Good morning and welcome to the LIC Tech International Report Second Quarter Fiscal Year 2026 Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. To submit a question, you may type it into the Ask a Question box on the webcast screen. Please note this event is being recorded. I would now like to turn the conference over to Robert Bloom with Lithum Partners. Please go ahead.

Great. Thank you very much, Chloe. Good morning, everyone, and thank you for joining us on today's call to discuss Lick Tech's second quarter 2026 financial results. Joining us on today's call from the company are Fei Chen, Chief Executive Officer, and David Kowalczyk, the company's Chief Financial and Chief Operating Officer. As the operator mentioned, before I turn the call over to management, I'll remind everyone that there will be a Q&A session at the end of the call today. To ask a question through the webcast portal, simply type your question through the Ask a Question feature in the webcast player there. Before we begin with prepared remarks, we submit for the record the following statement. This conference call may contain forward-looking statements. Although the forward-looking statements reflect the good faith and judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different from those discussed during the conference call. The company therefore urges all listeners to carefully review and consider the various disclosures made in the reports filed with the Securities and Exchange Commission, including the risk factors that attempt to advise interested parties of the risks that may affect our business, financial condition, operations, and cash flows. If one or more of these risks or uncertainties materialize or if the underlying assumptions prove incorrect, the company's actual results may vary materially from those expected or projected. The company therefore encourages all listeners not to place undue reliance on these forward-looking statements, which pertain only as of this date and the date of the release and conference call. The company assumes no obligation to update any forward-looking statements to reflect any events or circumstances that may arise after the date of this release and conference call. Now, I'd like to turn the call over to Fei Chen, CEO of Electec International. Fei, please proceed.

Thank you, Roboff, and a good day to everyone on the call. Before discussing the quarter, I want to acknowledge an important development for Littech and our shareholder base. In June, we completed an underwritten public offering that generated approximately 18 million in net proceeds. The offering brought a number of new shareholders into Littech. and I want to thank those investors along with our existing shareholders for the confidence you have placed in our company and our technology. We recognize the rising equity capital comes with significant responsibility to our shareholders. We expect to be judged by how effectively we deploy that capital how consistently we execute and ultimately whether we can translate our technology and market opportunities into sustainable financial performance. A portion of the proceeds was used to repay our outstanding senior promissory notes and original issue discount notes, significantly strengthening our balance sheet. The remaining capital provides us with the working capital and the financial flexibility to execute our growth priorities. Importantly, having a stronger balance sheet does not change the need for financial discipline. We remain focused on capital allocation, disciplined spending, and converting our commercial opportunities into revenue and improved profitability. Our priority now is execution and demonstrating measurable progress in our financial results. For shareholders who are newer to LeedTech, I would like to provide just a very brief high-level review of the strategy we have been implementing over the past several years. Our objective is to build a more balanced, repeatable, and profitable company. around applications where our silicon carbon membrane technology provides a clear performance advantage and where customer adoption can scale. To begin with, commercial pool has become a much more important part of that strategy. We have invested in a standardized and a modular Clariflow platform, expanded our distribution network, and built references across Next, Marine has also re-engaged through our joint venture in China, which gives us local sales, sourcing, assembly, development, and service capabilities in a market where local execution is essential. Our DPF and membrane business and our plastics business provide a steady The largest variable in our outlook remains water for energy and water for industry. These markets represent meaningful revenue opportunities for lead tech, but the sales cycles are typically longer and more complex. Projects often require pilot testing, technical validation, customer approvals, Capital Budgeting and Multiple Layers of Internal Decision Making. As a result, project timing can be difficult to predict and is often influenced by customer processes that are outside our direct control. This means Water for Energy and Water for Industry can be significant drivers of our future growth, but they can also create variability in our quarterly and annual revenues. Our focus is therefore on building a border pipeline, advancing multiple opportunities in parallel, and converting more of these projects into form orders. Over time, we believe this should make the business less dependent on the timing of any single large project. Based on what we have learned from the market, we have refined our go-to-market approach for both water for energy and water for industry. In Water for Energy, going forward, we will focus on building strategic commercial partnerships that help us accelerate market penetration and convert our technology capabilities into commercial opportunities. In Water for Industry, we will take a more targeted approach, focusing our resources on selected applications where we see clear customer needs and a strong technology fit. The steel industry is a good example, where our recent follow-on order demonstrates the potential to move from initial installation to broader multi-system deployments. Our objective is to build a more visible, repeatable, and scalable opportunity pipeline while maintaining disciplined resource allocation. The second quarter illustrates both sides of our strategy. Commercial pool achieved record revenue and the marine continues to execute against its order board. Since quarter end, the U.S. industry wastewater reuse order and the 2.0 million follow-on order from a U.S.-based steel manufacturer have further reinforced the progress we are making in selected water for industry applications. At the same time, delaying a larger Water for Energy project has reduced our revenue visibility for the remainder of 2026. As a result, we are revising our full-year revenue guidance to a range of 20 million to 23 million. Importantly, even at the revised guidance range, we expect to deliver meaningful year-over-year revenue growth reflecting the underlying process across our business. We are disappointed by this delay, particularly because we had expected this project to contribute revenue this year. But our response is not to wait. We are putting greater emphasis and resources behind the markets where we see more repeatable demand, shorter sales cycles, and a better revenue visibility. At the same time, We will continue to pursue significant opportunities in the world of energy, but in a more selective and increasingly partnership-driven manner. This is not a sudden change in direction. Rather, it is a continuation and acceleration of the strategy shifts we have discussed over the past several quarters, informed by what we have learned from the market. We now have a stronger balance sheet and the significant market opportunities. But ultimately, we need to demonstrate that these strengths translate into improved financial performance. Our priorities are clear, execute on the opportunities in front of us, maintain financial discipline, improve profitability, and build a more predictable and sustainable business. And let me be clear, achieving profitability as quickly as possible remains one of our highest priorities. Let us talk about each area in more detail. Commercial pool was the strongest area of business in the second quarter. Revenue reached a record 1.5 million. Compared with 0.8 million in both the second quarter of 2025 and the fourth quarter of 2026. The performance reflects the work we have done to standardize the Clariflow platform, strengthen our distribution partnerships, and establish a border base of reference installations. During the quarter, we completed assembly of the systems. for the Plumtum Aquatic and the Leisure Center project in Australia, and our fourth U.S. commercial pool project in Walland, Wyoming. The large pool system in the entire Netherlands, which we announced in April, is now operating successfully. This project demonstrates that Clary Flow can serve different facility sizes Project Designs and Geographics. We are maintaining the advantage of a modular platform. We continue to have our focus in establishing new distribution relationships in the prioritized geographic regions. Expanding the partner network is an important part of the pool strategy. because local partners are critical for identifying projects earlier, supporting system design and installation, and providing the customer relationships needed to scale efficiently. Pools are attractive to Leetech because the systems can be more standardized than our many large industry projects. The value proposition is straightforward and each successful installation can help create additional opportunities in the surrounding market and add aftermarket service business. Transitioning to marine, marine revenue totalled 0.7 million in the second quarter compared with 0.4 million in the second quarter of 25 and 0.8 million in the first quarter of 26. During the quarter, we received factory acceptance test approval for the first two ISO dual-fuel water treatment units. This represents an important execution milestone and reflects the significant progress made by our team and our joint venture in China. We expect to deliver one additional ISO dual-fuel water treatment unit and the two marine squabble water treatment systems in the third quarter. We also secured a commercial order of four water treatment systems for EGR-equipped vessels in China, with the first system currently expected to be delivered in December. The China joint venture has allowed us to re-establish a stronger position in marine by combining DICTEX membrane technology with localized engineering, sourcing, assembly, and service. We continue to manufacture our co-silicon carbon membranes in Denmark. We're using the joint venture to improve competitiveness and responsiveness in the Chinese shipping building market. The growing mix of ISO, EGR, squabble systems, and related aftermarket opportunities gives us confidence that the marine can become a more consistent contributor over time. Turning to water for energy, the most significant change occurred recently. A major customer went through an organizational change that affected the decision-making process for an important water for energy project that we had expected to contribute revenue in 2026. New decision makers became involved and significant parts of the customer's internal evaluation and approval process effectively had to restart. As the impact of this delay became clear, we reassessed what we could realistically deliver and recognized as revenue during the remainder of 2026. Given the slower customer decision-making process combined with the lead time required for certain critical equipment, we concluded that it was no longer prudent to maintain our previous full-year revenue guidance. I want to be clear that we are disappointed by this delay. Our team has invested Significant time and resources in technical validation, field engagement and commercial development. Importantly, we have not seen any change in the underlying need for our technology and the technical results remain compelling. The project has not been terminated and remains an active opportunity. Our relationship with the customer remains intact, and we continue to engage closely with the new decision-makers as they work through their internal evaluation and approval process. Within the water industry, the near-term opportunity set is becoming increasingly tangible, particularly in steel and other industry wastewater applications. Yesterday, we announced a 2.1 million follow-on order from a US-based steel manufacturer for four additional industry wastewater filtration systems with approximately 75% of the order currently expected to be delivered by the end of 2026. This order views directly on the successful deployment of customers' initial systems which uses our silicon carbon membrane technology to treat challenging waste water with high oil content and significant variability as part of the customer's water water reclamation process. What is particularly important to us is the progression of this customer relationship. We started with one system, allowing the customer to validate our technology under real operating conditions. Based on successful performance of that system, the customer has now moved forward with four additional systems. This demonstrates the potential of our strategy. Proven the technology in a demanding application, establish strong customer reference, and then scale from initial installation to a broader deployment. This transition from an initial installation to a larger multi-system deployment is exactly the type of development we want to see in the waterfall industry. It demonstrates the potential to convert successful technology validation into repeat business and larger commercial opportunities. This week, we also announced an order from a new U.S. customer for a cure-flow QF6 ceramic membrane filtration system to be installed at its new facility in Freeport, Texas. The system will treat wastewater generated from industry equipment cleaning operation and recycle the treated water back into the facility's wash water supply. This is an important proof point for several reasons. It brings a new US customer to Leetech, demonstrates the applicability of our standardized Qflow platform beyond traditional produced water treatment, and addresses a challenging and highly variable waste water stream where consistent removal of suspended solids and oil is critical. Most importantly, It delivers a clear economic and environmental benefit to the customer by reducing both wastewater disposal volumes and fresh water consumption. Together with the new steel industry order, this industry wastewater order reinforces our belief that selected water for industry applications can develop into a more repeatable and scalable business. Our standardized systems provide customers with clear economic and sustainability benefits. We are allowing us to deploy proven solutions across similar applications. This is why we are allocating greater resources toward selected industry segments where we see strong technology fits, increasing customer engagement and a better near-term revenue visibility. Finally, our DPF and membrane business remain important foundational part of LeakTech. DPF and membrane revenue was approximately $1 million in the second quarter compared with $1.3 million in both the previous year quarter and the first quarter of 26. The decrease primarily reflected temporary production delays caused by constrained availability of Critical Raw Material. Plastics revenue was $0.9 million compared to $1.2 million in the second quarter of 2025 and approximately $1 million in the first quarter of 2026. Customer purchasing decisions slowed during the quarter and variability of raw material prices and the border marked uncertainty, where both DPF and plastic and David Nørby Foss Kowalczyk. To summarize, the second quarter delivered record commercial pool revenue, continued execution in marine and meaningful progress industry wastewater. These achievements were off-site by the delay in water for energy that has reduced our near-term revenue visibility and then lead us to revise our 2026 revenue outlook. Where we are disappointed by timing change, we remain optimistic about direction of the business. We have a stronger balance sheet, a broader shareholder base, growing traction in markets where we can build standardized and repeatable solution and a greater clarity around where to allocate our resources. Our priority now is execution, converting these advantages into more predictable revenue growth, improved margins, and ultimately, sustainable profitability. Let me now turn the call over to David to review the financial results in more detail. I will then make a few closing

Thank you Fei and good day everyone. I will walk through our second quarter financial results, the revised full year outlook and the impact on the June financing on our balance sheet. The revenue for the second quarter of 2026 was 4.4 million, compared with 5 million in the second quarter of 2025. representing a decrease of 12%. The quarter included strong year-over-year growth in commercial pools and marine, offset by lower water for energy activity, temporary production constraints in DPF and membranes, and softer customer purchasing in plastics. Within commercial pool, revenue was a record 1.5 million, compared with 0.8 million in the prior year quarter. Marine revenue was 0.7 million compared with 0.4 million last year. These increases demonstrate the progress in the strategic growth markets Fei just discussed. BPF and membrane revenue was approximately 1 million compared with 1.3 million in the second quarter of 2025. Plastic revenue was approximately 0.9 million compared with 1.2 million in the prior year quarter. As Fei noted, the DPF and membrane comparison was affected by raw material availability, while plastics reflected slower customer purchasing decisions in a volatile raw material environment. Gross profit for the second quarter was 0.4 million, representing a gross margin of 8.4%. This compares with a gross profit of 0.5 million and a gross margin of 9.8% in the second quarter of 2025. The year-over-year decline primarily reflected product mix, including a lower contribution from higher value system activity. as well as a lower utilization of manufacturing capacity while we continue to manage costs carefully. These factors were particularly offset by procurement benefits and lower depreciation expenses. As we have discussed in prior calls, our current revenue level remains below the point where fixed production costs are fully absorbed. Improving gross margins therefore depends on both revenue scale Standardized commercial pool, marine, and selected industrial systems are important to that effort because they provide opportunities to reuse engineering, improve procurement, simplify manufacturing, and create better operating leverage as volume increases. Total operating expenses for the second quarter were 2.7 million, compared with 2.6 million in the second quarter of 2025, an increase of 4%. Approximately 60% of the increase was related to foreign exchange rate movements, given that a significant portion of our cost base is denominated in Danish crowns and euros. Selling expenses were 0.8 million compared with 0.8 million in the prior year quarter. Excluding currency effects, the increase primarily reflected the annualized impact of hires within the Chinese joint venture, continued investments in sales coverage in the US and Europe, and annualized costs for the US service center. General and administrative expenses were 1.6 million. compared with 1.5 million in the second quarter of 2025. Adjusting for currency movements, G&A remained stable and below general inflation, as the costs of filling open positions were offset by savings in other overhead areas. Research and development expenses were 0.3 million compared with 0.2 million in the prior year quarter. The increase primarily related to membrane development and development work for marine and commercial pool systems. We continue to manage operating expenses with discipline, while directing investments towards the areas that support commercial growth and more reputable system platforms. Other expenses for the second quarter were 0.7 million, compared with approximately 0.1 million in a comparable period of 25. The increase was primarily attributable to amortization of debt discount accrued and paid interest on the senior for missionary notes and losses on foreign currency translations. Net loss for the second quarter of 26 was 3.1 million, compared with a net loss of 2.2 million in the second quarter of 25. Adjusted EBITDA was a negative 1.6 million compared with a negative 1.3 million in the prior year quarter. Slight decline was due to the lower revenue and gross profit and currency driven increase on operating expenses. Turning to our outlook, we are revising our expectations for the full year of 2026. Adjusted to a range of 20 to 23 million. The revision primarily reflects the movement of water for energy projects that were previously expected to contribute in 26, but are now anticipated to be completed beyond the current fiscal year. The range continues to contemplate strong performance from commercial pool and marine selected water for industry opportunities, including the new U.S. steel manufacturing follow-on order and ongoing contributions from DPF membranes and plastics. Approximately 75% of the 2.1 million order is expected to be delivered by the end of 26. The principal variable remains the timing of larger system orders. We have reduced the amount of water for energy revenue assumed in the outlook, but we have not removed this opportunity from our commercial pipeline. The revised revenue cadence will affect the timing of operating leverage. Our priorities remain gross margin improvement, disciplined operating spending, and Careful Working Capital Management. We will continue to align investment with the markets where we see the strongest visibility and the best opportunity to create repeatable profitable growth. Turning to the balance sheet, we entered the second quarter with cash on hand including restricted cash of 15.7 million as of June 30th. This compares with 2.7 million at the end of the first quarter. The change primarily reflects the June public offering. The offering closed on June 8 and generated approximately 18 million in net proceeds. In connection with the transaction, we eliminated the remaining senior provisionary notes and original issue discount notes. As a result, LeakTech ended the quarter with a substantially stronger equity position and greater financial flexibility. We intend to use that flexibility carefully. The capital is not a substitute for operating execution. It gives us the ability to support working capital, pursue business development in target markets, and make focused investments that can help accelerate growth. We will evaluate those investments against clear commercial milestones and continue to manage cash with discipline. And with that, let me now turn the call back to Fei.

Thank you, David. Before we open the call for questions, I want to return to the message I shared at the beginning. Leetech is building around a differentiated silicon carbon filtration platform. that can solve difficult water and emission challenges across multiple markets. The opportunity is significant, and our responsibility is to translate the opportunity into a business that is more predictable, scalable, and profitable. The second quarter demonstrates clear progress in commercial pool and marine. Since quarter end, The new U.S. industry wastewater treatment order and $2.1 million follow-on order from a U.S.-based steel manufacturer have provided further commercial validation of our technology and strengthened our confidence in the opportunity within selected industrial wastewater applications. At the same time, the quarter reinforced The need to remain disciplined in Water for Energy where customer-controlled project timing can create meaningful revenue volatility. We are responding by allocating greater resources toward markets where we have better visibility and a clear path to scale. We are pursuing Water for Energy opportunities more selectively and increasingly through strategic partnerships. Across the business, we are focused on building repeatable system platforms, expanding our market reach through partnerships and remaining disciplined use of financial flexibility created by the June offering. We appreciate the support of both our longstanding and the new shareholders. We recognize the responsibility that comes with that support. and we are committed to earning it through disciplined execution, more predictable growth, and improved financial performance. With that, Robert, we would be happy to take any questions.

Great. Thank you very much, Fei and David, for the prepared remarks. Just as a reminder to everyone listening to the webcast portal, if you have a question, you can type it into the Ask a Question box on your screen there. We do have a few questions already in the queue here, so we will begin. First here, would you speak to where process improvements driving profitability may be realized in the near term? Examples may be sales, assembly, water system engineering, or another area for LICTEC.

Very good question. We actually have been working intensively in the past one or two years, really to make the cost reduction for our processes in order to speed up the profitability. I can mention, first of all, we are doing the standardized product across all the applications, as we mentioned, the marine area, the commercial pool area, and also the water for industry area. We are now having our product standardized, and that reduces the cost and also provides the scale of the economy when the sales go up. And we're also looking much more close to our procurement process. Purchasing for the raw materials and the components, we really improve on that, and that will provide us the cost reduction. and we also using our joint venture in China to see if there's any other component and the materials in China can be much more cheaper and attractive for us than we normally purchasing in Europe. So those are very much things we're doing. We're also working very much on the inventory optimization. We're also working on The production efficiency and the quality control, all this contributing to the improvement of our costs. And from the sales perspective, we're also working very much on using our sales pipeline and CRM system really to control where we're going to use the sales resource and where we're really going to invest in the technology and also the whole process to get the commercial results. and because that also brings a lot of cost to us. So from the beginning to the end, we are looking at each of the steps to really make the cost reduction. We still have a long way to go because they continuously have the possibility to improve, but we are very much aware to do that.

All right, very good. Thank you for that. Next question here. Could you talk about the competitive advantages that the CureFlow system has versus the other systems on the market? And how long did the steel customer have your unit operational before they chose to add four more units?

Our cost flow system is based on our silicon carbon membrane. And this is very unique because our membrane has the patented coating make it very suitable for the waters which is very, very dirty, contains high oil content, and high suspended particles, and also different impurity in the water. And that's actually exactly the reason why our system is really function well in the steel manufacturing industry. On top of a membrane, our system, because we call it cross flow, is really a continual operation system, and we're able to have the water recycled continuously in the system, and that makes the system continuously safe cleaning, and really reduce the risk for being blocked by the impurity in the water. The company that uses our system for the steel manufactured waters has been running our system for 10 months and it has been very stable and they were so amazed because before they were using polymer membranes and those membranes very easily got blocked and they have to be changed very often. That really brings a lot of OPEX for them, the costing. and also very often they have to stop the treatment and replace and that really also caused the break in their production process. So our system can run continuously and for all this 10 months period and without any troubles and we're very stable and keep the promise we have given to them. And that's actually the basis why they have decided to extend another four systems. because they're really happy for the performance of our system.

Okay, very good. The next question here is, are you seeing a larger number of pool system sales, or are you seeing larger sales per system, sort of the size of the system versus the quantity of the systems?

We see both. I mean, right now, the majority of the sales still is in Europe. Special in North Europe. But we now coming to US with a strong partner. And also, as you hear, we actually already finished the first pool system. It's going to be installed in US in the quarter three, by the end of quarter three. So if we continue coming to the US, we will continue to come to US. In US, the systems are bigger. David Nørby Foss Kowalczyk

Next question here is, how many ICER water treatment units do you forecast could be sold in an average year, and how many annual units do you have capacity for?

That's a very good question. I mean, the market is quite big, not only ISHO. It's ISHO combined with EGR, because ISHO is about 30% of market. and EGR is the 70% of market. So these two technologies, they're kind of parallel and share the market. And we are very happy. We already got EGR sales order and we're going to deliver by end of this year. So we are also going to the EGR market. So right now, according to the internet data, There are 600 boats and vessels to be delivered from now to 2028-2029 and the combination of ISO and EGR. Our goal is to get a substantial amount of those vessels to get our installations. So we are working in China to do the assembly part. And what we're doing is we find some very good partners in China to do the assembly for us. So in this way, our assembly capacity should be quite flexible. So we're able to increase quite fast in this way. So we don't see that as really a challenge. So what we now really focus on is to finalize the standardized of our system for the marine application, both for ISO EGR and also for SCRABR. So in this way, we're really able to speed up very fast when the sales come in. And we see a very good cadence, both for the sales and also delivery in this area.

Very good. I am showing no further questions here. So with that, Fei, I will turn it back over to you for any closing remarks.

Thank you, Robert. Thank you all very much for joining us today and for your continued interest in this topic. We look forward to updating you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.