Desert Control AS

M&A Activity • Jul 3, 2023

Desert Control Announces Finalization of Strategic Review Process for the Middle East

Desert Control Announces Finalization of Strategic Review Process for the Middle East

Sandnes, Norway, 3 July 2023 – Desert Control (DSRT) (the "Company") announces the conclusion of the strategic review process to change its business model for the Middle East as announced on 27 April 2023. The strategic review was initiated with the aim of optimizing long-term shareholder value and securing sustainable funding to strengthen the foundation to drive the Company's growth strategy. Today, the Company provides an update on the milestones achieved.

- 13 June 2023, the Company published an update on having received incoming interest from multiple parties related a potential change of the Company’s business model to a royalty based licensing structure with local operators taking on the complete responsibility for production, sales, distribution, and implementation of LNC for the Middle East region. The Company further announced having signed non-binding letters of intent with selected parties with the intention to reach final agreements by around mid-year.

- 22 June 2023, the Company announced an agreement where Mawarid Holding Investment (MHI) acquires Desert Control’s LNC production company in the UAE along with LNC production assets and Desert Control’s shareholding in the Abu Dhabi based JV Mawarid Desert Control for $1,8 million. MHI becomes Desert Control’s exclusive licensed operator for the UAE with ambitions to expand across the Middle East region.

- 3 July 2023, the Company announced an agreement with Heart SA to become a licensed operator for Desert Control in the Kingdom of Saudi Arabia (KSA). Heart SA will acquire one LNC production cluster (4 mobile LNC production units) for $1 million and an anchor the strategic partnership by becoming a shareholder in Desert Control AS with an investment of $1 million in a directed share issue at NOK 10,- per share.

Key results of the Strategic Review include:

1. Strengthened Liquidity through Partnership Agreements in the Middle East:

The Company successfully expanded its strategic partnership with Mawarid Holding Investment in the United Arab Emirates (UAE), and further signed a new agreement with Heart SA to produce, sell, distribute, and implement Desert Control's Liquid Natural Clay (LNC) in the Kingdom of Saudi Arabia (KSA). This milestone results in an addition of approximately NOK 40 million in increased liquidity for Desert Control.

2. Operational Cost Reduction from Transition to Royalty-Based Licensed Operator Model:

The Company's shift to a licensed operator model, targeted for completion during H2 2023, aims to reduce monthly operational costs by approximately NOK 1.5 million. The transition also introduces a royalty-based revenue stream from Middle Eastern partners, providing a consistent source of income throughout the term of the licensing agreements.

3. Stronger Foundation for Growth in the Middle East by New Partnership Model:

The Company is confident that leveraging the local knowledge, networks, and capacity of dedicated operator partnerships will spur growth and momentum in the Middle East, facilitating enhanced commercialization and adoption of Desert Control's LNC technology.

4. Enabling Accelerated Commercialization and Growth in the United States:

The transition to a licensed operator model strengthens the Company's foundation, allowing for increased focus on innovation and global expansion. By unlocking cash and reducing operational costs in the Middle East, the Company can continue developing the region while shifting resources to accelerate commercialization in the United States and other markets.

5. U.S. Update – Continued Progress and Steadfast Execution:

The Company continues to make strides in the United States. With ten new pilot projects signed year to date, Desert Control is on track to reach its target of 20 pilot projects in the U.S. by year's end. The Company targets a >50% conversion rate to larger projects and aims for the first contract for full-scale deployment to be signed by the end of the year. The recent OMRI approval of Liquid Natural Clay (LNC) for use in compliance with the USDA National Organic Program also broadens the Company's market opportunities in the U.S.

In conclusion, the strategic review process has strengthened Desert Control's financial position, enabling the Company to minimize short-term dilutive capital raises while extending the financial runway. The Board of Directors are pleased with the outcome of the strategic review. A stronger financial position combined with an improved foundation to drive LNC adoption in the Middle East will allow the Company to accelerate its United States business, poising the Company for continued growth and creation of long-term shareholder value.

For further inquiries, please contact:

Ole Kristian Sivertsen

President and Group CEO, Desert Control

oks@desertcontrol.com

About Desert Control:

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%.

For more about Desert Control, visit https://www.desertcontrol.com

Important notice:

This information is considered to be inside information pursuant to the EU Market Abuse Regulation (MAR) and is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act. The stock exchange announcement was published by Marianne Vika Bøe, Chief Financial Officer of Desert Control AS, at the time and date stated above in this announcement.

Disclaimer related to forward-looking statements

Matters discussed in this announcement may constitute forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as "believe", "expect", "anticipate", "strategy", "intends", "estimate", "will", "may", "continue", "should" and similar expressions. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although the Company believe that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict, and are beyond their control. Actual events may differ significantly from any anticipated development due to a number of factors, including without limitation, changes in public sector investment levels, changes in the general economic, political and market conditions in the markets in which the Company operates, the Company's ability to attract, retain and motivate qualified personnel, changes in the Company's ability to engage in commercially acceptable acquisitions and strategic investments, and changes in laws and regulation and the potential impact of legal proceedings and actions. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this release by such forward-looking statements. The Company does not make any guarantee that the assumptions underlying the forward-looking statements in this announcement are free from errors nor does it accept any responsibility for the future accuracy of the opinions expressed in this announcement or any obligation to update or revise the statements in this announcement to reflect subsequent events. You should not place undue reliance on the forward-looking statements in this announcement.

The information, opinions and forward-looking statements contained in this announcement speak only as at its date, and are subject to change without notice. The Company does not undertake any obligation to review, update, confirm, or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this announcement.

This announcement is for information purposes only and is not to be relied upon in substitution for the exercise of independent judgment. It is not intended as investment advice and under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy any securities or a recommendation to buy or sell any securities of the Company.