Quarterly Report • Aug 24, 2023
Quarterly Report
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Desert Control AS | Q2 Report 2023
| DESERT CONTROL SECOND QUARTER AND FIRST HALF 2023 REPORT4 | |
|---|---|
| Q2 AND FIRST HALF 2023 HIGHLIGHTS5 | |
| FINANCIAL KEY FIGURES 6 |
|
| COMPANY UPDATE 7 |
|
| Corporate Updates | 7 |
| United States | 10 |
| Middle East | 12 |
| ABOUT DESERT CONTROL 15 |
|
| INQUIRIES | 16 |
| CAUTIONARY NOTE |
17 |
| STATEMENT BY THE MANAGEMENT AND BOARD OF DIRECTORS | 18 |
| CONSOLIDATED FINANCIAL STATEMENTS DESERT CONTROL GROUP19 | |
| ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG)30 | |
| OUR CORE VALUES | 31 |
Desert Control concludes strategic review, initiates transition to licensed operator model for the Middle East, delivers on target for the United States, and obtains key regulatory approvals. The Company closes the quarter with an outlook for significant cost reductions, improved capital efficiency, and strengthened liquidity.
Webcast presentation for Desert Control Q2 and First Half 2023 Report and Interim Financial Results is hosted on 24 August 2023 at 10:00 AM, Central European Time (CET). Register: https://go.desertcontrol.com/Q2-2023
2023, delivered on target, and
toward conversion to larger Company anticipates to start negotiations for the inaugural
compliance with the USDA National Organic Program for
of LNC application since July 2022. Demonstrated further
Sandnes, Norway, 24 August 2023 – Desert Control AS (DSRT) announces its second quarter and first half report for the fiscal period ending 30 June 2023.
Desert Control concludes strategic review, initiates transition to licensed operator model for the Middle East, delivers on target for the United States, and obtains key regulatory approvals. The Company closes the quarter with an outlook for significant cost reductions, improved capital efficiency, and strengthened liquidity.
STEADFAST PROGRESS, UNLOCKING POTENTIAL, AND MAKING STRATEGIC ADVANCEMENTS
Desert Control started 2023 with a sharp focus on executing a sales strategy based on a customer conversion model. The U.S. team achieved its targets of securing five new pilot projects per quarter and is steadily progressing toward conversion to larger deployments. Around the end of the year, the Company anticipates to start negotiations for the inaugural contract for large-scale deployment, marking a pivotal milestone for LNC commercialization in the United States.
The second quarter marked the launch of a strategic review process, resulting in the transition to a royalty-based licensed operator model for the Middle East. The new
model empowers local partners to take on complete responsibilities for LNC production, sales, and delivery. This restructuring optimizes cost efficiency and strengthens Desert Control's focus on R&D, innovation, strategic development, and global growth.
The strategic shift reduces operating costs by removing the need for local subsidiaries in the Middle East. The licensing model further allows for more efficient capital allocation as the local operators take ownership of LNC production units and associated future asset investments. The outcome of the strategic review secures ≈NOK 30M cash from asset sales and licensed operator transactions and an additional NOK 10M from a private placement.
Transitioning to a licensed operator model for the Middle East further aims to reduce Desert Control's annual operating costs by >NOK 15M. The new model optimizes operational efficiency, reduces overhead, lowers financial expenditure, and enables a shift of resources to strengthen the development of the Company's business in the United States.
For more details about the licensed operator model, please refer to the Frequently Asked Questions (FAQ) document published on 1 August 2023: https://go.desertcontrol.com/ FAQ-LicenseModel
Financial Highlights Second Quarter 2023 [second quarter 2022 in brackets] Financial Highlights First Half 2023 [first half 2022 in brackets]
Gross R&D expenses NOK 0,3 M [NOK 0,9 M]
Revenue NOK 2,3 M 2 [NOK1 M]
• Equity 30.06.2023 NOK 67,8 M (equity ratio 91,2 %) [NOK 150,4 (92,4 %)]
1 Private placement of NOK 10M by issue of 1M DSRT shares to H-EART as strategic anchoring of the licensed operator partnership for KSA will be reflected in the cash balance as of August 2023. 2 ≈NOK 30M (USD 2.8M) revenues from initial licensed operator agreement transactions and asset sales are anticipated to be recognized in H2-2023
LNC production capacity increased by >2X for all deployed units, enabled by continuous innovation efforts during the first half of 2023. Boosting the capacity of existing units enables larger projects while optimizing already deployed CAPEX. Based on these improvements, the current LNC production capacity in the U.S. is anticipated to be sufficient to support the pipeline of Technical Pilots and Commercial Pre-Projects. Future CAPEX for additional LNC production units can be linked directly to signed contracts for largescale deployments.
The efficiency and scalability of LNC application further improved by 30X since July 2022.
• LNC received OMRI approval for use in compliance with the USDA National Organic Program, announced on 15 June 2023: https://go.desertcontrol.com/ OMRI
Entrepreneurship World Cup:
• Desert Control won the prestigious Sustainability and Environment Award at the Entrepreneurship World Cup Global Final in Riyadh on 12 March 2023: https://go.desertcontrol. com/ewc
• Desert Control was announced winner of the Uplink Challenge for Food Ecosystems in Arid Climates and named Top Innovator by the World Economic Forum at the Annual Meeting of the New Champions in Tianjin on 29 June 2023: https:// go.desertcontrol.com/WEF23
UAE
sectors in the UAE:
Technical Pilots: Engagement with potential clients is initiated through smaller-scale pilot programs, validating LNC's efficiency – essentially proving that "it holds water".
Pre-Projects): Successful Stage 1 pilots evolve into larger pre-projects where the goal is to demonstrate LNC's scalability and economic viability across larger areas, assessing cost savings and the impact on yield and crop quality.
Large-Scale Deployment: Upon successfully completing Stage 2, the objective is to enter contracts for large-scale commercial deployment.
Desert Control demonstrated steadfast progress and continued to deliver on target, securing five new pilots each quarter in the U.S. These pilots exhibit the versatile capabilities of LNC, showcasing its effectiveness across the agriculture, turf and landscaping segments for an increasing variety of crops, plants, and application methods.
The U.S. team continues improving operational efficiency. Pilots have been executed consistently, ensuring cost-effectiveness. Multiple deployments further demonstrated the value of applying LNC through existing irrigation systems – enhancing scalability, reducing labor requirements, and driving down costs. The overall efficiency and scalability of LNC application have improved by 30X since July 2022.
This progress, coupled with >2X increase in production capacity, signifies an important milestone for the U.S. operations. Larger projects can now be accommodated without additional asset investment, preserving capital while still growing operations.
Engagements with clients continue to highlight the need for water conservation as a linchpin for the sustainability of their businesses. With potential future water cuts and increasing costs, growers and landowners are increasingly seeking solutions. The OMRI certification of LNC for use in compliance with the USDA national organic program further validates LNC as a viable solution, extending its reach to the organic farming market.
The U.S. team is firmly on track and targets continued delivery on target for the second half.
Deployments continue to demonstrate that LNC application is not limited by crop type. LNC is expanding its reach as a viable solution for diverse vegetation growing in sandy soils.
The staged customer conversion model remains at the heart of the U.S. sales strategy. The purpose is to build trust with clients through 3 stages, respecting soil as the lifeline of their livelihood. The objective is to secure at least five new pilot projects per quarter, targeting a >50% conversion to larger deployments. This strategy underscores our commitment to growing LNC adoption at the speed of trust.
Land upgrade (Conversion of barren land)
Avoids costs related to setting up, managing, and operating local subsidiaries.
• Enables reallocation of resources towards R&D, innovation, strategic development, and global expansion.
In Summary: The licensed operator model ensures continued development of the Middle East region through local partners while Desert Control shifts resources and focus to strengthen the development of business opportunities in the United States and other markets.
For more details: https://go.desertcontrol.com/FAQ-LicenseModel
Under the licensed operator model, Desert Control grants partners in the Middle East (MHI and H-EART) the rights to produce, sell, and deliver LNC within designated territories under a royalty-based license.
Following the strategic review initiated in April, licensed operator agreements have been signed with Mawarid Holding Investment in the United Arab Emirates and H-EART in the Kingdom of Saudi Arabia. As a result, these partners will assume full responsibility for LNC production, sales, and delivery within their designated Middle East markets. This approach obviates the need for local subsidiaries and simultaneously transfers ownership and the accompanying CAPEX requirements for production assets to the operators.
Transitioning to the licensed operator model unlocks cash, reduces costs, and frees up resources, allowing Desert Control to focus more intently on the United States while licensed operators continue developing the Middle East.
A significant milestone was further achieved on 13 July 2023 by receiving final certification from the Ministry of Climate Change and Environment (MOCCAE). This regulatory approval authorizes LNC for sale and use across all sectors in the UAE. The MOCCAE accreditation will support future endeavors in obtaining necessary regulatory approvals for LNC across the Middle East.
The collaboration with esteemed regional partners, powered by the licensed operator model, seamlessly integrates global strategy with local expertise. This forward-thinking approach reinforces Desert Control's relevance in the Middle East, fostering sustainable innovation and growth through strategic partnerships in the region.
Moving into the year's second half, Desert Control remains committed to its sales strategy focused on the customer conversion model. The Company maintains its objective of securing minimum five new pilot projects per quarter, targeting a 50% conversion to larger deployments. Negotiations for the inaugural contract for large-scale deployment
is anticipated to start from around the end of the year.
The outlook remains promising, bolstered by the strategic initiatives and advancements in the first half of 2023. The Company has increased LNC production capacity more than twofold, significantly improving unit economics and extending the reach of deployed CAPEX. This achievement enables delivery
capabilities for larger projects without investment in additional assets. Innovation efforts focused on enhancing production capacity, unit economics, and operational efficiency will continue.
We thank our team, partners, shareholders, and all other stakeholders for the continued support!
Desert Control specializes in climate-smart AgTech solutions to combat desertification, soil degradation, and water scarcity. Its patented Liquid Natural Clay (LNC) restores and enhances soil ecosystems to reduce water usage and improve the efficiency of fertilizers and natural resources for agriculture, forests, and green landscapes. LNC enables sandy and arid soil to retain water and nutrients, thus increasing crop yields, plant health, and ecosystem resilience while preserving water and natural resources by up to 50%.
Agriculture and food production consumes more than 70% of all available freshwater. Desertification and soil degradation further increase the pressure on water and natural resources in a negative spiral. Feeding the global population requires growing more food in the next 40 years than was produced over the last 500 years; this can only be achieved by improving resource efficiency and regenerating nature.
According to the United Nations, twelve million hectares of fertile land perish annually to desertification, representing an annual \$490 billion loss to the global economy. Desert Control's vision is making earth green again to foster the prosperity of life.
For more about Desert Control, visithttps://www.desertcontrol.com
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
Disclaimer related to forward-looking statements
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 forward-looking 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 forwardlooking 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 forward-looking statements.
The information enclosed is subject to the disclosure requirements pursuant to sections 5-12 in the Norwegian Securities Trading Act.
Register: https://go.desertcontrol.com/Q2-2023 24 August 2023 at 10:00 AM
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ..............................................20 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ......................................................21 CONSOLIDATED STATEMENT OF CASH FLOWS .....................................................................22 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................................23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS...................................................24
1.1 General information................................................................................................ 24 1.2 Basis of preparation ................................................................................................ 24 2 Revenue from contracts with customer.................................................................... 25 3 Equity and shareholders............................................................................................. 26 4 Cash and cash equivalents......................................................................................... 28 5 Assets classified as held for sale ................................................................................ 29
The Board of Directors and the CEO have considered and approved the Q2 and First Half 2023 Report and Interim Financial Results for Desert Control Group ("Group") for the three months ending on 30 June 2023. The interim consolidated financial statements are unaudited and have been prepared in accordance with IFRS as well as additional information requirements as per the Norwegian Accounting Act.
We confirm to the best of our knowledge that:
Knut Nesse Chair
Maryne Lemvik Board Member
Kristi an P. Olesen Board Member
Marit Røed Ødegaard
Board Member
Ole Kristi an Sivertsen Chief Executi ve Offi cer
Geir Hjellvik Board Member
20 21
| Quarters | First half | |||||
|---|---|---|---|---|---|---|
| (Amounts in NOK thousand, unaudited) | Notes Q2 2023 Q2 2022 | 2023 | 2022 | 2022 | ||
| Revenue from sales | 2 | 18 | 458 | 893 | 1 053 | 2 223 |
| Other income | 432 | - | 1 448 | - | 1 995 | |
| Total income | 450 | 458 | 2 341 | 1 053 | 4 218 | |
| Cost of goods sold (COGS) | -164 | 834 | 289 | 1 742 | 2 508 | |
| Gross margin | 614 | - 377 | 2 052 | - 690 | 1 711 | |
| Salary and employee benefit expenses | 11 266 13 821 27 360 30 163 62 087 | |||||
| Other operating expenses | 8 864 | 6 091 17 598 12 251 29 859 | ||||
| Depreciation and amortisation | 2 092 | 1 511 | 3 999 | 2 586 | 6 108 | |
| Operating profit or loss | -21 608 -21 799 -46 905 -45 689 -96 343 | |||||
| Finance income | 3 821 | 5 353 | 9 825 | 5 779 15 873 | ||
| Finance costs | 441 | 351 | 441 | 587 | 9 987 | |
| Profit or loss before tax | -18 228 -16 798 -37 521 -40 497 -90 457 | |||||
| Income tax expense | 8 | - | 11 | - | 3 | |
| Profit or loss for the year | -18 236 -16 798 -37 532 -40 497 -90 459 | |||||
| Allocation of profit or loss: | ||||||
| Profit/loss attributable to the parent | -18 236 -16 798 -37 532 -40 497 -90 459 | |||||
| Other comprehensive income: | ||||||
| Items that subsequently may be reclassified to profit or loss: | ||||||
| Exchange differences on translation of foreign operations | -2 693 | 46 | - | - 43 | ||
| Total items that may be reclassified to profit or loss | -2 693 | - | 46 | - | - 43 | |
| Total other comprehensive income for the year | -2 693 | - | 46 | - | - 43 | |
| Total comprehensive income for the year | -20 930 -16 798 -37 486 -40 497 -90 503 | |||||
| Allocation of total comprehensive income | ||||||
| Total comprehensive income attributable to owners of the parent | -20 930 -16 798 -37 486 -40 497 -90 503 | |||||
| (Amounts in NOK thousand, unaudited) | Notes | 30.06.2023 | 30.06.2022 | 31.12.2022 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 5 | - | 6 504 | 7 221 |
| Property, plant and equipment | 5 | 7 055 | 21 462 | 21 002 |
| Right-of-use assets | 5 | 647 | 1 497 | 1 635 |
| Total non-current assets | 7 701 | 29 463 | 29 857 | |
| Current assets | ||||
| Inventory | 230 | 90 | 584 | |
| Accounts receivable | 21 | 564 | 1 572 | |
| Other receivables | 4 404 | 8 131 | 9 052 | |
| Other current financial assets | 23 979 | 40 850 | 41 416 | |
| Cash and cash equivalents | 4 | 18 004 | 82 023 | 36 791 |
| Total current assets | 46 637 | 131 658 | 89 415 | |
| Assets classified as held for sale | 5 | 20 046 | - | - |
| TOTAL ASSETS | 74 385 | 161 121 | 119 272 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 3 | 124 | 123 | 123 |
| Share premium | 230 849 | 230 849 | 230 849 | |
| Currency translation differences | -1 290 | -3 571 | -1 336 | |
| Retained earnings | -161 840 | -76 966 | -122 636 | |
| Total equity | 67 843 | 150 436 | 107 001 | |
| Non-current liabilities | ||||
| Non-current lease liabilities | 702 | 198 | 425 | |
| Total non-current liabilities | 702 | 198 | 425 | |
| Current liabilities | ||||
| Current lease liabilities | 217 | 1 195 | 1 059 | |
| Trade and other payables | 3 294 | 4 617 | 5 004 | |
| Public duties payable | 690 | 323 | 944 | |
| Other current liabilities | 1 638 | 4 352 | 4 839 | |
| Total current liabilities | 5 839 | 10 487 | 11 845 | |
| Total liabilities | 6 541 | 10 685 | 12 270 | |
| TOTAL EQUITY AND LIABILITIES | 74 385 | 161 121 | 119 272 |
Sandnes, 23.08.2023
Knut Nesse Chair
Maryne Lemvik Board Member
Kristi an P. Olesen
Board Member
Marit Røed Ødegaard Board Member
Ole Kristi an Sivertsen Chief Executi ve Offi cer
Geir Hjellvik Board Member
| Quarters | First half | Full Year | |||||
|---|---|---|---|---|---|---|---|
| Cash flows from operating activities (NOK thousand) | Notes Q2 2023 Q2 2022 | 2023 | 2022 | 2022 | |||
| Profit or loss before tax | -18 228 -16 798 -37 521 -40 497 -90 457 | ||||||
| Adjustments to reconcile profit before tax to net cash flows: | |||||||
| Net financial income/expense | -3 380 -5 001 -9 384 -5 192 -5 886 | ||||||
| Depreciation and amortisation | 2 092 | 1 511 | 3 999 | 2 586 | 6 108 | ||
| Share-based payment expense | 2 025 | 33 | 3 940 | 124 | 4 283 | ||
| Working capital adjustments: | |||||||
| Changes in accounts receivable and other receivables | 5 066 | 78 | 6 198 | -2 553 -5 066 | |||
| Changes in trade payables, duties and social security payables | -1 682 -4 774 -1 964 | 1 395 | 2 402 | ||||
| Changes in other current liabilities and contract liabilities | -1 370 | 1 496 -3 200 | - 326 | 161 | |||
| Net cash flows from operating activities | -15 477 -23 455 -37 932 -44 464 -88 455 | ||||||
| Cash flows from investing activities (NOK) | |||||||
| Purchase of property, plant and equipment | - -6 838 | - 346 -11 155 -13 969 | |||||
| Purchase of financial instruments | 14 924 24 521 17 437 36 497 36 744 | ||||||
| Proceeds from sale of property, plant and equipment | 433 | - | 1 234 | - | 890 | ||
| Interest received | 82 | - | 170 | - | 867 | ||
| Net cash flow from investing activities | 15 439 17 683 18 495 25 342 24 533 | ||||||
| Cash flow from financing activities (NOK) | |||||||
| Proceeds from issuance of equity | 1 | - | 1 | 1 | 1 | ||
| Lease payments | 128 | - | 677 | - 727 | -1 590 | ||
| Interest paid | -4 | - | -2 | - | - 3 | ||
| Net cash flows from financing activities | 125 | - | 676 | - 726 | -1 592 | ||
| Net increase/(decrease) in cash and cash equivalents | 87 -5 772 -18 761 -19 848 -65 514 | ||||||
| Cash and cash equivalents at beginning of the year/period | 17 795 87 886 36 790 101 923 101 924 | ||||||
| Net foreign exchange difference | 121 | - 91 | -25 | - 53 | 380 | ||
| Cash and cash equivalents, end of period | 18 004 82 023 18 004 82 023 36 790 |
| (Amounts in NOK thousand, unaudited) | Share capital | Share premium |
Cumulative translation differences |
Retained earnings |
Total equity |
|---|---|---|---|---|---|
| Balance at 31 December 2021 | 122 | 230 849 | - 107 | -36 592 | 194 272 |
| Profit (loss) for the period | -40 497 | -40 497 | |||
| Other comprehensive income | -3 464 | -3 464 | |||
| Issue of share capital | 1 | - | 1 | ||
| Transaction costs | - | ||||
| Share based payments | 124 | 124 | |||
| Balance at 30 June 2022 | 123 | 230 849 | -3 571 | -76 966 | 150 435 |
| Balance at 31 December 2022 | 123 | 230 849 | -1 336 | -122 636 | 107 001 |
| Profit (loss) for the period | -37 532 | -37 532 | |||
| Other comprehensive income | 46 | -5 613 | -5 567 | ||
| Issue of share capital | 1 | 1 | |||
| Transaction costs | - | ||||
| Share based payments | 3 940 | 3 940 | |||
| Balance at 30 June 2023 | 124 | 230 849 | -1 290 | -161 841 | 67 843 |
| (Amounts in NOK thousand, unaudited) | Share capital | Share premium |
translation differences |
Retained earnings |
Total equity |
|---|---|---|---|---|---|
| Balance at 31 December 2021 | 122 | 230 849 | - 107 | -36 592 | 194 272 |
| Profit (loss) for the period | -40 497 | -40 497 | |||
| Other comprehensive income | -3 464 | -3 464 | |||
| Issue of share capital | 1 | - | 1 | ||
| Transaction costs | - | ||||
| Share based payments | 124 | 124 | |||
| Balance at 30 June 2022 | 123 | 230 849 | -3 571 | -76 966 | 150 435 |
| Balance at 31 December 2022 | |||||
| 123 | 230 849 | -1 336 | -122 636 | 107 001 | |
| Profit (loss) for the period | -37 532 | -37 532 | |||
| Other comprehensive income | 46 | -5 613 | -5 567 | ||
| Issue of share capital | 1 | 1 | |||
| Transaction costs | - | ||||
| Share based payments | 3 940 | 3 940 |
The consolidated financial statements of Desert Control AS and its subsidiaries (collectively, "the Group" or "Desert Control") for the second quarter period ended 30 June 2023 were authorised for issue by a Board meeting held on 23 August 2023.
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 climate-smart 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.
The interim 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 interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as adopted by the EU (IAS 34). The same accounting policies and methods of computation are followed in the interim financial statements as compared with the most recent annual financial statement. The condensed interim financial statements do not include all of the information and disclosures required by International Reporting Standards (IFRS) for a complete set of financial statements, and these condensed interim financial statements should be read in conjunction with the most recent annual financial statements. The annual financial statements were prepared in accordance with International Financial Reporting Standards and interpretations as issued by the International Standards Board and as adopted by the EU The interim 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. There have been no changes to significant accounting policies since the preparation of the annual financial statements for 2022. The condensed interim financial statements are unaudited.
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.
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.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue from sale of LNC is recognised when a customer obtains control of LNC, which normally is when LNC is applied at point of delivery, based on the contractual terms of the agreements. Each sale represents a single performance obligation.
The Group's revenue from contracts with customers has been disaggregated and presented in the tables below:
| First half | Full Year | ||||
|---|---|---|---|---|---|
| Q2 2023 | Q2 2022 | 2023 | 2022 | 2022 | |
| 18 | 458 | 893 | 1 053 | 2 223 | |
| 18 | 458 | 893 | 1 053 | 2 223 | |
| Quarters | First half | Full year | |||
| Q2 2023 | Q2 2022 | 2023 | 2022 | 2022 | |
| - | - | - | 331 | - | |
| 18 | - | 845 | - | 1 100 | |
| - | 458 | 48 | 722 | 1 123 | |
| 18 | 458 | 893 | 1 053 | 2 223 | |
| Quarters |
Transaction costs are deducted from equity, net of associated income tax.
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.
| Share capital in Desert Control AS | Number of shares authorised and Par value per |
fully paid share (NOK) | Financial Position |
|---|---|---|---|
| At 1 January 2022 | 40 724 640 | 3 | 122 174 |
| Share issue 10 March 2022 | 375 040 | 0 | 1 125 |
| At 31 December 2022 | 41 099 680 | 0 | 1 125 |
| Share issue 10 March 2023 | 227 109 | 0 | 681 |
| At 30 June 2023 | 41 326 789 | 0 | 1 806 |
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.
| Shareholders in Desert Control AS at 30.06.2023 | Ownership/ Total shares Voting rights |
|
|---|---|---|
| Olesen Consult HVAC AS | 5 900 000 | 14,3 % |
| J.P. Morgan SE | 2 528 989 | 6,1 % |
| Nordnet Livsforsikring AS | 1 815 692 | 4,4 % |
| Ole Morten Olesen | 1 635 800 | 4,0 % |
| Lithinon AS | 1 423 706 | 3,4 % |
| Nesse & Co AS | 1 360 000 | 3,3 % |
| BNP Paribas | 1 313 365 | 3,2 % |
| LIN AS | 1 215 275 | 2,9 % |
| DNB BANK ASA | 1 108 449 | 2,7 % |
| Idland | 1 101 506 | 2,7 % |
| Clearstream Banking S.A. | 1 047 871 | 2,5 % |
| Jakob Hatteland Holding AS | 1 000 000 | 2,4 % |
| The Northern Trust Comp, London Br | 958 275 | 2,3 % |
| Beyond Centauri AS | 928 771 | 2,2 % |
| OKS Consulting AS | 925 000 | 2,2 % |
| Sortun Invest AS | 677 715 | 1,6 % |
| Glomar AS | 627 715 | 1,5 % |
| Investore Finans AS | 499 028 | 1,2 % |
| JPMorgan Chase Bank, N.A., London | 422 104 | 1,0 % |
| Others | 14 837 528 | 35,9 % |
| Total | 41 326 789 | 100,0 % |
| No of shares | % | Origin | # shareholders |
|---|---|---|---|
| 32 818 340 | 79.4 | Norway | 3 761 |
| 3 756 958 | 9.1 | Luxembourg | 8 |
| 1 596 359 | 3.9 | UK | 9 |
| 1 410 145 | 3.4 | France | 5 |
| 1 058 324 | 2.6 | Others | 57 |
| 686 663 | 1.7 | Sweden | 17 |
| 41 326 789 | 100 | Total | 3 856 |
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.
| Cash and cash equivalents | 30.06.2023 | 31.12.2022 |
|---|---|---|
| Bank deposits, unrestricted | 17 043 | 35 617 |
| Bank deposits, restricted | 961 | 1 174 |
| Total cash and cash equivalents | 18 004 | 36 791 |
Bank deposits earns a low interest at floating rates based on the bank deposit rates.
Non-current assets are classified separately as held for sale in the Consolidated balance sheet when a sale is highly probable. This condition is met when an asset is available for immediate sale in its present condition, Desert Controls is committed to the sale, and the sale is expected to be completed within one year from the date of classification. In Desert Control, these requirements are normally met when management has approved a negotiated letter of intent with the counterparties
Liabilities directly associated with the assets classified as held for sale and expected to be included as part of the sales transaction, are also classified separately. The net assets and liabilities of a disposal group classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
Furthermore, we would like to inform our stakeholders that the business operations in the Middle East are being discontinued. As a result, certain non-current assets related to this segment have been classified as held for sale as per the conditions mentioned above. This strategic decision aligns with our commitment to optimize our operations and resources for enhanced growth and value creation.
In the second quarter of 2023 Desert Control entered into agreements with Mawarid Holding Investment LLC and Mawarid International Investment LLC (jointly referred to as "Mawarid"), pursuant to which Mawarid will acquire Desert Control's 49% ownership in Mawarid Desert Control LLC. Further, Mawarid will acquire Desert Control Liquid Natural Clay Manufacturing (Sole Proprietorship) LLC. In connection with the contemplated transaction, Mawarid will also acquire mobile LNC production units currently operated by Desert Control.
For the initial implementation of the agreements, a consideration of USD 1.8 million will be payable to Desert Control in two tranches in relation to the transfer of the 49% ownership in Mawarid Desert Control LLC and the 100% ownership in Desert Control Liquid Natural Clay Manufacturing (Sole Proprietorship) LLC to Mawarid.
In the second quarter of 2023 Desert Control entered into an agreement with Holistic Earth Advanced Regeneration Technologies SA (H-EART). H-EART will acquire one LNC production cluster, consisting of 4 LNC production units, for USD 1 million.
Liquid Natural Clay (LNC) can reduce water consumption for agriculture, forests, and green landscapes by up to 50%. The amount of water required to produce LNC is recovered within 2-3 weeks (offset by irrigation water savings). Improved water efficiency and increased crop yields contribute significantly to a positive impact on the United Nations Sustainable Development Goals (SDGs), including reducing hunger and competition for scarce resources and securing access to clean water. Arid regions using energy-intensive seawater desalination can further significantly reduce CO2 and greenhouse gas (GHG) emissions.
LNC enables sandy soil and desert land to retain water and nutrients. Reduction of water consumption further allows for reducing fertilizer usage. Reduced leaching of fertilizers and pesticides through the soil can further minimize the risk of chemical run-off reaching through to natural water systems and oceans. Stopping fertilizer and pesticide leaching can further improve life below the water by reducing ocean acidification and eutrophication.
According to the Intergovernmental Panel on Climate Change (IPCC), restoring degraded soil ecosystems can globally offset 5-6 Gt of CO2 annually. Even degraded soils have degrees of stored carbon. When tilling or mechanically working amendments into the ground, carbon exposed to oxygen may turn into CO2 and escape into the atmosphere. LNC can be applied directly to the surface of the ground without intervention to the soil. LNC percolates into the ground in a non-intrusive way without exposing any carbon to surface air oxygen, safeguarding the carbon storage of soil ecosystems and fostering increased carbon sequestration.
Non-intrusive soil treatment is further gentle to fragile soil ecosystems, home to 95% of all biological species on earth. Reclaiming and protecting soil is therefore critical to preserving and restoring biodiversity.
Mining clay and the production of LNC requires energy. Logistics and transportation of material, equipment, personnel, and manufacturing also require energy. Desert Control strives to reduce energy consumption in all stages of the process and facilitate the use of renewable energy sources wherever available. These negative impact factors are, by far, surpassed by the sum of positive impacts from stopping and reversing desertification and soil degradation, reducing water consumption, and other environmental benefits.
LNC has no adverse impact on any of the 17 United Nations Sustainable Development Goals (SDGs). Further, LNC has a significant direct positive impact on 9 of the SDGs.
Leadership Inspirational pro-active execution
Curious and solution-oriented
Challenge status-quo | create value
Integrity Keep promises | grow strong relationships
Contribution Desire to make everything better
Diversity Inclusive | open-minded | respectful
Desert Control AS Grenseveien 21 (FOMO Works) 4313 Sandnes, Norway
Desert Control Americas Inc 470 Ramona Street Palo Alto, CA 94301, USA
Desert Control Middle East LLC Abu Dhabi Business Hub Unit No. B2-25 and B2-26, ICAD1 P.O.BOX 114043 Abu Dhabi, UAE
Desert Control Americas Inc 37860 W Smith Enke Rd Maricopa, AZ 85138, , USA
Desert Control Americas Inc 1219 E 21st St Yuma, AZ 85365, USA
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