Desert Control AS

Welcome to the Desert Control Q3 2025 company update webcast. Today's presentation will review our Q3 2025 report and financial results for the fiscal period ending September 30, 2025. We will also share selected updates from Q4 2025 to date. Following the presentation, there will be a Q&A session. We have received many questions today, but of course, you're encouraged to submit questions anytime using the Q&A function. And to begin, Lars Eichmar, Chair of the Board, will share some opening remarks. And after that, our CEO, James Thomas, will present the Q3 update.

Thank you, Ari. Good morning. Dear shareholders and supporters of Desert Control, I hope that you all are doing well and enjoying the autumn season. My name is Lars Eismark and I'm the chairman of Desert Control and I want to welcome you to this Q325 webcast. Q325 was a very eventful quarter. First of all, we closed a rights issue that has given us capital to pursue our ambitions and strategy. Thank you to all of you who supported the process with positive support and remarks and to those of you who chose to invest. will do our outmost to live up to your expectations and belief in us. On the same note, the continued strengthening of our balance sheet is an ongoing effort, and the management and the board see this task as a natural part of our daily subordination. The board and management has had organizational build and efficiency on the agenda for some time. Hence, we took the decision to move our R&D in Norway to the US. This comes on the back of an acknowledgement that having R&D in different locations was not optimal. Shipments of tests, soil samples, etc. was increasingly complicated, and the fact that we need proximity to our test facilities, to our customers and our partners, made the decision necessary. This means goodbye to loyal and valued employees in Norway, and I want to send my gratitude to them for the efforts in taking desert control to where we are today. At the same time, we're also saying welcome to new employees in the US. We've earlier informed you of our need to execute swiftly on our strategy in the US and we have several ongoing hiring processes. This is primarily within our sales force, the operations team and in R&D. We're helped by professional search firms and we're excited to announce results in Q1 and Q2 26. The same goes for two additional board members. I've made it very clear that the new board members must be rooted in the southwest of U.S., and they must have a track record within agriculture and architecture. We have currently positive dialogues, and I hope to announce the outcome of these in Q1 2026. As you might recall, we underlined the importance of being structured in our go-to-market priorities and hence being compliant with our strategy. Permanent crops is an instrumental segment for us and I'm so proud that we've secured exciting pilots in the very attractive segments Almond and Wine. The pilots are leading growers in their segments and needless to say, important for our success in showing the way for their colleagues. Q3 has also given me the opportunity to interact with our licensed partners, Saudi Desert Control and so on. I'm so happy to see their commitment and their investments giving positive results in an environment where you have to be very, very patient and where solid personal relationships are crucial for success. Well done and good luck with the exciting opportunities that you have in front of you. On an ending note, The right issue and the organizational changes has taken a lot of attention and massive resources from the management team. It's important that we now get back to normal life and concentrate our efforts on generating a solid pipeline, onboarding new colleagues successfully, and staying close to our customers and partners. Before I hand it over to our CEO, James Thomas, I want to wish you and your families a wonderful autumn and winter season. Thank you. James, over to you.

Thank you, Lars. And let me add my note of thanks to our shareholders in every day and in the Reichen's issue. It is, as I said in my letter, fantastic to have a group of shareholders who's so passionate about our mission and our company. And having said that, we actually have some new investors on the call. So to those of you who know the company so well, I apologize, but I'm going to need to run through some of the basics of the company, and I'll try and do that in some degree of haste but provide the right overview. So as I think most of you obviously know on the call, Desert Control is a technology company in the soil health business, and our target markets are agriculture, trees and forests, and golf and landscaping. And the company is now really in its early stages of commercial launch in all of those sectors. And it's an exciting time to be part of the journey with Desert Control. And so, all right, if I can get the next slide. Also, just really as a reminder, you know, the product is delivered on-site and made fresh in a manufacturing facility we essentially bring on-site. And several of you have put in questions on the status of manufacturing, and we will address those through the course of the conversation. But we are in the science business, and we are increasingly in the science business. And, you know, we believe this company has a fundamental role in soil science and is the leader, for sure, in our own technology. All right. We've covered this a lot. One of the things that Lars and I have been very focused on is focus. And so despite the applicability of this technology in many, many parts of the world, we are intensely focused at this time in the U.S. Southwest and with our partners in the Middle East. These markets are very large on their own, and the company needs to execute against the near-term opportunities in each. Next slide. Again, this is a slide you've all seen before, or at least most of you have seen before. We are direct in the United States. We are distributor-based in the Middle East. Lars has touched on that, and Jan will touch on that later. And we do offer the product in two ways. pay-on-delivery and the pay-as-you-save model, which we've executed in the Gulf area and one that I am a big fan of. And our revenues from the Middle East come from licensing and hardware sales. I apologize. Go ahead. Next slide. All right. Sometimes I get questions from investors about why not Spain? Why not Australia? Why not? Why not? And Jan and I get 10 emails a week from somebody who wants to bring LNC to their home market. And the answer to all of them is, we will get to you. But right now, we are positioned in two of the three largest markets. And so we have plenty of opportunity in our core markets. And that is where we'll remain our focus in the near term. So I'm sorry to all those people who really want us to bring the technology somewhere else, but we have our hands full capturing our own opportunities this time. All right, next slide. And I think, you know, we've covered this, but it's important to kind of come back to it, especially given the recent activity that we're seeing in the pilots. So permanent crops are truly our focus. Trees is where we've had a lot of success. We are seeing success in early trials in vineyards. We will be doing more of that in the near term. And on the far right-hand slide, we haven't given up on the high-value parts. of field crops. We continue to try and fight the right application and the right academic groups to work with. But as I think we've all said before, much as there's a lot of acreage in alfalfa and corn and cotton, those are not target markets for us at this time. If the product is not being applied in what's truly a high-value situation, we're not doing that at this time. Next slide, Eric. So I think we've touched on this, and we have news, I think, on almost all of these places during this quarter. So the major turf segments, obviously, parks, and you'll hear from Jan, I think, about some work being done in parks. During the quarter, we did additional work with Cal State Fullerton in their fields and expect to do more work with them in coming times, and golf has obviously been our major focus in the turf segment. Go ahead, Ari. So, you know, this slide is, again, something many of you have seen before. Our product is very well proven in 80% sandy soils and higher. That is our today, our core customer. And while that may seem in some ways to limit the technology, which we believe over time will be applicable in soils with lower sand fractions, I just would like to remind all investors that the California market in highly sandy soils is a $500 million market by itself. So we don't, at least I don't feel, and I don't think the company feels at all constrained by pursuing our highest value opportunities today because they, of their own right, are very, very large. Obviously, as we can move down the sand fraction towards 60, the market expands dramatically, and there is ongoing scientific work there, and we'll keep you posted on how we move it. But in the short run, there's more than enough business in the 80% sand and higher level. Next slide. You've seen this slide before, many of you, and, you know, it's meant to point out kind of the obvious. California is a big market, and we are investing additional resources there. Most of the hiring we're doing is in the California markets, and the pilots that we're doing this week and the pilots we have scheduled are In coming weeks are all in California. We are not giving up on Arizona. Arizona is a good market for this technology, but the California market is just so much larger. And the emphasis on water savings, water subsidies, and the price of water are all stronger in California than they are in Arizona at this time. Although there are some interesting things happening in Arizona around government grants and other things, opportunities to subsidize the technology. So we may actually see Arizona start to perk up, but for the moment I want to talk about California. Go ahead, Ari. And equally, you know, the other market I want to talk about or at least make people aware of where we are not yet active because it's 3,000 miles from where we are active and we are very focused is the Florida market at some point will be very large for this technology. Go ahead, Ari. Okay, so let's get into the company update, and this is the first slide. So we called out, I think, almost all of these in the letter that we wrote and the report we've just published, but I do want to touch on some of the more significant ones that are of interest to shareholders based on all the questions. So last quarter we had to talk about kind of where Woodland Hills was after we'd had our problems. with some damage to the irrigation system. And I think it's really good news there. I think a couple of things that we've tried to make clear to the market. The customer is very happy, and the customer is happy with the way we handled the issues that were created, and those issues are behind us. And the customer is really happy with how the golf course looks. and the customer is really happy with their water savings. We are seeing significant water savings in August and September in particular, two of the hottest months in the L.A. market, and the product is performing as hoped. I was going to say as expected, but it's performing better than is expected, and we will be issuing our first invoices to that customer in coming weeks. So Woodland Hills is in good shape, everybody's happy, and the technology is working well. Wood Ranch continues to be very happy with the pilot we've done with them. They look at both the soil sensor data and some drone data, and they're quite happy, and we're in the process of trying to figure out when to do a full application there. We've got a contract out to them. We mentioned in the letter, the almonds, you know, this is – I think a testament to the demand for the product, frankly. You know, we've talked about adding people to the company, and we've added agricultural sales in the Salinas Valley. And Cord Nunes started three weeks ago, and we already have three pilots. And we already have three pilots in almonds. And almonds is a $200 million free market. As I say in the letter, we're not going to get 200 million trees out of it. But I think the rapidity with which we were able to get these pilots shows the interest in our technology from some of the large California crop growers. And almonds is the biggest, but pistachios, avocados, obviously we've seen success in dates in Arizona. So I expect to see a lot more activity in the California area.