Earnings call transcript: Desert Control Q2 2025 sees revenue miss, stock down

Desert Control AS (market cap: $25.78M) reported its financial results for Q2 2025, revealing a significant revenue shortfall compared to forecasts, which led to a sharp decline in its stock price. The company posted actual revenue of $128,000 against a forecast of $4 million, resulting in a 96.8% revenue miss. This discrepancy contributed to an 11.89% drop in its stock price, closing at $4.88, near its 52-week low of $4.21. According to InvestingPro analysis, the stock appears undervalued at current levels, presenting a potential opportunity for value investors. Get access to 12 additional ProTips and comprehensive valuation metrics with InvestingPro.

Key Takeaways

• Desert Control’s Q2 revenue fell significantly short of expectations.
• The company maintains a positive cash balance and no interest-bearing debt.
• Stock price dropped nearly 12% following the earnings announcement.
• Focus remains on expanding in key markets like California and Arizona.

Company Performance

Desert Control experienced a challenging second quarter in 2025, with revenues declining compared to the same period in 2024. Despite the revenue shortfall, the company maintains a robust financial position with a positive cash balance of $25 million and no interest-bearing debt, reflected in its strong current ratio of 7.69. However, InvestingPro data indicates the company is quickly burning through cash, which investors should monitor closely. Desert Control continues to focus on its Liquid NanoClay technology, targeting applications in agriculture and landscaping, particularly in sandy soil markets.

Financial Highlights

• Revenue: $128,000 (significant decrease from forecast)
• Positive cash balance: $25 million
• Equity: €43.7 million, representing 89.4% of total assets

Earnings vs. Forecast

Desert Control’s revenue for Q2 2025 was $128,000, significantly missing the forecast of $4 million by 96.8%. This substantial shortfall marks a challenging quarter compared to previous periods, where the company had shown more stable performance.

Market Reaction

Following the earnings announcement, Desert Control’s stock price fell by 11.89%, closing at $4.88. This decline reflects investor disappointment in the company’s performance, placing the stock near its 52-week low of $4.21. With a beta of 1.18, the stock shows moderate volatility compared to the broader market. The market’s response underscores concerns about the company’s ability to meet revenue targets. Discover more detailed stock analysis and Fair Value estimates with a InvestingPro subscription, including access to comprehensive Pro Research Reports covering 1,400+ stocks.

Outlook & Guidance

Looking ahead, Desert Control projects revenue exceeding $3 million for 2026, with 60% expected from its U.S. operations. Analysts are optimistic, forecasting revenue growth of 367.78% for the current year. The company is focusing on expanding its presence in California and Arizona, aiming for full golf course applications and potential government contracts in the Middle East.

Executive Commentary

CEO James Thomas emphasized the company’s scientific and technological foundation, stating, "We are a science and technology company." He also highlighted the importance of water conservation, noting, "No one can produce more water." These comments reflect Desert Control’s commitment to innovation and sustainability.

Risks and Challenges

• Revenue shortfall raises concerns about future financial performance.
• Operational challenges in key markets like California and Arizona.
• Potential market saturation and competition in target regions.
• Macroeconomic pressures that could impact expansion plans.

Q&A

During the earnings call, analysts questioned Desert Control’s strategies to overcome operational challenges and improve revenue performance. The company addressed shareholder concerns about the declining share price and discussed ongoing evaluations of funding alternatives to support its growth initiatives.

Full transcript - Desert Control AS (DSRT) Q2 2025:

Webcast Moderator, Desert Control: Welcome to the Dantesco Q2 twenty twenty five company update webcast. Today’s presentation will review our Q2 twenty twenty five report and interim financial results for the fiscal period ending 06/30/2025. We will also share selected updates from Q3 twenty twenty five today. Following the presentation, there will be a q and a session. We are encouraged to submit your questions, with the q and a function.

And to begin, Lars, chair of the board, will share opening remarks. And after, our CFO our CEO, James Thomas, will present. Thank you.

Lars Aisbach, Chairman of the Board, Desert Control: Thank you very much, and before going in there, I can see that you have to turn the camera on for me. So while you’re doing that so, dear shareholders, first of all, I hope that you have had a nice summer holiday having spent time with family and friends and now have returned, reenergized. So, second quarter and the start of the summer season has been very eventful for Desert Control. We faced, as you know, challenges three and a half weeks after our application of four and a half million liters of material at Woodland Hills, where a smaller number of sprinklers were clothed with material. Our analysis points in the direction of human error during the application process, and this has now been mitigated, and we have learned a valuable lesson.

Thank you, to Woodland Hills staff for being a good partner in problem solving and cocreating process excellence in these matters. And the same kudos goes to PGA West for being an understanding and supportive partner in the efforts of handling a challenging infrastructure and operational challenge during the application. These two projects are lessons that remind us of the stage of maturity that Desert Control is in and what it takes to achieve operational excellence. All hands are on deck to get these lessons into our standing operating procedure setup. Second quarter was also a quarter full of interesting applications into new segments and even more interesting pilots and research projects with our partners.

I’m personally excited about these steps, and I’m indeed fascinated about the prospects that the positive results will mean in terms of increasing addressable markets for Desert Control. James will touch upon some of these examples during today’s webcast. The board has been, beyond the normal board meetings, very active during the second quarter, and I want to thank my board colleagues for being for their sincere interest, engagement, and professional attitude. A special thank you goes to Orr, who’s been for his efforts during the past year. Orr will not continue on the board due to other commitments, and the board will use the upcoming period to expand the board with a new board member.

It would be natural for us to have a new board member whose experience and expertise mirror our strategy in landscaping and agriculture, and especially with the personal footprint in The US markets that we are interested. Lastly, the board is actively evaluating funding alternatives and strategic partnerships to secure additional resources as needed. This may include potential equity financing grounds and cost optimization measures to extend the financial runway and enable execution of the long term growth plan. In conjunction with these evaluations, the board may also assess other strategic alternatives to enhance shareholder value. And with this introduction, I’ll hand over the word to James Thomas, our CEO.

James Thomas, CEO, Desert Control: Thank you, Lars. And good morning, good afternoon, and good evening to shareholders depending on which time zones you’re in. We appreciate your investment in Desert Control and your interest in attending these meetings. And my objectives in this meeting are a few fold. One is just to make sure that people understand where we are from a technology standpoint and a market standpoint.

I wanna address some of the operational issues that we faced. I wanna assure you that the technology is still robust and valid, and customers are engaging with us across all our segments. I do wanna try and further refine the market opportunity for the company today. I think one of the things that’s happened in the history of Desert Control because it is quite an amazing technology and has such broad applications is we’ve maybe spent too much time on how big the global market opportunity is and not communicated effectively how big the local opportunity where we currently operate is. And I wanna make sure that we have a chance to have comments from my colleagues, Marty Weems and Jan Vader, who are on the call today and will be available in the q and a section also along with Leo Shaparian, our CFO, who will cover the financial details.

So with that, I think we’ll try and get right into the presentation to leave plenty of time for questions. But for those of you relatively new to the story, we are a soil health, soil amendment company, and we do that by adding minerals to soil, sandy soils, and we do that mineral delivery through clay. And our core segments continue to be agriculture, trees, and golf and landscaping. And the opportunities, in some ways may mirror those. Agriculture is the biggest opportunity, but also the longest, term opportunity.

Trees and forests are an opportunity today and in various geographies are very large, and the golf and landscaping and turf business is a place we have already shown commercial results. So, that’s us. Ari, if you take us to the next slide. Many of you have seen this slide before, and I don’t intend really to go into deep detail here other than to actually try and address some of these questions early about the operational challenges that we experienced and that we’ll get into in greater detail later. But this product, as you know, is a scientifically based product where we have to blend the right soils, the right plant types, the right water at the customer, and the right clay to get the optimal results.

And so first and foremost, we strongly believe we are able to do that. This is part of the magic of Desert Control, part of the intellectual property of Desert Control. This is not one size fits all, and we have a good handle on what the important variables are and continue to believe we do have those things. Secondarily, as you all know, we make this product fresh at the customer site. This is actually a picture of the prior or the current in The Middle East production unit, but we make this product fresh.

And this is also part of our technology intellectual property piece. And I wanna assure people that our belief is we do not have a problem in any way with our production methodologies, with the core technology, or with, our ability to produce LNC in high volume. The third thing that we do in our commercial applications is we use customer irrigation systems. And customer irrigation systems, by their very nature, for big customers, are big, and they produce a lot of flow, and they do that using high pressure and big pipes. And we, to be successful in an installation, need to blend the product coming off our equipment successfully into the customer’s irrigation system.

And these irrigation systems vary from 60 year old pipes in the ground behind 40 year old high pressure pumps flowing to one week old sprinkler heads to brand new drip tape being installed in a field that is being first cultivated. And we have to adapt to each one of those environments, and, we do that successfully many, many times. We didn’t do that successfully at PJ West or at Woodland Hills, and we’ll get into kind of the specifics of that blending. But here, I wanna leave you with the message that we believe in LNC and have seen nothing to tell us that LNC is not the valuable product we believe it to be. We believe in our production methodology and the technology we bring to bear there.

Needs to be optimized, but we’ve seen nothing that makes us question our production, you know, technology core. And we have successfully used irrigation systems in many places, but this is the sharp end of the spear. If we don’t do this well, it doesn’t matter that LNC will work and that we’ve made it well. We have to get it out in the ground effectively through customer irrigation. So, we’ll talk a little bit more about that, but I do wanna highlight the fact that the company is fundamentally the same company it was five months ago with the same upside, the same technological, innovation, and the same challenges that we face.

And so let me leave it there for the moment. Next slide, please. So I think you guys have seen this all slide before. You know, this is a big global opportunity, and we are focused, in the American Southwest and in The Middle East through distributor partners. We do plan to get to all of these other markets, but for this stage of the company, at this market capitalization, we’re plenty, active and have plenty on our plates in The Middle East and in The US, particularly, frankly, in The US.

Alright. Can I get the next slide? And, you know, a little further drill down, mostly as a reminder, in The US, we are focused on California and Arizona. We will do work in Nevada. We will do some work in New Mexico, etcetera.

But our real interest at the moment is California and Arizona. We do that directly on the account of Desert Control, and we offer that product in two different ways. An upfront purchase, which we have seen at Oasis State and others, and a pay as you save model where we share risk with the customer of our technology saving them sufficient water, which is the only variable at the moment. But, hopefully, ultimately, it will be all inputs and us sharing in the savings in those inputs. In The Middle East, we do have our activities conducted currently in The UAE through an exclusive distributor and in Saudi Arabia through two nonexclusive distributors, And we are going to expand our presence in The Middle East as the technology matures and those markets mature.

But that just lays the table. And I wanna get a little more granular with the next slide. So even though we’re restricted to quote two markets at the moment, these are two of the three largest markets for our technology, based on the analysis of third parties and ourselves. And I think that’s important as you think about our opportunity set and where this company can grow from here. We are already active in two of the three major markets.

We’re not ignoring the other markets, but we have positions where it most matters. A little more granularity. Ari, if you give me the next slide. As we talk about our opportunity, I think it’s important also to define what we mean by agriculture and what we’ll mean by landscaping, because we use those terms, and they’re actually somewhat specific. So our focus in agriculture is in permanent crops, by which we mean trees largely, trees of the lemon variety, of the date palm variety, of the avocado variety, of the almond variety, etcetera, And fruit, orchards predominantly against citrus, but other fruit trees also, are being grown in soils that are receptive to our technology.

We mean vineyards, again, a permanent crop. And, this is an area we’ve done some pilots and we’ll continue to focus on. And in the field crop, which is the biggest series by acres by far in The United States and in Saudi Arabia and everywhere. This is where we’re grow people are growing a lot of fundamental feedstocks. We are really only interested in the high value part of that market, which are the vegetables that we see in Yuma, Arizona and other places and berries.

We are not at this time pursuing corn, alfalfa, cotton peas. We’ve done a trial in corn. We’ll continue to work with collaborators in these places, but they are not a commercial focus. Next slide, please, Ari. When we talk about turf, in some ways, turf is also a permanent crop.

Right? It’s just a permanent crop of a particular variety, mostly grass. And we are focused on parks, playing fields, and golf courses. And if you’re wondering why this golf course slide looks a little ratty, because it does look a little ratty, we it’s it’s a customer. Right?

This is a guy who has a problem with sandy soils and water. So, you know, the Augusta National Course where they play the masters, they’re not a customer. But this guy is a customer, and that’s what we care about as customers. So, if I can get the next slide, please. I wanna touch again on this market piece, and I know I’m spending a lot of time on it, but it’s how we think about the business, and so I’m trying to share that with you.

As you know, the product is designed to work in sandy soils, and sandy soils are classified in two broad buckets. Obviously, it’s a continuum from 1%, I guess, going to backwards, 99% sand, 98% sand, etcetera, but they’re classified in two buckets, kind of the 80% and above soils, which are the ones you may most think about us addressing because clearly The UAE, Saudi Arabia, and parts of Arizona and California are almost a 100% sand. And then there’s a group of sands or soils that have 60 to 80% sand. And the what this slide is attempting to show you, on the left hand side is that if we look only at the most sandy soils greater than 80% sand, the market in our target markets in agriculture. So back to the trees, the vineyards, the fruits, and the vegetables, but not the corn, and other large broad crops.

In California, it’s $500,000,000 And in Arizona, it’s another $40,000,000. And we’ll show some slides later showing you some other states. But even in our most restricted markets, we have a large market opportunity. If we can expand the technology below 80% sand, and we have done work in 70% sand, that would expand our markets in these states another tenfold. So the $500,000,000 market in California begins becomes 5,000,000,000.

I am not saying we are going to get to 60% sand. I’m saying that if we could, it would be big, and we’re below 80% sand today. And we’re doing the work in our research labs and with our field collaborators to find out how far down we can push the value of this technology. So big markets. Big markets even when we narrow them completely.

Next slide, please. And here, I wanna get into even more detail. I’m using the 80% sand or 60 to a 100% sand here, but, again, excluding broad crops. And in California, you can see that it’s a $5,000,000,000 market, a third of which is trees, a third of which is vineyards, 10% of the orchards, and the balance is high value fruits and vegetables kind of crop. In Arizona, a market that’s much more dominated by the vegetable and, fruit kind of side of the equation, that’s Yuma, Arizona.

If you’ve ever flown over Yuma, Arizona, or more importantly, maybe driven across in a pickup truck, there’s a lot of lettuce, a lot of bell peppers, a lot of stuff growing down there. And in Texas, you’ll see this market. And Texas is on this list because it is so big, not that we’re currently super active there. But, again, good tree crops and some high value dominated by high value vegetables. I talk about these states, but I wanna touch on four more.

Can you, give me the next slide? So these are other states just in The US that represent large markets for us that have soils that have these similar characteristics. Those of you who’ve been to Florida know that it’s very flat. It’s a giant sandbar. And so we find areas with a lot of sandy soil, and on that sandy soil are planted predominantly fruit crops.

And so we are not in Florida now. We’re not gonna be in Florida in December, but this is another large potential market in agriculture in The States. And, again, if you’ve been to Florida, you also know there are lot of golf courses in Florida, and we are in contact with some of the people who manage many of those golf courses. So I think I’ve spent a lot of time on this, but I think it’s really important for the market to remember that where we are is a big opportunity. Next slide.

So with that, I wanna skip to the next session, which is to bring you up to kind of more what’s going on over the last quarter or so. Next slide. And, we’re gonna have, Marty and Yan get further into this. But what I want you to know is we’ve been very active. It’s been another very active with very diverse customers.

Some of those customers are expansion of existing projects like Cal State Fullerton. Others are brand new customers. And so we continue to see progress at the research and the commercial application and partner across all of this quarter. We’re not gonna spend a lot of time on it, but we’ve also been seeing progress in the lab. And some of that progress, while pretty nascent, is pretty interesting.

And with that, I think I’m turning it over to you, Marty. Is that right?

Marty Weems, US Operations Lead, Desert Control: That’s great. Thank you, James. So here in The States, we’re we’re very excited about all the activity we’ve had in the in the recent quarters, especially here in the second quarter. We continue our focus, as discussed in previous quarterly calls, around permanent crop agriculture, golf courses, ornamental landscapes, and have some really exciting opportunities there. I’ll speak more on the next slide about Oasis State, but we’re excited to be on a path to almonds in California.

That’s a really massive permanent crop in the state of California, and we have a really good access to our membership and relationship with the Western Growers Association as their largest permanent crop contingent is in the almond category. With golf courses, we had a successful phase two with Mesa del Sol. They’re quite excited to see their progress and outputs. They took a little bit on that. We’ve previously only worked on some of their fairway spaces.

They wanted to test on a few parts of some of their greens, which typically golf courses are very shy about doing much different on their greens. It’s their most protected, most valuable piece of real estate. And they’re but Mesa del Sol is keen to expand what they were beginning to see on the fairways and look at that on the greens in preparation for consideration of full course application there. Woodland Hills, we had actually a fantastic application that at the time of application, while we’re there, we, you know, produced millions of liters of product. We that went out through the system quite well.

We didn’t seem to have any clogging while we’re there, and things went quite well. It was a great week or so of of application work. The equipment worked great. Production work production equipment worked great. We we made a good product.

It was only in the weeks later that we noticed some of their you know, a a small number or percentage of their sprinklers were not fully functioning. They were functioning, just not fully functioning. We dug into that deeper and and we’re able to find both the specific challenge with their equipment and have gotten that all rectified now, we do believe. And courses has continued to be open, very productive, and, just looks beautiful, looks amazing, and we’re beginning to see good results there in terms of some water conservation. Ornamental landscapes, this is in The US, we’ve not leaned into this as much until recently, especially places like a Tempe marketplace we’re very excited about.

If you go look at it, it looks, like it would not have that much of a water challenge. It’s a large shopping center, but they’ll spend almost half a million dollars a year in water, and we have an opportunity to help them save a significant part of that. And their water is quite expensive because they’re irrigating with potable water. So we continue to see really exciting opportunities and and new business opportunities as well. Next slide, please.

But specific to Oasis State, we’re we’re extremely excited about this relationship. They continue to be a really positive partner, and the initial focus with Oasis State was in a, on a very challenged, ranch in California that has a finite amount of water available to it. And that that particular project that was applied last year is going quite well. The the customer Oasis date, which is, to my knowledge, is the largest producer of commercial organic dates in the world. They are a a massive operator and and incredibly professional.

They see a lot of good things that that they are liking, and and at their suggestion, they wanted to do a commercial scale project that’s focused on yield so that we can work towards the prospect of of LNC being a foundational component of their farming activities program, whether water is compromised or not compromised, which most of their ranches, have plenty of water, which is why they grow date dates there. So, but they are keen to look at the the business case for broad scale, use of l and c as a foundational support for their new, nutrition programs. In order to give this, you know, as much scientific power as possible, we are actually doing, about a thousand trees, and we have five replicates and different treatment pattern treatment algorithms. So the scientific power of this output will be really robust. And we have our, University of Arizona relationship, which continues.

And not only continues, but it has expanded to include more and more researchers, you know, principal investigators from the University of Arizona community. So we’re excited that also as a part of this, we’re we’re working with some folks that we haven’t worked with in the past as well as many that we have. So this is a really exciting project. Think of this as we’re trying to take a a commercial grower who is the equivalent of a Formula one car in in date growing and trying to help them get more output from one of the most efficient, most productive date pro going date growing programs on the planet. So helping them improve yields and the the grades of their particular dates could have massive impact and and tremendous opportunity, and doing it on commercial scale with a world class commercial grower is just a fantastic opportunity for us, so we’re really quite excited about that.

So, with that, that completes, what I wanted to share from The United States for this. I’ll turn it over to Jan for The Middle East.

Jan Vader, Middle East Operations Lead, Desert Control: Thank you, Marni. I’ll touch on some of the highlights from The Middle East. As James mentioned, our partners remain active, mainly focused on the on The UAE and Saudi Arabia. Starting off here, we’ll touch on Saudi desert control. As indicated in our report, they actually achieved a big milestone this quarter, which was the first commercial project.

Having been involved in our initial business in The Middle East, you know, I know this is a big milestone coming in at less than two years after they started any activity in The kingdom. So the application was a 3.7 hectare application at a commercial turf farm. This is Atlas Turf Arabia. They’re actually the first internationally licensed golf and sports turf farm in The Middle East, and they are also a part of the Atlas Turf International, which is the largest supplier in the world of certified turf grasses. So it’s exciting because the there’s huge interest and focus on sports in the kingdom, and and I got even more boosted when they won the or got awarded the World Cup twenty thirty four.

So the sports fields is a very big focus in the kingdom and a interesting a very interesting market for us. Right? And we also have a continued activities and and new nurseries being added. So we’ve we’ve got several ongoing project within three nurseries. So combined with the turf farm and a few strategic pilots within the landscaping sector, it really positions SDC and and LNC as a product and service very well for the many urban and rural sort of large scale greening tree planting initiative that is ongoing and and starting up in the in The Kingdom.

Go to the next slide, Ari. On the UE side, we are continuing or SOIL, our partner there, is continuing to expand the footprint within the new residential communities landscaping sector. We finished off the Dubai Hills project in the quarter. This is mid the majority of that was done actually 2024. They also added a smaller project called the Greenview residential development in the Dubai South.

Both these communities, although the volumes that we put into the ground in the recent quarter wasn’t that big, both communities are managed by the Maher properties, which is the leading real estate developer in Dubai. For those of you who have visited the city, you will see their signs everywhere, including on the the Burj Dubai Burj Khalifa Tower. Additional to the focus on the real estate, the we have also done a stage two pilot within the in the golf course, this is the Trump International Golf Club in Dubai. And we are starting a new public park project for Masdar City, which is the developing sustainable development in Abu Dhabi. So we do hope to announce the focus remains very much on the landscape side.

We do hope to announce some larger residential projects in Dubai and potentially other Emirates within the next quarters. And we see, you know, the varied activities within the residential communities mixed in with sport and and public parks, you know, strongly positioning soil for the for the sustainable development and the urban green urban greening initiatives that are going on in the in The Emirates. So that’s what I had on the very quickly on The Middle East, and we are then gonna pass on to our CFO, Leo, to touch on the financial updates.

Leo Shaparian, CFO, Desert Control: Thank you, Jan, and good afternoon to all of The figures are shared in detail in the financial report published earlier this morning. We go to the next slide, Auren. These financial key figures will be covered in more detail in the following slides. In Q2 twenty twenty five, DESER Control completed a major U. S.

LNC application under a performance based PACE contract. Preparations were made to support future U. S. Market growth. Turf applications in The Middle East continued under existing licensing, though market adoption remains early stage.

Revenue decreased compared to Q2 twenty twenty four, largely reflecting the impact of the PACE contract structure, where income is recognized over time rather than at project completion. EBITDA held steady compared to the same period last year and year to date. Higher activity in The U. S. Was balanced by tight cost control and better delivery efficiency from our next generation production system.

The company closed the second quarter with a positive cash balance of $25,000,000 and has no interest bearing debt. Next slide. Revenue from sales in Q2 also included some licensing royalties. For further details, please refer to note two. Licensing activities in The Middle East were below expectations this quarter, and further time will be needed before we see meaningful pickup.

Our operating results remain stable year over year, reflecting continued discipline in managing operational cost. We have maintained a lean cost base while focusing resources on core activities to support future growth. Next slide. At the end of q two twenty twenty five, the company held NOK 25,000,000 in cash and cash equivalents and equity of EUR 43,700,000.0, representing 89.4% of total assets. With no interest bearing debt, our liquidity position is lean, yet sufficient to support operations and planned initiatives.

Last quarter, we guided for a financial runway into late Q3 twenty twenty five. Through disciplined cost management and operational focus, we now expect this to extend into Q4 twenty twenty five, maintaining stability while executing on our plans. Next slide. Operating cash flow now reflects only continued operations adjusted for depreciation and amortization, underscoring our disciplined cash centric approach. In Q2, cash flow developed in line with both expectations and recent quarters with no significant variances and no new capital inbound.

To get additional information about the Desser Control share and the top 20 shareholders, please visit our web page, dessercontrol.com/investors. And back to you, James. You’re on mute, James.

James Thomas, CEO, Desert Control: Great. Thank you, Leo. And so let’s get into the outlook as we see the next twelve to eighteen months developing. Next slide, please. So I I think it’s important that we remember where this company really is on its journey.

We’re still a relatively young company. We are a company with a technology that started, you know, in a laboratory, and we’ve moved it into commercial operations. And so I think that where we are is we’re on this inflection point. We have just completed two very large jobs, and have developed the equipment to make us capable of developing those jobs. And we continue to accumulate the customer relations, the community kind of buzz, and the scientific inputs to push the product, further and further and further into our target markets.

We are very focused on the, quote, small half a billion to $5,000,000,000 market that we currently address. We are not giving up on the other markets. But as we pursue our growth path, we have lots of runway in our own marketplaces. One of the things that I like to think about, both as an executive and as an investor is is the wind in your face or is the wind at your back? And in our technology’s case, whether, the current American president lasts or doesn’t last, the wind is at our back.

No one can produce more water. Right? No one can produce more food by executive order. And the drivers of the opportunity for desert control remain the same and, frankly, are accelerating. This is a technology that could support a much broader adoption in a much faster pace, but we are quite cognizant of the fact that we are a young company working with shareholder money.

So we’re trying to be very good stewards of your money. And as a result, we will focus our activities on what we see as the most valuable of those activities in the short run and activities which we think will provide the foundation and evidence for a broader expansion outside The US, outside The Middle East, at the appropriate time. Next slide, Ari. So what are we looking at? What are we expecting to happen, from where we sit today and are on our path towards that journey?

I’m gonna start this on the milestones. We had some hiccups this quarter. We’re not run away from those hiccups. We need to get better on our execution. I think we know what went wrong, and we’re fixing it.

And we’re committed to getting better. We need to execute better in California. Arizona has historically been our home market. But as you saw from the prior slides, California is where the bigger current opportunity is, and we need to get better there. I do think there will be a long term opportunity in Arizona, which is what took the company there originally because we are going to see significant changes in the law of the river, the 100 year old pack that allocates the Colorado River that I think will lead to changes in the price and, importantly, volume of water available to some of our potential customers in Arizona.

So this is not a we’re running away from Arizona. We think Arizona does have long term potential. It’s just that we’re gonna build out further in California where the need is obvious. You know, you’ve heard us say this before about how important the new production units are, and they are really important. The prototype has proven that we can do large jobs, and we need to have both, permanent equipment and more of it.

And I think you will see us, bring those machines to bear before the end of the year. As our press release said, we’ve had some issues in getting into final construction, but we are active with contract manufacturers. We have some quotes from contract manufacturers, and so I do expect that you will see those units. And I am very excited to get my hands on. Most of my presentation has focused on agriculture because by acreage, that is really, the biggest market, but we are active in golf, remain active in golf, and remain excited about golf.

And we have pilots, to do in golf, and I think we will continue to see more and more pilots in golf. Agriculture, I think I’ve beaten this drum pretty hard. This is the big market. Permanent agriculture is the big market for us. We have done a lot of work in agriculture, on both sides of the border, but predominantly in Arizona, and we will do a bunch more work in California over the coming twelve months.

Marty brought out that we have this trial that we plan to install in the almond, market there in California. There are 200,000,000 almond trees in California alone. They’re not all for us, but that’s a very big market, and they’re very thirsty. So we have great hopes for there. On the full golf course applications, I think that we’ll do at least two more over the course of this time.

You know that we’ve talked about Berkeley, and we have an MOU with Berkeley Country Club up near San Dia San Francisco. I still think that’s a a real opportunity. We’re in dialogue with them. As you know with golf or at least you’ve heard from all of us in golf, you know, your windows are narrow. You need to get in during the maintenance seasons.

So I would expect that, you know, you’re gonna see a lot more activity in golf in the spring and in the fall from a full course basis, but you can pilot year round. And I don’t wanna lump all of golf into kind of the Northern Hemisphere seasons. We’ve got some courses out there in Arizona, California that are just plain hot all the time. And so they have to do the maintenance when they can, and we’ve seen opportunities, to do that. I think and Jan has been with us since the beginning in The Middle East, and and, you know, we’ve been telling you about The Middle East for a long time.

I think the Middle East guys really are on the cusp of some large contracts. It’s always been the case in The Middle East that this is elephants. Right? In California, Arizona, all over The US, it’s all about midsize, small, midsize, kinda banging it out a lot of times. In The Middle East, this is about big government contracts.

And we are seeing activity both in The UAE with soil and with SDC in Saudi Arabia that says some of those big contracts are maturing. I don’t think we’re gonna do 15,000,000 trees next year in The Middle East, because that’s not how this works. We’ll get signed up for a big contract, and it will start with what are sizable deployments, but not million tree kind of deployments. But I do think we’ll see that activity, and I think that will drive conversations about production units. Because as we’ve tried to tell you in the past, the old equipment was good for doing pilots.

It’s hard to do big commercial jobs with them. The new equipment is much better, so I think we’ll have conversations with our partners in that area. And we didn’t spend much time on it in the presentation, but this is a science company. We are a science and technology company, and we remain committed to being a science and technology company. And we continue to see interesting adjacencies is one way to talk about it around LNC with the kinds of other soil health factors we can support, whether that’s nutrient use, nutrient retention, whether that’s synergy with fungi or good microbials, we continue to see those things, and we continue to refine them.

And, we do that somewhat behind the curtain, but I assure you that we will continue to invest in our science and our technology. So from a milestone standpoint, that’s how we view the business, and how we would expect to be measured. From a revenue, guidance point, this is we have not given guidance for 2026 yet. And I guess I would characterize this as initial guidance for 2026. We’re obviously only halfway through 2025, and this is a company where things are pretty dynamic.

But I believe the business will generate more than $3,000,000 in next year and that the 50% of it, 60% of it will come from The US business, and their balance will come from licensing revenue and hardware sales in The Middle East. You know, that’s a very big number if you’re doing $10,000 jobs at a time. It’s a very small number, right, if you’re doing 100 hectare jobs at a time. And I think what we will see is a combination of both because the small jobs lead to the big jobs, but I think we’ll see a number of big jobs, including these two golf courses, including deployments in agriculture, etcetera, that will bring up that number. So, that’s what we’re we’re planning for in the next twelve to eighteen months.

And, next slide. So I think this is you know, you’ve seen this slide before. This is in some ways, you know, what we’ve been doing for the last three years, and we’ll just keep doing. Right? We don’t think anything’s changed in the market, and maybe I should leave it, that way in the sense that we believe in the product.

We have made tremendous strides in our ability to make the product, which allows us to be commercial. We have customers who believe in the product, as you’ve seen at Oasis States and other people, including Woodland Hills, who believes in the product. Right? We have had a couple of hiccups. They’re we strongly believe they’re operational, aka human, and that they’re all at the injection side.

And Marty and his team are working very diligently on tightening up our processes at the injection side. We are doing tests in California or in Arizona, sorry, on our own sprinkler rigs to try and drive them to failure to recreate our problems. Our customers continue to proceed. Our customers perceive the value in the product and understand where we are technologically, and so we’re not on hold. I wanna communicate that quite clearly.

We continue to move forward. And as Lars opened this, and I know many of us on the phone or on the video are interested, we are aware of our cash situation and our burn rate, and we are working quite diligently on that. And, obviously, as a public company around all of these points, whether they’re the great markets, the success, the customer dynamics, the failures, There are things that we’re allowed to, tell you and things we’re not. And I’d ask you in the questioning that you ask those questions.

But if we have questions that we’re unable to answer, I request that you understand that. And so next slide. Magic. You. James,

Webcast Moderator, Desert Control: thank you so much for your update. Now we will start the q and a session, and we invite all of you to use the q and a function, for this. So, we will start with the questions that we received this morning, and we can start with the first that is directed to our, chair of the board, Lars Aisbach. So there had been rumors about indicative offers for the company from a larger player. Can the company confirm whether there has been interested, from any party to acquire the company?

Lars Aisbach, Chairman of the Board, Desert Control: So So thank you for the question. And and and first of all, I I I think it’s hard to to respond on on rumors. But but let me emphasize that we would have and we will continue to report on anything that has relevance for the market in in these matters. That’s the short answer to that question, may I?

Webcast Moderator, Desert Control: Thank you for your question, Lars, and for your reply on this. Okay. We’re having another question. What will you start getting shareholders confident about the share again and getting the share price up?

James Thomas, CEO, Desert Control: Ari, was that directed specifically to Lars?

Webcast Moderator, Desert Control: James, you can Go

James Thomas, CEO, Desert Control: ahead, Lars. Sorry. I should I just wasn’t sure. I we couldn’t hear who it was directed to. Go ahead.

Lars Aisbach, Chairman of the Board, Desert Control: So so I I I think one of the means of, replying to that question is basically to be open in our communication. And I think we’ve had a continuous stream of news every time we had relevant information to share with the market. I think, I I hope at least shareholders acknowledge that we have in q one and in today’s webcast been extremely open on all aspects of Desert Control. As with any venture company, as with any mature going concern, it’s not everything that is rosy. We have a company that holds massive potential, and I’m very excited about the progress we’ve made.

But but we have had hiccups, and I’m I’m absolutely certain, and I can almost guarantee we will continue to have hiccups as we proceed, but we learn from all of them. And I’m sure that with some of the aspects that we shared today, I I hope the shareholders are receiving some of these news in a positive manner.

Webcast Moderator, Desert Control: Thank you, Lars.

Leo Shaparian, CFO, Desert Control: But it’s

Lars Aisbach, Chairman of the Board, Desert Control: up to every shareholder, of course, to make their own assessment.

James Thomas, CEO, Desert Control: Right. And and if I might, I’d like to just follow-up a bit there because I agree completely with Lars. One of the things that I think both of us have been accused of in our personal lives is being too honest and too direct, but we consider you on this journey with us. And I think what we’re trying to do is convey, both the tremendous market opportunity, which is very, very real, the value of the technology, which is very, very real, the engagement of our customers, which is very, very real, and the fact that we’re still small. And, and we have a really low market cap, to be perfectly straightforward.

I think that, you know, we are where we are, and we are trying to treat you as fellow investors in this space and on our journey. And we will share with the market both our triumphs and our, tragedies, too strong a word, but that’s how we’re trying to communicate with people. And we’re not focused I will tell you, quite honestly, I don’t even know where the stock trades at $11.49 in any given day. I do watch the stock, but we’re trying to build long term value here. And I think we can and we will.

And I think, off the space of both, market cap and opportunity, there’s a lot of room for us.

Webcast Moderator, Desert Control: Thanks, James, for your reply. Actually, we have, a question here. We can answer this one live. What does happen with the projects, with the Munirium company, Mortise Garden? Can we get a status update on both?

James Thomas, CEO, Desert Control: I think that would be a question for Marty. Yeah.

Marty Weems, US Operations Lead, Desert Control: Yeah. Happy to answer that. And we continue to have a fantastic relationship with both of those businesses. They are both just fantastic growers, fantastic partners. We’re consistently in contact with them and checking up on the progress of where LNC has been applied and seeking opportunities to expand that with them.

So all is well with those relationships and there’s always a conversation of what’s next and where will it be next that it fits well into their particular business programming as each of those organizations move forward. But we have great relationships there and continue to watch progress of the where of their crops where the application has been provided, both in terms of yield outputs as well as water conservation.

Webcast Moderator, Desert Control: Thanks, Marty. We have another question, that is for the Chairman of Pest Control. It says, the company capital needs have been known and communicated to the market for a long time. One month ago, the share price, which effectively the company currency was at Norwegian kroner $7.08. Why was the share issue not carried out of time?

And and he’s asking in a specific reply from Lars.

Lars Aisbach, Chairman of the Board, Desert Control: Yeah. So thank you for the question. I think it’s it’s it’s fair question, and it’s a very relevant question. But but let me emphasize very, very clearly. The board or I would even say a board has at all times the responsibility to address the strength of the balance sheet of Desert Control.

And I can assure you that the board has had an ongoing task to pursue all avenues that will strengthen our financial muscle. This has this has not been only the case for the current new leadership and the current board, but that has been the case for a long time going back as well. And needless to say, the board would have, and we still will, as I mentioned before, report any information in these matters that would have been, or are relevant to share with the market.

Webcast Moderator, Desert Control: Thank you, Lars. And we have another question, which is, again, about the results LIMUNEDA that Marty already replied to. And we don’t have further, more questions in our q and a, session in our webinar. So I will share my screen again to have some ending remarks.

James Thomas, CEO, Desert Control: I could probably make them Lars and I could probably make them without oh, there it is. Okay. Perfect. So, again, thank you for not just participating in this call, but obviously for your support of the company. We are, as we said, probably broken record wise here, focused on growth, focused on the huge opportunity.

We have a small team. We’re making a lot of progress. We own our mistakes when we make them, and we celebrate our successes also. And our successes are greater than than not, and, we expect them to continue. I wanna thank the team.

I wanna make a real point of this. I mean, Lars and I were out at PGA West, when we were installing in that job and seeing it and and when we had our problem. And it was a 119 degrees. And, you know, one of the things when you work in sandy soils is one of the reasons at Sandy’s is hot. And our guys are out there every day.

Marty himself was out in the Arizona heat yesterday working on the Oasis State install. So I wanna thank our employees who work hard every day making this company what it is. I am very optimistic. I think the entire team is very optimistic. We’re also very realistic, and, we’re focused on building shareholder value and targeting the markets that I think, we’ve identified and where we see value for the technology.

Through my focus, I don’t want anybody to think that someday we’re not gonna go to Australia. I think this technology will be relevant in Australia, but it’s not what we’re doing today. And what we’re really focused on is executing really well, in what are really big markets that we’re already in. And we look forward to sharing our progress in all regards, with you going forward. And, you know, thank you again for being part of our investor base.

Lars, anything you wanna say?

Lars Aisbach, Chairman of the Board, Desert Control: I think you said it very well, Thomas and James. And what I will also is to wish everybody a fantastic weekend.

James Thomas, CEO, Desert Control: Great. Thanks, everyone.

Lars Aisbach, Chairman of the Board, Desert Control: Thank you.

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