LIQT

Balance Sheet and Capital Update

• Completed an underwritten public offering in June 2026 that generated ~$18 million in net proceeds, strengthening the shareholder base and balance sheet
• A portion of proceeds was used to repay all outstanding senior promissory notes and original issue discount notes, leaving remaining capital for working capital and strategic growth initiatives
• Management reaffirmed a commitment to financial discipline, disciplined capital allocation, and prioritizing execution to deliver measurable financial progress

Strategic Direction

• Core objective is to build a balanced, repeatable, profitable business centered on the company's differentiated silicon carbon membrane technology, focusing on applications with clear performance advantages and scalable customer adoption
• Refined go-to-market for large water segments: Water for Energy will prioritize strategic partnerships to accelerate penetration; Water for Industry will use a targeted approach focused on applications with clear customer needs and strong technology fit (e.g., steel manufacturing wastewater treatment)
• Increased resource allocation to shorter sales cycle, higher visibility segments (Commercial Pool, Marine, selected Water for Industry applications) to reduce quarterly revenue volatility from large Water for Energy projects

Operational Milestones

• Commercial Pool: Completed assembly for projects in Australia and the U.S., the large Netherlands project is operating successfully, and the company continues expanding its distribution partner network to scale geographically
• Marine: Received factory acceptance test approval for the first two ISO dual-fuel water treatment units; secured a 4-system order for EGR-equipped vessels in China, with first delivery expected in December 2026; the China joint venture provides localized engineering, sourcing, assembly, and service to improve competitiveness
• Water for Industry: Post-quarter, secured a $2.1 million follow-on order from a U.S. steel manufacturer (75% expected to be delivered by end-2026) and a new order for a system at a facility in Freeport, Texas; the steel follow-on followed 10 months of successful initial operation, validating the strategy of pilot validation followed by scaled deployment

Financial Performance Summary

• Gross profit was $0.4 million (8.4% gross margin) in Q2 2026, down from $0.5 million (9.8% gross margin) in Q2 2025, with the decline driven by product mix shifts and underabsorbed fixed production costs at current revenue levels
• Total operating expenses were $2.7 million (up 4% year-over-year), with ~60% of the increase driven by foreign exchange movements; operating expense discipline is maintained, with investments focused on commercial growth and standardized platform development
• Net loss was $3.1 million, compared to a $2.2 million net loss in Q2 2025; adjusted EBITDA was negative $1.6 million, compared to negative $1.3 million in the prior year quarter

• Full year 2026 revenue guidance was revised downward to a range of $20 million to $23 million, from the company's prior higher range, due to a delayed large Water for Energy project that is no longer expected to contribute revenue in 2026 • Even at the revised range, management expects meaningful year-over-year revenue growth, driven by strong performance across Commercial Pool, Marine, and selected Water for Industry applications, including the recently announced $2.1 million steel follow-on order • The revised guidance assumes much lower Water for Energy revenue for 2026, but the delayed project remains active in the company's commercial pipeline • Management reaffirms core priorities of gross margin improvement, disciplined operating spending, and careful working capital management, with investment aligned to high-visibility, repeatable growth markets

Total Q2 2026 revenue was $4.4 million, a 12% decrease from $5 million in Q2 2025. Breakdown by segment:

1. Commercial Pool: Revenue of $1.5 million (record, 34.1% of total Q2 revenue), up 87.5% from $0.8 million in Q2 2025.
2. Marine: Revenue of $0.7 million (15.9% of total Q2 revenue), up 75% from $0.4 million in Q2 2025.
3. DPF and Membrane: Revenue of approximately $1 million (22.7% of total Q2 revenue), down 23.1% from $1.3 million in Q2 2025, with the decrease driven by temporary raw material availability constraints.
4. Plastics: Revenue of approximately $0.9 million (20.5% of total Q2 revenue), down 25% from $1.2 million in Q2 2025, with the decrease driven by slower customer purchasing amid volatile raw material prices and broader market uncertainty.
5. Water for Energy: No material revenue contribution in the quarter, due to a large customer project delay, which created the primary offset to growth in Commercial Pool and Marine.

• Large Water for Energy and Water for Industry projects have long, complex sales cycles that depend on customer internal processes, organizational changes, capital budgeting, and multi-layer approvals, all outside the company's direct control, creating significant quarterly and annual revenue volatility from unpredictable project timing

• Raw material availability constraints can cause temporary production delays and reduce revenue for core segments, while volatile raw material prices can slow customer purchasing decisions
• A large portion of the company's cost base is denominated in Danish kroner and euros, so unfavorable foreign exchange movements can increase operating expenses relative to forecast
• Current revenue levels remain below the threshold required to fully absorb fixed production costs, limiting gross margin improvement until meaningful revenue scale is achieved
• The company has a history of net operating losses, and achieving sustained profitability remains uncertain without successful execution of growth and cost reduction initiatives

Q: Where can near-term process improvements drive profitability, across sales, assembly, engineering, or other areas? / A: Management is pursuing cost reduction across the entire business. Standardizing products for Commercial Pool, Marine, and Water for Industry generates economies of scale as sales grow. Improved procurement processes, plus localized sourcing through the China joint venture, lowers component and material costs. Additional improvements come from inventory optimization, higher production efficiency, better quality control, and targeted sales resource allocation via CRM pipeline management to avoid wasteful spending on low-probability opportunities.

Q: What competitive advantages does the CureFlow system have, and how long was the steel customer's initial unit operational before placing the follow-on order? / A: CureFlow uses LeedTech's unique patented silicon carbon membrane, which performs exceptionally well in wastewater with high oil content, high suspended solids, and variable contamination that clogs competing polymer membranes. It is a continuous operation system that auto-cleans, reducing blockage risk. The steel customer ran the initial unit for 10 months with stable, trouble-free operation; competing membranes required frequent replacement and production shutdowns, so the customer approved the 4-unit follow-on based on this proven performance.

Q: Are commercial pool sales growing from more system units, or larger average system size? / A: Growth is coming from both. Most current sales are in Northern Europe, but the company is now entering the U.S. market with strong partners, where commercial pool systems are typically larger than European systems. The first U.S. system is on track for installation by the end of Q3 2026, and geographic expansion into the U.S. is expected to drive both more unit sales and larger average transaction size going forward.

Q: What is the annual sales opportunity for marine water treatment units, and what is the company's current assembly capacity? / A: The combined global market for ISO and EGR marine water treatment systems (which split ~30%/70% of the market) has ~600 new vessel deliveries expected through 2028-2029, and LeedTech targets a substantial share of this market. The company uses third-party assembly partners through its China joint venture, so capacity is flexible and can scale quickly to meet growing demand. Current near-term focus is on finalizing standardized system designs for all marine product lines to speed up delivery as orders increase.