGA West story, but PGA West is an important customer, a big reference site, very good guys, Nick and Jeremy. But it's not a nine-course deal for next year.

Q: Citybank account owns approximately 10% of the company. Who is behind?

A: Okay, I think we answered that earlier with the nominee disclosure. Go ahead.

Q: When will the new units be ready for use, and is there an immediate need for them given that the prototype appears to be performing well?

A: Okay, great question and one obviously that Jan and I think about every day.

And, you know, it's been slow, right? And I think we've said it's been slow. But I do believe that, you know, we're in the final stages of a contract with the contract manufacturer and, you know, I think that'll get signed this month. And if it wasn't for Christmas next month, I'd say I think we're going to get a unit next month.

But I think it's probably safer to say we'll get it sometime early next year. As far as needing it goes, really great question. You know, the answer is we need it.

And the prototype is performing well and we will use the prototype to do the larger of the almond trials. But with the advance into California, the geography is big just to be perfectly straightforward, right? It's a 10-hour drive from Yuma to the vineyards we're going to be treating in a couple of weeks. And so we need more equipment both for geographical dispersion and because we're getting enough interest where even if the jobs aren't big, we can't be in two places at the same time.

So that's the status of the manufacturing unit.

Q: What specific role will Siemens play in the rollout of the units?

A: So Siemens, the partnership with Siemens has been great. As I mentioned during my presentation, I was with them at Climate

Week in New York.

The team here in Norway is very close to them. But I do want to at least—I’ve heard some people speculating that we're going to have Siemens build the entire unit and maybe take over global manufacturing. And I don't think that will be the case.

We are pursuing contract manufacturers in local geographies. And the control systems will be Siemens. But the actual pipe bending and things will take place closer to the customers.

So I just—I mean, Siemens is great. We're using their technology. I don't think they're going to be building our machines.

Q: Will Desert Control at some point, to ensure smooth global roll out and satisfied partners, outsource everything regarding unit production, maintenance and logistics to a dedicated partner?

A: I don't think so. We're a technology company and we're still an emerging technology company. And we're going to roll this out across a lot of different crop types and a lot of different soil types in a lot of different places.

And that's what we do. It's a core part of who we are and what we do. So, no, I don't see us having kind of a global execution partner where all we do is sales and marketing.

The application is too important, as we found out, both to our success and failure.

Q: The NOK 15 million revenue guidance from the Middle East seems partly outside your control — how confident are you in achieving this?

A: So, it's totally outside of our control. That's to be perfectly honest. I mean, we have partners in the Middle East who are completely in charge of their territories.

So, how good do I feel about it? Look, I was just down there with Jan. Jan and I talk about this. Lars has spent a bunch of time with these guys.

He was just with our Saudi Desert Control partner's head office in Geneva a couple of weeks ago. We think they're on the cusp of big things. And they do have production equipment of their own.

But we think the productivity of the new unit versus the units they have today, our old units that we used before we built the new prototype, is such that they will need new units in order to deliver the kinds of, you know, quantities of LNC that they're talking about needing. So, I can't tell you that it's contracted. But I feel pretty good about it.

Both the machine sales and the royalties. But they got to catch a big account. Because until they catch a big account, they can use their own equipment to do it.

Q: Where will the NOK 15 million in LNC revenues from the U.S. come from, given that only two golf courses are currently included in your guidance?

A: Right. So, I think that the revenue stream from the U.S. will be heavily turf. At least through the summer of next year.

And potentially through the course of the whole year. But the good news is, you know, a golf course is a valuable thing. So, if I was to say to you, do I think two-thirds of the revenue will be golf and one-third will be agriculture, that's probably a pretty good bet.

But this is a very small revenue target and it's a very lumpy business. So, if you think that a single golf course, you know, is 4 million

NOC, you know, it's not a big number.

Q: When do you expect the MOU with Syngenta to be concluded, and are you in discussions with other potential industrial partners?

A: So, Syngenta, I think we'll have news in coming months on Syngenta. Syngenta, as you know, we did an application of the product for them at their Colorado research farm. And harvests are being completed, but data is not yet in.

And so, I think we'll have an update for on Syngenta later in time. As far as other partners, we get approached by potential partners a lot. To be perfectly straightforward, we turn most of those partners down because there tend to be regional partners or not the right fit for us.

And as far as people like Syngenta, we remain interested in dialogue, but I don't have any new partnerships to announce.

Q: When will the UN conclude its pilot project, and what are the next steps once the results are available?

A: I guess I'll take that, Jan. So, look, the World Food Program is something we really want to be involved with.

And I know they're frustrated, we're frustrated, everybody's a little frustrated about how long this is taking. But World Food is important to us. We continue to work with both their office in Iraq and other offices to try and get this thing executed.

And, you know, we literally have the will to do it, but we're up against some significant bureaucracy in Iraq and we're working our way around it. But I personally and the whole company really want to see this project go and other World Food Program projects go because it's a great application for the technology.

Q: We see postings on social media this week on Green Yiyat, 70.5 million trees will be planted and another Green Yiyat project management, especially at Saudi Desert Control, saying that my visit marks the final stage of developing of LNC product.

Can you enlighten us a bit of regarding of the process and the potential of the LNC in this project?

A: I'm not entirely sure what post is referred to here, but, you know, Green Yiyat is one of the large projects related to the Yiyat

City. They're under the Royal Commission of Yiyat City.

And we mentioned last quarter, there are some other projects in the Kingdom, which are being revisited in terms of timelines and budgets and such. But the large projects in Yiyat City themselves are moving ahead. So Green Yiyat, Sports Boulevard, King Salmon

Park, all very interested for us, good partnerships or good fit technically for liquid natural clay.

And both our partners have activities related to these entities. We're not in a position where we can, you know, comment specifically on what they're doing so far, as we mentioned in our update, you know, our partner SDC is very much positioning themselves both in terms of technology and research for this kind of governmental projects, right? So, yes, of course, if there is something significant commercially, we will come back to that. It is a very good fit for us.

And it's a natural thing for us to pursue. And we do have some activities, but we can't go into the details of exactly what they are yet. Thank you, Jan.

Q: In approximately percentage, what level of water savings is Woodland Hills experiencing?

A: So, I think that the way I can answer that is, you know, we have over time suggested that LNC could say between 20 and 30 percent of the water needs in turf applications.

And I would say what we see is in line with our previous thoughts. Thank you, James.

Q: How do you plan to grade shareholder value from the proceeds of this race, considering that the previous findings have led to value erosion rather than appreciation?

A: So, you know, the only way I can answer that question, I think, is that, you know, the proof is in the pudding.

And we are going to be out pushing LNC forward. And we see increasing appetite and we see increasing opportunity in permanent crops and turf in particular. And, you know, that's what we get up every day to do, is to get more LNC in the ground, to have more customers like it, to have more people, you know, pay us for the product.

And that is at the end of the day, we're trying to build value. And we'll do that and have been doing that through the recruitment of team members. And again, what we see is when we have the resources to talk to customers and the equipment to deliver the product, there is interest in having a product.

So, those are the milestones we set for ourselves. I think on the slide we presented them. That's how I measure value creation.

Thank you. That was the last question. And I will just share my screen to say thank you for joining our Q3 report and financial results presentations 2025.

Yep. Thank you, everybody, for listening. Thank you for your support.

Hopefully, the call has provided a sense of our optimism and, frankly, you know, what's really going on in the business. And, as I say, the passion of our shareholder group is awesome. And we look forward to reporting progress in the future.

We're working on that in the right kind of ways. But thank you. And I send along my thanks for the end of the year also.

Her best wishes for the end of year, as Lars did. Bye-bye. Bye-bye.