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Desert Control AS
Quarterly Report • Nov 15, 2024
3577_rns_2024-11-15_a71401f4-657b-4e68-ac27-0e7f21f1607a.pdf
Quarterly Report
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| CEO MESSAGE3 | |
|---|---|
| FINANCIAL REVIEW4 | |
| COMPANY UPDATE5 | |
| OUTLOOK 8 | |
| RESPONSIBILITY STATEMENT9 | |
| CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES10 | |
| ADDITIONAL INFORMATION22 | |
COMPANY UPDATE FINANCIAL REVIEW
ADDITIONAL INFORMATION
CEO Message
Desert Control made good progress in the third quarter of 2024. Promising pilot results across agriculture and landscaping continue to validate the economic and environmental value of LNC, providing a solid foundation for advancing commercial discussions with clients.
Landscaping pilots in California achieved impressive water savings, marking a significant milestone as the region's high water costs continue to rise. As we entered the fourth quarter, the first agreement with commitment to deploy our water conservation solution to a complete golf course was announced on November 8th. We have also seen substantial yield gains in the agriculture segment, demonstrating how farmers can achieve improved profitability from LNC investments, even where average water costs remain lower.
The quarter marked the first royalty income from the Middle East. While modest, this revenue shows that years of groundwork in the region start paying off. We are seeing growing commercial traction in this market driven by solid pilot results and our partners' increased investments in building dedicated sales teams and launching marketing initiatives.
Technology development and continuous innovation remain central to our strategy, unlocking new capabilities and market opportunities. The next-generation LNC production system—on track for commercial readiness in 2025—represents a 1000X capacity increase since 2019. These advancements will ensure the ability for scale-up to meet the growing global demand for sustainable soil health and water conservation solutions.
Strategic partnerships continue to add value, accelerating our development, growth, and market reach. On the R&D front, our collaboration with Syngenta is off to a good start, showing potential to fast-track the evolution of LNC as a platform for holistic soil health and opening opportunities for growth through established global channels. On the technology side, I'm also excited about Siemens' dedication to us as a valuable partner supporting our production system advancements.
During the quarter, we further strengthened our sales and soil science expertise in the U.S. and appointed Lars R. Eismark as Executive Chair. His leadership is already making an impact, and
I look forward to working with him to advance our strategic priorities. I extend our sincere gratitude to Knut Nesse for his leadership as Chair over the past six years. He has been a foundational force for Desert Control, and I am grateful for our collaboration in transforming the company from an idea to an emerging leader in soil health.
Thanks also to our shareholders, partners, and customers for your steadfast support. I'm excited about what lies ahead as we continue innovating to bring solutions to the market for a more sustainable future.
Ole Kristian Sivertsen Chief Executive Officer Desert Control
ADDITIONAL INFORMATION
Financial Review
KEY FIGURES *
| NOK million | Quarters | YTD | |||
|---|---|---|---|---|---|
| Q3 2024 | Q3 2023 | 2024 | 2023 | ||
| LNC Revenue | 0,11 | 0,00 | 1,88 | 0,85 | |
| Licensing Royalties | 0,07 | - | 0,07 | - | |
| Other Income | - | 0,01 | - | 0,54 | |
| Total revenue and other income | 0,18 | 0,01 | 1,95 | 1,38 | |
| EBITDA | -14,16 | -17,90 | -44,95 | -60,81 | |
| Net Income | -15,21 | -19,33 | -45,43 | -56,86 | |
| Total cash balance | 74,83 | 35,01 | 74,83 | 35,01 | |
| (Bank deposits and funds) | |||||
| Equity 30.09.2024 | 86,32 | 52,52 | 86,32 | 52,52 | |
| Equity Ratio | 95,4% | 60,0% | 95,4% | 60,0% |
* Includes both continued and discontinued operations. For more details, refer to Note 5, "Discontinued Operations," and the 2023 Annual Report.
In the first nine months of 2024, Desert Control reached a record number of installations, increased LNC deployment volumes, and more than doubled LNC revenue compared to the previous year. These achievements highlight enhanced operational efficiency driven by the new prototype LNC production system, streamlined integration with irrigation systems, and insights gained from pilots and prior projects.
- • Revenue Increase: For the first nine months of 2024, LNC revenue totaled NOK 1.88 million, up from NOK 0.85 million in the same period of 2023. (The first nine months of 2023 also included NOK 0.54 million from discontinued operations). In Q3 2024, total revenue and other income was NOK 0.18 million, up from NOK 0.01 million in Q3 2023. LNC revenue was NOK 0.11 million in Q3 2024, compared to zero in Q3 2023. Q3 2024 was the first quarter to include licensing royalties, generating NOK 0.07 million from our licensed operators.
- • Improved EBITDA: For the first nine months of 2024, EBITDA improved to NOK -44.95 million from NOK -60.81 million in the same period last year. Operational efficiencies and the shift to a licensed operator model in the Middle East were key drivers in improving EBITDA to NOK -14.16 million in Q3 2024, compared to NOK -17.9 million in Q3 2023. These changes reduced overhead costs and increased cost efficiency and scalability for project deployments.
- • Cash Position: Desert Control ended Q3 2024 with a cash balance of NOK 75 million, compared to NOK 35 million in Q3 2023. The company continues to operate with no interestbearing debt.
The growth in project volume and LNC deployment, combined with improved EBITDA figures, underscores the enhanced efficiency of operations. Desert Control's ability to handle larger volumes at a reduced cost base positions the company to maintain healthy margins as it scales up.
ADDITIONAL INFORMATION
Company Update
POSITIVE U.S. MARKET RESULTS SET THE STAGE FOR LARGER COMMERCIAL OPPORTUNITIES
Desert Control continued to gain momentum in the U.S. agriculture and landscaping sectors with eight new installations completed during the third quarter, growing the project portfolio to 42 projects. Golf and turf pilots in California achieved irrigation savings of over 25%, with some clients reporting water reductions exceeding 50%. These positive results empower negotiations for larger projects with new and existing clients, as demonstrated by the post quarter milestone of November 8th, announcing the first agreement for a complete golf course deployment with Berkeley Country Club.
In agriculture, second-year harvest data from a commercial date grower indicates nearly double the yield from LNC-treated trees compared to untreated ones. These outcomes highlight LNC's economic impact potential on high-value permanent crops and support the company's long-term expansion in agricultural markets.
FIRST ROYALTY REVENUE SHOWS PROGRESS TOWARD GROWING MARKET ADOPTION IN THE MIDDLE EAST
In the third quarter of 2024, licensed operations in the Middle East generated the first royalty income for Desert Control. Although modest revenue, this marks a milestone toward sustainable growth under the new go-to-market model. The company's partners are optimistic, increasing investments in developing opportunities within this large, highpotential market.
A new commercial contract for around 1.8 million liters of LNC for water conservation for landscaped areas was secured for a leading real
estate development in the UAE. Additionally, the company's partners are making inroads in the landscape nursery market, with an ongoing pilot project in the UAE demonstrating positive early results and a separate project launched in Saudi Arabia. These initiatives are expected to drive further adoption of LNC in this rapidly expanding sector.
CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES
ADDITIONAL INFORMATION
Ongoing pilots with real estate developers, golf courses, and government entities continue to advance toward long-term commercial contracts. These efforts align with regional strategies to integrate LNC technology into water conservation frameworks, strengthening the technology's position in sustainable land and water management.
TECHNOLOGY DEVELOPMENT UNLOCKS NEW CAPABILITIES AND EXPANDS MARKET POTENTIAL
Desert Control continued advancing its Liquid Natural Clay (LNC) technology development during the third quarter of 2024. Ongoing R&D efforts focus on enhancing LNC's versatility and expanding its impact beyond water conservation, unlocking new market opportunities. Research programs extend into soil health disciplines, focusing on several initiatives, including integrating beneficial microbes into LNC formulations. These efforts aim to enhance soil microbiology and ecosystem resilience across diverse environments, laying the foundation to optimize plant health and crop yields.
LNC shows solid potential for synergies with various soil-enhancing techniques, including biologicals, microbials, and other regenerative practices. Developing LNC into a platform for soil ecosystem services that enhance soil fertility and
resilience is a strategic R&D priority for Desert Control, with early positive results already emerging. As these synergies progress through focused R&D efforts, LNC will strengthen its position as a vital solution in sustainable agriculture.
The collaboration with Syngenta, one of the world's largest agricultural technology companies, has delivered promising laboratory results, showing improved water efficiency, root biomass, and microbial activity. Plans are in place to extend these trials to the field in the Middle East during the fourth quarter, validating the combined impact on soil health, crop yields, and water use efficiency under real-world conditions.
Partnerships with recognized industry giants like Syngenta strengthen the validation and recognition of LNC's potential and can open doors to established global sales and distribution channels, accelerating market adoption. The outcome of such partnerships will further strengthen LNC's role in promoting
sustainable agricultural practices, making collaboration a major factor in scaling Desert Control's impact globally.
PRODUCTION SYSTEM ADVANCEMENTS STREAMLINE OPERATIONS TO SUPPORT LARGER-SCALE DEPLOYMENTS
Development of the next-generation LNC production system progressed as planned during the quarter, with throughput capacity nearing the target of 120,000 liters per hour.
CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES
COMPANY UPDATE
ADDITIONAL INFORMATION
This increased capacity improves cost efficiency and unlocks new commercial opportunities by enabling the timely execution of large-scale projects — such as treating an entire golf course within the 2-4 day maintenance windows typically available — providing access to market opportunities previously out of reach.
In partnership with Siemens, advanced digital solutions were integrated into the platform for the next-generation production system during the quarter. These include real-time production tracking, automated reporting, and telematics integration. These enhancements ensure consistent performance across deployments and lay the foundation for future automation and scalability optimization.
The new production system remains on track for commercial readiness during the first half of 2025 and will enable Desert Control and its partners to efficiently deliver projects in the current pipeline and meet growing demand.
STRATEGIC FOCUS ON SCALABILITY AND LONG-TERM VALUE CREATION
Desert Control's focus on R&D, operational efficiency, and technology enhancement continues to pave the way for sustainable, scalable growth. Every advancement in technology, production systems, and deployment capabilities strengthens the company's ability to address global soil and water conservation challenges.
Webcast presentation for Desert Control Q3 2024 Report and Interim Financial Results is hosted on 15 November 2024 at 10:00 AM, Central European Time (CET). Register: https://go.desertcontrol.com/Q3-2024
7
CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES
ADDITIONAL INFORMATION
Outlook
The company will continue advancing pilots in agriculture and landscaping across California and Arizona, leveraging recent results to secure larger commercial contracts. In the Middle East, efforts will focus on converting pilot projects into long-term agreements, securing new projects, and establishing LNC as a key part of regional water conservation requirement frameworks.
Technology development remains at the core of the company's strategy, strengthening the foundation for scalable growth. R&D efforts are set to unlock new capabilities, increase value, and open new market opportunities. The next-generation production system, scheduled for commercial readiness in the first half of 2025, will enhance cost efficiency and pave the way for scalable operations.
Through continuous innovation, partnerships, and collaboration, Desert Control lays the groundwork for accelerated market adoption of sustainable soil health and water conservation solutions to deliver lasting value for all stakeholders.
COMPANY UPDATE FINANCIAL REVIEW
CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES
ADDITIONAL INFORMATION
Responsibility Statement
Today, the Board of Directors and the Chief Executive Officer have reviewed and approved the Desert Control Group Condensed Interim Financial Statements as of 30 September 2024.
Pursuant to the Norwegian Securities Trading Act § 5-6 and the Norwegian Accounting Act § 3-3d, we hereby confirm, to the best of our knowledge, that:
The Desert Control Group Condensed Interim Financial Statements for the first nine months of 2024 have been
prepared in accordance with IFRS Accounting Standards as adopted by the European Union (EU), IFRS® Accounting Standards as issued by the International Accounting Standards Board (IASB), and additional Norwegian disclosure requirements.
The Condensed Interim Financial Statements give a true and fair view of the Group's assets, liabilities, financial position, and results as of 30 September 2024.
The interim report gives a fair view of important events that have occurred during the first nine months of the financial year and their impact on the Condensed Interim Financial Statements, and the principal risks and uncertainties for the remaining three months of the financial year.
Lars R. Eismark Executi ve Chairman
Roar Husby Board Member
Sandnes, 14.11.2024
Marit Røed Ødegaard Board Member
Ole Kristi an Sivertsen Chief Executi ve Offi cer James Thomas
Maryne Lemvik Board Member
Board Member
9
COMPANY UPDATE FINANCIAL REVIEW
CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES
ADDITIONAL INFORMATION
CONDENSED INTERIM FINANCIAL STATEMENTS AND NOTES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME............................. 11 CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................... 12 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...................................... 13 CONSOLIDATED STATEMENT OF CASH FLOWS .................................................... 14 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS................................ 15
10
Consolidated Statement of Comprehensive Income
| Quarters | First nine months | Full Year | Quarters | First nine months | Full Year | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in NOK thousand, unaudited) Notes |
Q3 2024 | Q3 2023 | 2024 | 2023 | 2023 | (Amounts in NOK thousand, unaudited) Notes |
Q3 2024 | Q3 2023 | 2024 | 2023 | 2023 |
| Revenue from sales 2 |
182 | - | 1 952 | 845 | 846 | Allocation of profit or loss: | |||||
| Other income | - | 13 | - | 538 | 543 | Profit/loss attributable to the parent | -15 207 | -19 331 | -45 430 -56 863 | -62 554 | |
| Total revenue and other income | 182 | 14 | 1 952 | 1 383 | 1 389 | ||||||
| Cost of goods sold (COGS) | 13 | 0 | 256 | 64 | 64 | Other comprehensive income: | |||||
| Gross margin | 169 | 13 | 1 696 | 1 320 | 1 325 | ||||||
| Salary and employee benefit expenses | 9 126 | 11 239 | 26 356 | 31 368 | 39 064 | Items that subsequently may be reclassified | |||||
| Other operating expenses | 4 892 | 4 251 | 19 636 | 17 722 | 22 286 | to profit or loss: | |||||
| Depreciation and amortisation | 1 397 | 965 | 3 822 | 2 963 | 4 175 | ||||||
| Operating profit or loss | -15 247 -16 442 | -48 117 -50 733 | -64 200 | Exchange differences | |||||||
| Finance income | -2 339 | 935 | 7 787 | 10 760 | 17 600 | on translation of foreign operations | -3 219 | -15 | -3 490 | 31 | 1 878 |
| Finance costs | -2 055 | 1 241 | 5 026 | 1 682 | 13 192 | Total items that may be reclassified to profit or loss | -3 219 | -15 | -3 490 | 31 | 1 878 |
| Profit or loss before tax from continuing operations | -15 531 | -16 747 | -45 356 -41 654 | -59 791 | Total other comprehensive income for the year | -18 426 | -15 | -48 921 | 31 | 1 878 | |
| Income tax expense | -0 | -23 | 59 | -11 | -11 | ||||||
| Profit or loss for the year | Total comprehensive income for the year | -18 426 -19 346 | -48 921 -56 832 | -60 676 | |||||||
| from continuing operations | -15 531 -16 725 | -45 415 -41 643 | -59 780 | ||||||||
| Allocation of total comprehensive income | |||||||||||
| Discontinued operations | Total comprehensive income attributable | ||||||||||
| Profit or loss after tax for the year from discontinued operations 5 |
-315 | -2 606 | -654 -15 220 | -2 774 | to owners of the parent | -18 426 -19 346 | -48 921 -56 832 | -60 676 | |||
| Profit or the loss for the year | -15 846 | -19 331 | -46 069 -56 863 | -62 554 |
CEO
Consolidated Statement of Financial Position
| At 30 September | At 31 December | |||
|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||
| (Amounts in NOK thousand) | Notes (unaudited) (unaudited) | (audited) | ||
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 5 | 7 548 | 6 316 | 8 044 |
| Right-of-use assets | 80 | 526 | 439 | |
| Total non-current assets | 7 627 | 6 842 | 8 484 | |
| Current assets | ||||
| Inventory | 162 | 227 | 217 | |
| Trade receivables | 264 | 27 386 | 17 | |
| Other receivables | 7 571 | 2 702 | 5 172 | |
| Other current financial assets | 3 | 19 279 | 19 616 | |
| Cash and cash equivalents | 4 | 74 833 | 15 732 | 100 008 |
| Total current assets | 82 832 | 65 325 | 125 030 | |
| Assets classified as held for sale | 5 | - | 15 409 | - |
| TOTAL ASSETS | 90 459 | 87 577 | 133 514 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 3 | 161 | 127 | 161 |
| Share premium | 6 | 133 182 | 240 846 | 321 180 |
| Currency translation differences | -1 565 | -1 305 | -80 | |
| Retained earnings | -45 460 | -187 154 | -192 194 | |
| Total equity | 86 318 | 52 515 | 129 067 |
| At 30 September | At 31 December | |||
|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||
| (Amounts in NOK thousand) | Notes (unaudited) (unaudited) | (audited) | ||
| Non-current liabilities | ||||
| Non-current lease liabilities | - | 578 | - | |
| Total non-current liabilities | - | 578 | - | |
| Current liabilities | ||||
| Current lease liabilities | 84 | - | 464 | |
| Trade and other payables | 2 498 | 2 912 | 1 873 | |
| Public duties payable | 513 | 804 | 912 | |
| Other current liabilities | 1 047 | 30 768 | 1 198 | |
| Total current liabilities | 4 141 | 34 484 | 4 448 | |
| Total liabilities | 4 141 | 35 062 | 4 448 | |
| TOTAL EQUITY AND LIABILITIES | 90 459 | 87 577 | 133 514 |
Lars R. Eismark Executi ve Chairman
Roar Husby Board Member
Sandnes, 14.11.2024
Marit Røed Ødegaard Board Member
Ole Kristi an Sivertsen Chief Executi ve Offi cer James Thomas
Maryne Lemvik Board Member
Board Member
Consolidated Statement of Changes in Equity
| (Amounts in NOK thousand, unaudited) | Share capital | Share premium |
Cumulative translation differences |
Retained earnings |
Total equity |
|---|---|---|---|---|---|
| At 1 January 2023 | 123 | 230 849 | -1 336 | -122 636 | 107 001 |
| Profit (loss) for the year | -56 832 | -56 832 | |||
| Other comprehensive income | 31 | -10 496 | -10 465 | ||
| Issue of share capital | 4 | 9 997 | 10 001 | ||
| Transaction costs | - | ||||
| Share based program options | 2 810 | 2 810 | |||
| At 30 September 2023 | 127 | 240 846 | -1 305 | -187 153 | 52 516 |
| At 1 January 2024 | 161 | 321 180 | -80 | -192 194 | 129 066 |
| Profit (loss) for the period | -45 460 | -45 460 | |||
| Currency translation differences in OCI | -1 485 | - | -1 485 | ||
| Issue of share capital | 0 | 0 | |||
| Share based program options | 4 195 | - | 4 195 | ||
| Share premium reclassification1 | -192 194 | 192 194 | - | ||
| At 30 September 2024 | 161 | 133 182 | -1 565 | -45 460 | 86 318 |
1) For more information see note 6. Share Premium reclassification
Consolidated Statement of Cash Flows
| Quarters | First nine months | Full Year | ||||
|---|---|---|---|---|---|---|
| (Amounts in NOK thousand, unaudited) Notes |
Q3 2024 | Q3 2023 | 2024 | 2023 | 2023 | |
| Profit or loss before tax from continuing operations | -15 538 | -16 747 | -45 356 -41 654 | -59 376 | ||
| Profit or loss before tax for discontinued operations | -315 | -2 606 | -654 -15 220 | -5 910 | ||
| Adjustments to reconcile profit before tax to net cash flows: |
||||||
| Depreciation and amortisation | 1 397 | 316 | 3 822 | 4 315 | 6 492 | |
| Net financial income/expense | 737 | 1 136 | -2 311 | -8 247 | -4 449 | |
| Foreign exchange gains or losses | 27 | - | 27 | - | 3 186 | |
| Share-based payment expense | 1 409 | -1 130 | 4 195 | 2 810 | 4 219 | |
| Derecognition of Goodwill | - | - | - | - | 7 220 | |
| Working capital adjustments: | ||||||
| Changes in accounts receivable and other receivables | -1 571 -25 663 | -2 590 -19 465 | 5 802 | |||
| Changes in trade payables, | ||||||
| duties and social security payables | -1 895 | -268 | 226 | -2 232 | -3 162 | |
| Changes in other current liabilities and contract liabilities | -94 | 28 071 | -532 | 24 871 | -4 236 | |
| Net cash flows from operating activities | -15 844 -16 891 | -43 173 -54 822 | -50 214 | |||
| Net cash flows from operating activities | -15 844 -16 891 | -43 173 -54 822 | -50 214 | |||
|---|---|---|---|---|---|---|
| Cash flows provided by (used in) investing activities (NOK) |
||||||
| Capital expenditures and investments | -639 | - | -2 962 | -346 | -691 | |
| Sale (Purchase) of financial instruments | -0 | 4 700 | 19 613 | 22 138 | 22 346 | |
| Proceeds from sale of property, plant and equipment | - | -9 | - | 1 225 | 10 556 | |
| Interest received | 1 627 | 11 | 1 627 | 181 | 398 | |
| Net cash flow provided by (used in) investing activities | 988 | 4 703 | 18 278 | 23 197 | 32 610 |
| Quarters | First nine months | Full Year | ||||
|---|---|---|---|---|---|---|
| (Amounts in NOK thousand, unaudited) | Notes | Q3 2024 | Q3 2023 | 2024 | 2023 | 2023 |
| Cash flow | ||||||
| provided by (used in) financing activities (NOK) | ||||||
| Proceeds from issuance of equity | - | 10 001 | - | 10 002 | 85 473 | |
| Transaction costs on issue of shares | - | - | - | - | -3 608 | |
| Lease payments | -127 | 347 | -384 | 1 023 | -1 146 | |
| Interest paid | - | -0 | - | -3 | -23 | |
| Net cash flows | ||||||
| provided by (used in) financing activities | -127 | 10 348 | -384 | 11 023 | 80 696 | |
| Net increase/(decrease) in cash and cash equivalents | -14 983 | -1 841 | -25 279 -20 602 | 63 092 | ||
| Cash and cash equivalents | ||||||
| at beginning of the year/period | 90 887 | 18 004 | 100 008 | 36 791 | 36 791 | |
| Net foreign exchange difference | -1 072 | -432 | 104 | -458 | 125 | |
| Cash and cash equivalents, end of period | 74 833 | 15 731 | 74 833 | 15 731 | 100 008 |
CEO
ADDITIONAL INFORMATION
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
1.1 GENERAL INFORMATION
Corporate information
The consolidated financial statements of Desert Control AS and its subsidiaries (collectively, "the Group", "Company" or "Desert Control") for the three months period ended 30 September 2024 were authorised for issue by a Board meeting held on 14 November 2024.
Desert Control AS is a private limited liability company incorporated and domiciled in Norway. It's shares are traded at the unregulated market place Euronext Growth. The Group's head office is located at Grenseveien 21, 4313 Sandnes, Norway.
Desert Control specializes in climatesmart Agri-tech solutions to combat desertification, soil degradation, and water scarcity. Its patented Liquid Natural Clay (LNC) enables sustainable ecosystem management by restoring and protecting soil's ability to preserve water and increase yields for agriculture, forests, and green landscapes.
1.2 BASIS OF PREPARATION
The consolidated financial statements of the Group comprise consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity, and related notes.
The consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as adopted by The European Union ("EU").
The consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments measured at fair value. Further, the financial statements are prepared based on the going concern assumption.
Comparative financial information is provided for the preceding period in the Consolidated statement of comprehensive income, Consolidated statement of financial position and Consolidated statement of cash flows.
Presentation currency and functional currency
The consolidated financial statements are presented in Norwegian Kroner (NOK), which is also the functional currency of the parent company. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.
For presentation purposes, balance sheet items are translated from functional currency to presentation currency by using exchange rates at the reporting
date. Items within total comprehensive income are translated from functional currency to presentation currency by applying monthly average exchange rates. If currency rates are fluctuating significantly, transaction date exchange rates are applied for significant transactions. The subtotals and totals in some of the tables in the notes may not equal the sum of the amounts shown in the primary financial statements due to rounding. All amounts have been rounded to the nearest thousand unless otherwise stated.
Going concern basis of accounting
Desert Control is currently in the precommercialization phase, focusing on refining our technologies and securing key partnerships for market entry. We anticipate completing this phase within the next two years, transitioning into commercial operations and revenue generation by the end of 2025.
This timeline is based on our current progress in product development, expected regulatory approvals, and initial customer engagement strategies. Management is committed to regularly reviewing and updating this timeline as circumstances evolve, ensuring our financial strategies are aligned with operational milestones to support the ongoing viability of the company. Desert Control's consolidated financial statements are prepared on a going concern basis.
2 REVENUE FROM CONTRACTS WITH CUSTOMERS
ACCOUNTING POLICIES
Revenue from sales is recognised when control of the goods or services transfers to the customer, reflecting the total consideration expected under the terms of the contract. Specifically, for our product LNC, revenue is recognised at the moment the product is applied at the delivery point, as this is when control typically passes to the customer, in accordance with the contractual agreements. This process marks the completion of the sole performance obligation per sale.
The Group's revenue from contracts with customers has been disaggregated and presented in the tables below:
| Quarters | First Nine Months | |||
|---|---|---|---|---|
| By area of operation: (Amounts in NOK thousand) | Q3 2024 | Q3 2023 | 2024 | 2023 |
| Liquid NaturalClay (LNC) continued operations | 109 | - | 1 879 | 845 |
| Liquid NaturalClay (LNC) discontinued operations | - | 48 | ||
| Licensing Royalties | 73 | - | 73 | - |
| Total | 182 | - | 1 952 | 893 |
| Quarters | First Nine Months | ||||
|---|---|---|---|---|---|
| By geographic market: | Q3 2024 | Q3 2023 | 2024 | 2023 | |
| Norway | 73 | - | 73 | - | |
| USA | 109 | - | 1 879 | 845 | |
| UAE, ref note 5 discontinued operations | 0 | - | 0 | 48 | |
| Total | 182 | - | 1 952 | 893 |
FINANCIAL REVIEW
3 EQUITY AND SHAREHOLDERS
ACCOUNTING POLICIES
Costs related to equity transactions
Transaction costs are deducted from equity, net of associated income tax.
Distribution to shareholders
The Group recognises a liability to make distributions to equity holders when the distribution is authorised and no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
No distributions were made to shareholders in the current or prior period.
Issued capital and reserves:
| authorised and fully paid |
Par value per share (NOK) |
Financial Position |
|---|---|---|
| 41 099 680 | 0,003 | 123 299 |
| 227 109 | 0,003 | 681 |
| 1 000 000 | 0,003 | 3 000 |
| 10 000 000 | 0,003 | 30 000 |
| 1 181 188 | 0,003 | 3 544 |
| 53 507 977 | 0,003 | 160 524 |
| 120 000 | 0,003 | 360 |
| 53 627 977 | 0,003 | 160 884 |
| Number of shares |
COMPANY UPDATE
All shares are ordinary and have the same voting rights and rights to dividends. Reconciliation of the Group's equity is presented in the statement of changes in equity.
The Group's shareholders:
| Shareholders in Desert Control AS at 30.09.2024 | Total shares | Ownership/ Voting rights |
|---|---|---|
| Woods End Interests LLC | 5 343 472 | 10,0% |
| J.P. Morgan SE | 4 348 444 | 8,1% |
| Nordnet Livsforsikring AS | 2 335 235 | 4,4% |
| DNB Bank ASA | 2 049 530 | 3,8% |
| Lithinon AS | 1 720 002 | 3,2% |
| BNP Paribas | 1 631 026 | 3,0% |
| Olesen Ole Morten | 1 586 083 | 3,0% |
| Lin AS | 1 502 275 | 2,8% |
| Yggdrasil Venture AS | 1 475 000 | 2,8% |
| Olesen Consult HVAC AS | 1 475 000 | 2,8% |
| Hako Ventures AS | 1 475 000 | 2,8% |
| Glomar AS | 1 368 456 | 2,6% |
| Nesse & Co AS | 1 360 000 | 2,5% |
| Ninas Holding AS | 1 304 128 | 2,4% |
| Jakob Hatteland Holding AS | 1 222 222 | 2,3% |
| Citibank | 1 212 280 | 2,3% |
| Clearstream Banking S.A. | 1 061 744 | 2,0% |
| OKS Consulting AS | 1 050 000 | 2,0% |
| The Northern Trust Comp | 958 275 | 1,8% |
| Sortun Invest AS | 949 937 | 1,8% |
| Idland Atle | 888 888 | 1,7% |
| Others | 17 310 980 | 32,3% |
| Total | 53 627 977 | 100,0 % |
Origin of shareholders:
CEO
| Country of Origin | No of shares | % | No of shareholders |
|---|---|---|---|
| Norway | 35 878 353 | 66,9% | 3 153 |
| United States | 5 744 691 | 10,7% | 39 |
| Sweden | 4 889 653 | 9,1% | 17 |
| Denmark | 1 801 562 | 3,4% | 11 |
| France | 1 322 942 | 2,5% | 9 |
| Ireland | 1 218 180 | 2,3% | 8 |
| United Kingdom | 1 170 447 | 2,2% | 6 |
| Others | 1 602 149 | 3% | 53 |
| Grand Total | 53 627 977 | 100% | 3 296 |
UPDATE
CEO
ADDITIONAL INFORMATION
4 CASH AND CASH EQUIVALENTS
ACCOUNTING POLICIES
Cash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits. Restricted bank deposits comprise of cash for withholding taxes which may not be used for other purposes.
| (Amounts in NOK thousand) | At 30 September | At 31 December | ||
|---|---|---|---|---|
| Cash and cash equivalents | 2024 | 2023 | 2023 | |
| Bank deposits, unrestricted | 74 371 | 14 771 | 99 522 | |
| Bank deposits, restricted | 461 | 961 | 486 | |
| Total cash and cash equivalents | 74 833 | 15 732 | 100 008 |
Bank deposits earns a low interest at floating rates based on the bank deposit rates.
ADDITIONAL INFORMATION
5 DISCONTINUED OPERATIONS
Middle East Operations
In June 2023, Desert Control entered into a significant agreement with Mawarid Holding Investment LLC (MHI) for the sale of its production entity in the United Arab Emirates, which included transferring the shares in the joint venture, Mawarid Desert Control, along with the Liquid Clay (LNC) production assets. This agreement designated MHI as the exclusive licensed operator for the UAE, aiming to expand operations across the Middle East. Subsequently, in July 2023, an agreement
was reached with Holistic Earth Advanced Regeneration Technologies SA (H-EART), resulting in the transfer of a single LNC Production cluster, which includes four production units, and granting H-EART the operational license on behalf of Desert Control in the Kingdom of Saudi Arabia.
Following these agreements, Desert Control Middle East LLC initiated the liquidation process to phase out the company's operations in the Middle East effectively.
In alignment with IFRS 5, the Group has classified its operations in the United Arab Emirates as discontinued following the strategic decision to exit the market. This reflects a significant shift in our geographical and operational focus, deemed material to our business structure and financial outlook.
FINANCIAL REVIEW
The financial results from these discontinued operations, including the gain or loss on deconsolidation, are separately reported in the Consolidated Statement of Comprehensive Income to enhance clarity and decision-usefulness for our stakeholders. Non-current assets and disposal groups related to these operations were measured at the lower of their carrying amount and fair value less costs to sell and have been presented as
held for sale in prior reporting periods until their disposal in 2023.
As of this date, Desert Control has no assets classified as held for sale, indicating the completion of significant transactions related to the discontinued operations within the 2023 fiscal year. All remaining minor transactions are expected to be settled by the final liquidation of Desert Control Middle East LLC in 2024.
The net results from these discontinued operations have been reported as a single line item in the Consolidated Statement of Comprehensive Income. For enhanced transparency and comparability, prior period figures have been restated.
| Net result for discontinues operations as of 30 June 2024 | Quarters | First Nine Months | ||||
|---|---|---|---|---|---|---|
| (Amounts in NOK thousand, unaudited) | Notes | Q3 2024 | Q3 2023 | 2024 | 2023 | |
| Revenue from sales | 2 | 0 | 0 | -0 | 48 | |
| Other income | 0 | 234 | 5 | 1 157 | ||
| Total income from discontinued operations | - | 235 | 5 | 1 206 | ||
| Cost of goods sold (COGS) | 320 | 76 | 795 | 302 | ||
| Gross margin from discontinued operations | -320 | 158 | -470 | 903 | ||
| Salary and employee benefit expenses | - | 1 822 | - | 9 052 | ||
| Other operating expenses | -4 | 760 | 184 | 4 888 | ||
| Depreciation and amortisation | - | 171 | - | 2 172 | ||
| Impairment | - | - | - | |||
| Operating profit or loss from discontinued operations | -315 | -2 595 | -654 | -15 209 | ||
| Finance income* | - | - | - | - | ||
| Finance costs | - | 11 | - | 2 883 | ||
| Profit or loss before tax from discontinued operations | -315 | -2 606 | -654 | -18 092 | ||
| Income tax expense | - | - | - | - | ||
| Profit or loss for the year from discontinued operations | -315 | -2 606 | -654 | -18 092 |
ADDITIONAL INFORMATION
6 SHARE PREMIUM RECLASSIFICATION
During Q3 2024, NOK 192,193,571 was reclassified from the share premium account to retained earnings to offset accumulated losses. This reclassification was approved by the Board of Directors and will be submitted for shareholder approval at the upcoming Annual General Meeting (AGM), in accordance with the Norwegian Companies Act (Aksjeloven). The reclassification did not impact the total equity of the company, as it was an internal adjustment within equity.
The purpose of this adjustment was to offset retained earnings losses with share premium and strengthen the company's equity position, ensuring compliance with Skattefunn and other relevant regulatory requirements.
ADDITIONAL INFORMATION
FORWARD-LOOKING STATEMENTS
Disclaimer related to forward-looking statements
Additional Information
This release contains forward-looking information and statements relating to the business, performance, and items that may be interpreted to impact the results of Desert Control and/or the industry and markets in which Desert Control operates.
Forward-looking statements are statements that are not historical facts and may be identified by words such as "aims", "anticipates", "believes", "estimates", "expects", "foresees", "intends", "plans", "predicts", "projects", "targets", and similar expressions. Such forwardlooking statements are based on current expectations, estimates, and projections, reflect current views concerning future events, and are subject to risks, uncertainties, and assumptions, and may be subject to change without notice. Forward-looking statements are not guaranteeing any future performance, and risks, uncertainties, and other important factors could cause the actual business, performance, results, or the industry and markets in which Desert Control operates in, to differ materially from the statements expressed or implied in this release by such forward-looking statements.
No representation is made that any of these forward-looking statements or forecasts will come to pass or that any forecasted performance, capacities, or results will be achieved, and you are cautioned not to place any undue reliance on any forwardlooking statements.
Q3 2024
The information enclosed is subject to the disclosure requirements pursuant to sections 5-12 in the Norwegian Securities Trading Act.
CEO
ADDITIONAL INFORMATION
INQUIRIES
For more information, please contact:
Ole Kristian Sivertsen President and Group CEO
Email: [email protected] Mobile (NOR): +47 957 77 777 Mobile (USA): +1 650 643 6136
Leonard Chaparian
Chief Financial Officer
Email: [email protected] Mobile: +47 90 66 55 40
Making Earth Green Again
GROUP HQ – NORWAY
YUMA
1219 E 21st St
Desert Control AS Grenseveien 21 (FOMO Works) 4313 Sandnes, Norway
PALO ALTO
PHOENIX / MARICOPA
Yuma, AZ 85365, USA
Desert Control Americas Inc
Desert Control Americas Inc 470 Ramona Street Palo Alto, CA 94301, USA
Desert Control Americas Inc 37860 W Smith Enke Rd Maricopa, AZ 85138, , USA
www.desertcontrol.com