Investor Presentation • Nov 25, 2022
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Desert Control AS | Q3 Report 2022
| DESERT CONTROL THIRD QUARTER REPORT 2022 AND YEAR-TO-DATE UPDATE4 | |
|---|---|
| Q3 AND YEAR-TO-DATE HIGHLIGHTS5 | |
| FINANCIAL KEY FIGURES 6 |
|
| 2022 YEAR-TO-DATE COMPANY UPDATE 7 |
|
| Gain accelerated commercialization in the United States | 8 |
| Reach large-scale adoption of LNC in the Middle East | 10 |
| Obtain a strategic position to grow into Southern Europe | 12 |
| Waterproof the foundation for global scale-up | 12 |
| OUTLOOK 14 | |
| ABOUT |
16 |
| INQUIRIES | 17 |
| CAUTIONARY NOTE 18 |
|
| STATEMENT BY THE MANAGEMENT AND BOARD OF DIRECTORS | 19 |
| FINANCIAL STATEMENT DESERT CONTROL AS 20 |
|
| ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG)30 | |
| VISION AND MISSION | 31 |
| OUR STRATEGY32 | |
| OUR CORE VALUES33 |
Desert Control secures the first commercial contract in the United States, increases efficiency with lower operational costs in the UAE, and enters MoU for future projects in Southern Europe.
The company closes the third quarter with a positive cash balance of NOK 100 Million and has no interest-bearing debt.
Webcast presentation for Desert Control Q3 2022 Report, Interim Financial Results and YTD company update is hosted on 25 November 2022 at 10.00 AM, Central European Time (CET). Register: http://bit.ly/3g3fW5H
Strengthening the organization by accelerating the recruitment of a sales team to drive commercialization in Arizona and California.
Streamlined organization with personnel transfer to Mawarid JV drives increased efficiency with lower UAE operational costs for Desert Control (reducing running costs by >50%).
Strengthened management team improves the organizational scalability for future growth.
Operationalizing the Mawarid partnership by transferring personnel and operational costs related to sales, distribution and project delivery from Desert Control Middle East to the Mawarid Desert Control sales and distribution company.
Restructuring Desert Control Middle East into a focused LNC production entity with an indirect go-to-market model for the UAE market through the Mawarid partnership.
Continuing collaboration with the University of Arizona for impact studies of LNC for American soil with positive results. Expanding the validation program with additional crops.
Establishing an office in Yuma, Arizona, to prepare for commercial deliveries.
Securing Mawarid Desert Control contract for a strategic commercial pre-project with a significant UAE food-security company for implementation commencing Q4 2022.
Desert Control secures the first commercial contract in the United States, increases efficiency with lower operational costs in the UAE, and enters MoU for future projects in Southern Europe. The company closes Q3 2022 with a positive cash balance of NOK 100 Million and has no interestbearing debt.
Desert Control specializes in climatesmart Ag-tech solutions to combat desertification, soil degradation, and water scarcity. Its patented Liquid Natural Clay (LNC) restores and enhances soil ecosystems to; reduce the usage of and improve the efficiency of; water, fertilizers, and natural resources for agriculture, forests, and green landscapes.
[third quarter 2021 in brackets]
Gross R&D expenses NOK 0.1M [NOK 3.4M]
[first nine months of 2021]
Desert Control has developed Liquid Natural Clay (LNC) to restore and enhance soil ecosystems to; reduce the usage of and improve the efficiency of; water, fertilizers, and natural resources for agriculture, forests, and green landscapes. After 12 years of R&D, the innovation underwent academic independent validation and pilots in the UAE from 2019 to 2021.
In March 2021, the company raised 200 MNOK funding for a market-based proof of concept to demonstrate commercial viability in the UAE and prove transferability to other geographies. This initiative launched as the "2+2 strategy" with efforts and investments focused on two countries and two segments; the UAE and the United States, and the segments agriculture and landscaping.
"We must think big, start small, act fast, and build the foundation to scale exponentially. This is at the core of our strategy, says President and Group CEO Ole Kristian Sivertsen."
More than 110 countries worldwide suffer desertification, degradation of vital topsoil, and increasing water scarcity, and issues are further accelerated by rising temperatures and severe droughts. According to the United Nations, the global addressable market is growing annually by 12 million hectares of land perishing to desertification. Therefore, a critical pillar of our strategy is to build the foundation for global scale-up, which requires focus and relentless execution.
For the first three quarters of 2022, the strategic focus has been to (1) commercialize in the UAE, (2) validate in the United States, and (3) build the foundation. Important milestones were achieved in all three areas during the third quarter. The UAE entity was restructured to fully implement the indirect go-tomarket model through the Mawarid partnership with significant costefficiency gains for Desert Control. The Q3 progress in the United States strengthens confidence in the potential to accelerate commercialization significantly ahead of initial expectations.
Further strengthening of the group management and a validated scaleon-demand model prepares the company for future growth.
The group conducted its annual strategy review in October 2022 based on the year-to-date progress. Commercialization has started with bite-sized deliveries in the UAE, and the focus for 2023 will shift to reaching larger-scale adoption. For the U.S., the company will continue its independent academic validation initiatives and, in parallel, focus on gaining accelerated commercialization. The company further aims to obtain a strategic position to grow into Southern Europe as the next market and will continue to waterproof the foundation for global scale-up.
Desert Control's progress in the U.S. is moving faster than first anticipated. In the UAE, it took nearly four years of independent academic validation and pilots before commercial deliveries and market adoption of LNC started in July this year. The company's U.S. operation began in March 2022 with an academic validation study for LNC on American soil with the University of Arizona, and in less than a year, the first strategic contract was signed with a flagship customer.
The rapid progress in the U.S. receives a significant tailwind thanks to academic validation initiatives and four years of hard work in the Middle East backed by 12 prior years of R&D. The U.S. market is financially driven, and investments that yield increased profitability can happen fast. Extreme droughts and increasing regulatory restrictions on
water consumption in states such as Arizona and California create a sense of urgency to implement solutions.
For Limoneira, the macro drivers are essential, and ensuring sustained profitability for the agriculture business is vital, says Desert Control CEO, Ole Kristian Sivertsen. At the same time, Limoneira is a company taking real action to foster sustainability with a genuine and passionate focus on soil health, water conservation, and reducing energy and fertilizer intensity while optimizing yields and fruit quality combined with proactive stewardship for land, nature, and our environment.
The preparation to accelerate commercialization in the U.S. continued with readiness activities throughout the third quarter and resulted in the first commercial agreement with Limoneira Company in November 2022. Limoneira's objective is to adopt LNC to enable climate-smart and resilient agribusiness with optimal usage of water, fertilizers, and natural resources while optimizing yields and quality of citrus production in desert environments.
The project's initial scope, valued at NOK 1.8 Million, is to apply Liquid Natural Clay (LNC) for 2,000 citrus trees in Cadiz, California, and 2,000 citrus trees in Yuma, Arizona. The combined area covers 40 acres of land. The contract is further backed by a letter of intent (LOI) to expand LNC deployment to full-scale rollouts for Limoneira ranches starting by Cadiz in the Mohave desert.
Deployment for 2,000 trees at the Cadiz ranch is anticipated to complete during December 2022 and at the Yuma ranch during January 2023, allowing for key indicators to be measured over the growing season and evaluated after harvest in September – October 2023. Based on the successful outcome, it is anticipated that a large-scale roll-out for Limoneira ranches could start in Q4 2023 for the Cadiz ranch, with 800 acres of land and approximately 70,000 citrus trees under cultivation. The broader opportunity includes the Yuma ranch of 1,300 acres with approx. 120,000 trees and other applicable agribusiness operations of Limoneira.
"We lead the agribusiness industry by example because we dare to innovate and expand our practices. The land teaches us how to be better stewards and how to adapt as conditions change in the economy, our industry, and the environment. Limoneira is committed to being a catalyst for positive change, and we continue to view these challenges as an opportunity to create a better future", says Harold S. Edwards, President & CEO of Limoneira Company.
The initial plan for U.S. market entry anticipated academic validation initiatives to run until the end of the second half of 2023, followed by pilots in the second half and commercial activities commencing towards the end of
adoption in Arizona. Desert Control has been active in Yuma since the launch of the independent validation program for LNC on American soil with the University of Arizona and the Yuma County Cooperative Extension. The field study at the Yuma Mesa Agricultural Research Station has received significant attention and interest from the local community. Agriculture in Yuma accounts for 40% of the county's economic base contributing more than \$4 billion annually. The addressable market is approximately 70 000 hectares of irrigated cropland with significant additional available land opportunities for LNC in the surrounding area.
Desert Control's commercial strategy for the United Arab Emirates (UAE) is to develop the go-to-market channel in partnership with Mawarid Holding Investment under Alpha
Dhabi Holding in Abu Dhabi. The partnership is structured in a Joint Venture company, Mawarid Desert Control LLC (MDC). Desert Control AS remains the owner of the technology, intellectual property, data, and assets. Desert Control Middle East LLC (fully under Desert Control AS) controls and operates the production assets and produces LNC with MDC as its sole off-taker. MDC buys LNC from Desert Control and is the exclusive sales, distribution, and delivery channel in the UAE.
Mawarid's contribution secures the Joint Venture (J.V.) company MDC sufficient working capital and funding to establish and grow the business. MDC will have access to Mawarid's 11.000-strong workforce for LNC field deployment and projects and further be supported by Mawarid's extensive network of clients and relationships.
Although it has taken significant time to establish the J.V., the parties passed critical milestones to operationalize the new entity during the third quarter. The financial infrastructure, including bank accounts, critical systems, and governance, was implemented, and the company is, per November, operationally able to hire personnel. The General Manager for MDC, Moamen Younis, was officially appointed on 14 November, and key positions in the company are being filled.
Hiring activities to build the Mawarid Desert Control salesforce kicked off at the end of June. The new salespeople were onboarded during the third quarter by interim hire
in Desert Control Middle East, followed by secondment to MDC and finally transfer into the newly operationalized J.V.
To further streamline the new goto-market model, other roles and responsibilities related to sales and project delivery (field application of LNC) have been transferred from Desert Control Middle East to Mawarid Desert Control, which now has 17 employees, including seconded personnel.
Desert Control Middle East LLC was initially established and organized to deliver turnkey projects directly to end-user customers, including sales and marketing, production of LNC, field application, and the complete delivery of projects for treating soil and land with LNC. With the new indirect business model, responsibility for sales and marketing, distribution, field application, and project delivery shifts to Mawarid Desert Control LLC. Desert Control Middle East LLC has, during the third quarter, started restructuring into a manufacturing company focused on the production of LNC to be distributed to the market through Mawarid Desert Control.
The restructuring effectively lowers
Desert Control's operational cost for the Middle East by more than 50%. Employees in roles related to sales and marketing, distribution, field application, and project delivery are, as of 1 October, seconded and transferred to Mawarid Desert Control.
Mawarid Desert Control has secured a contract for a strategic commercial pre-project with a significant UAE food security company for implementation commencing Q4 2022. The customer aims to adopt LNC on farms with various crops, soil, and water conditions across the UAE. The objective is to strengthen leadership in the field of climatesmart and resilient farming with optimal usage of water, nutrients, and natural resources while optimizing the yields and quality of food production. The initial scope is the deployment of LNC for the company's experimental farm and R&D facility, where the objective is to develop a concept for broad implementation.
A project for LNC impact on date palm cultivation in partnership with Mawarid started in September 2021. Following the harvest in September 2022, the full-year impact demonstrated reduced water usage by 46% (compared to optimized irrigation). Yields increased by 8%,
Continuing the collaboration with the University of Arizona Indications from the first phase of the validation program in collaboration with the University of Arizona continued to show positive potential for reduced irrigation frequency, increased lateral movement of water in the soil profile, promising potential for fertilizer savings, and reduction in mortality rates of seedlings. Further potential could support crop quality. All treated plots demonstrated increased and improved lateral movement of water compared to control plots.
In addition to water and fertilizer savings, the increased lateral flow may allow for significant savings on irrigation systems and water infrastructure. Irrigation lines and pipes may be placed further apart. Lower water volume requirements may further impact dimensions and requirements for water and drainage infrastructure.
The validation study is part of a five-year program in collaboration with the University of Arizona. The second crop cycle of the five-year validation program was initiated in early September and is extended to new crops with lettuce and celery, both high-value cash crops for Yuma agriculture. Preliminary results show a significant potential for LNC to enhance the sandy soil ecosystem.
The company established a sales office and operation hub in Yuma, Arizona to accelerate commercialization and market
and fruit quality (grade A) increased by 21%. Improved crop quality is driven by less wash-out of nutrients and better soil health.
Research shows that date palms need an average of 300 liters of water daily. The impact of LNC reduced water usage to an average of 70 liters daily. Research papers are available on request.
Entered into MoU with Amarenco Group
Desert Control signed a Memorandum of Understanding (MoU) for LNC to become part of Amarenco Group's ECHO Pledge initiative to regenerate soil, land, nature and biodiversity proactively. The agreement was signed on 15 November 2022, and Amarenco aims to restore 5,000 hectares of land over the first five years of the pledge program.
Amarenco is an independent energy producer based on solar and photovoltaic infrastructure and projects. The ECHO pledge is an initiative to proactively offset its energy production facilities by investing in soil regeneration programs to foster biodiversity and a positive footprint for future generations. Desert Control will supply LNC for Amarenco initiatives in strategic locations aligned with strategic objectives from both sides. The MoU outlines commonly targeted territories affected by drought, water scarcity, desertification, and land
degradation. For Desert Control, the partnership can build a foundation to obtain a strategic position to grow into Southern Europe.
Ole Kristian Sivertsen, President and Group CEO of Desert Control, said: "Amarenco and Desert Control share the mission to combat desertification and soil degradation. Amarenco will identify soil regeneration opportunities within the Amarenco Pledge, and Desert Control will support feasibility studies and provide LNC to achieve the program's objectives. Our vision of Making Earth Green Again is a solid driver for
our partnership."
WATERPROOF THE FOUNDATION FOR GLOBAL SCALE-UP
During H1, Desert Control strengthened the leadership team with several new positions, and onboarding of the new team members commenced in Q3. The newly established management team strengthens the organization for future growth.
The experience gained during 2022 related to on-demand scalability and mobility of the assets enables Desert Control to link future CAPEX investments directly to signed agreements.
Considering the nature of agribusiness, an agile scale-ondemand model with limited upfront CAPEX requirements is highly attractive. Agriculture projects typically develop in stages, starting with small pilots and commercial revenue-generating pre-projects for clients to evaluate the business impact during the season (from seeding to harvest). Large-scale deployment for the client's entire farmland will commence based on the successful outcome of preprojects.
(*Full-Time Intelligent Passionate People – in other companies, referred to as FTE) Fourteen nationalities have joined Desert Control from multiple sectors bringing unique experience, expertise, and skillsets. High diversity in education, ages, and cultural backgrounds enriches our organization and is vital to deliver on our mission. 24% of the employees are female. The team has 20 people in Norway, 24 in the UAE, and 6 in the U.S.
The scale-on-demand model allows for building and deploying additional LNC production capacity as needed based on signed contracts.
Q4 priorities under our GROW strategy focus on:
• Prepare the next stage for the Amarenco Group MoU (anticipated H1-2023)
Continue dedication to the scale-on-demand model (investments linked to contracts)
the United States
16 17
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 the usage of and improve the efficiency of; water, 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 increases 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
Email: [email protected] Mobile (NOR): +47 957 77 777 Mobile (USA): +1 650 643 6136 Mobile (UAE): +971 52 521 7049
Chief Financial Officer
Email: [email protected] Mobile: +47 406 36 356
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.
The Board of Directors and the CEO have considered and approved the Q3 2022 Report and Interim Financial Results for Desert Control Group ("Group") for the first nine months ending on 30 September 2022. 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:
Sandnes, 22.11.2022
Maryne Lemvik Board Member
Kristi an P. Olesen Board Member
Marit Røed Ødegaard Board Member
Ole Kristi an Sivertsen
Chief Executi ve Offi cer
Brage Wårheim Johansen Board Member
Geir Hjellvik Board Member
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION 22 | |
|---|---|
| CONSOLIDATED STATEMENT OF CASH FLOWS 23 |
|
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 24 |
|
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS25 | |
| 1.1 General information | 25 |
| 1.2 Basis of preparation |
25 |
| 2 Revenue from contracts with customer | 26 |
| 3 Equity and shareholders | 27 |
| 4 Cash and cash equivalents | 29 |
| Quarters | First nine months |
Full Year | ||||
|---|---|---|---|---|---|---|
| (Amounts in NOK thousand, unaudited) | Notes Q3 2022 Q3 2021 | 2022 | 2021 | 2021 | ||
| Revenue from sales | 2 | 129 | 2 277 | 1 182 | 2 277 | 3 127 |
| Other income | - | - | - | - | - | |
| Total income | 129 | 2 277 | 1 182 | 2 277 | 3 127 | |
| Cost of goods sold (COGS) | 616 | 325 | 2 358 | 519 | 563 | |
| Gross margin | -487 | 1 952 | -1 177 | 1 758 | 2 564 | |
| Salary and employee benefit expenses | 13 941 | 5 075 44 104 | 9 655 14 993 | |||
| Other operating expenses | 7 193 | 4 741 19 444 12 563 18 662 | ||||
| Depreciation and amortisation | 1 707 | -212 | 4 294 | 229 | 1 544 | |
| Impairment | - | - | - | - | 658 | |
| Operating profit or loss | -23 328 | -7 652 -69 018 -20 688 -33 293 | ||||
| Finance income | 2 | 8 635 | -899 14 415 | -527 | 1 730 | |
| Finance costs | 33 | 3 | 620 | 28 | 179 | |
| Profit or loss before tax | -14 725 -8 555 -55 223 -21 243 -31 743 | |||||
| Income tax expense | - | - | - | - | - | |
| Profit or loss for the year | -14 725 -8 555 -55 223 -21 243 - 31 743 | |||||
| Allocation of profit or loss: | ||||||
| Profit/loss attributable to the parent | -14 725 -8 555 -55 223 -21 243 -31 743 | |||||
| Other comprehensive income/loss: | - - |
- - |
- - |
|||
| Items that subsequently may be reclassified to profit or loss: | - | - | - | |||
| Exchange differences on translation of foreign operations | -1 107 | - -3 387 | - | -72 | ||
| Total items that may be reclassified to profit or loss | -1 107 | - -3 387 | - | -72 | ||
| Total other comprehensive income/loss for the year | -1 107 | - -3 387 | - | -72 | ||
| - | - | - | ||||
| Total comprehensive income/loss for the year | -15 832 -8 555 -58 610 -21 243 -31 815 | |||||
| - | ||||||
| Allocation of total comprehensive income/loss Total comprehensive income attributable to owners of the parent |
-15 832 -8 555 -58 610 -21 243 -31 815 |
| (Amounts in NOK thousand, unaudited) Notes |
30.09.2022 | 30.09.2021 | 31.12.2021 | |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 8 032 | 6 504 | 6 504 | |
| Research and development | - | - | - | |
| Property, plant and equipment | 24 345 | 2 482 | 10 525 | |
| Investment in subsidiaries | - | - | - | |
| Right-of-use assets | 1 240 | 2 324 | 2 006 | |
| Deferred tax assets | - | - | - | |
| Total non-current assets | 33 616 | 11 309 | 19 036 | |
| Current assets | ||||
| Inventory | 99 | - | - | |
| Accounts receivable | 127 | 771 | 544 | |
| Other receivables | 7 228 | 10 884 | 5 597 | |
| Intercompany receivables | - | - | - | |
| Other current financial assets | 40 943 | 90 000 | 77 347 | |
| Cash and cash equivalents | 2 | 59 453 | 101 173 | 101 924 |
| Total current assets | 107 850 | 202 828 | 185 412 | |
| TOTAL ASSETS | 141 466 | 214 137 | 204 447 | |
| EQUITY AND LIABILITIES | ||||
| Equity | - | - | - | |
| Share capital | 123 | 122 | 122 | |
| Share premium | 230 849 | 230 849 | 230 849 | |
| Currency translation differences | -6 052 | 384 | -107 | |
| Retained earnings | -91 658 | -28 523 | -36 592 | |
| Total equity | 133 263 | 202 832 | 194 272 | |
| Non-current liabilities | ||||
| Non-current lease liabilities | - | 521 | 1 423 | |
| Deferred tax liabilities | - | - | - | |
| Non-current provisions | - | - | - | |
| Total non-current liabilities | - | 521 | 1 423 | |
| Current liabilities | ||||
| Current lease liabilities | 648 | 1 402 | 528 | |
| Trade and other payables | 4 597 | 223 | 2 523 | |
| Intercompany payables | - | - | - | |
| Public duties payable | -209 | 347 | 1 023 | |
| Other current liabilities | 3 167 | 1 323 | 1 497 | |
| Contract liabilities | - | 7 488 | 3 181 | |
| Total current liabilities | 8 203 | 10 784 | 8 751 | |
| Total liabilities | 8 203 | 11 305 | 10 175 | |
| TOTAL EQUITY AND LIABILITIES | 141 466 | 214 137 | 204 447 |
Sandnes, 22.11.2022
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
Brage Wårheim Johansen
Board Member
Geir Hjellvik Board Member
| (Amounts in NOK thousand, unaudited) | Quarters | First nine months | Full Year | |||
|---|---|---|---|---|---|---|
| Cash flows from operating activities | Notes Q3 2022 Q3 2021 | 2022 | 2021 | 2021 | ||
| Profit or loss before tax | -14 725 -8 555 -55 223 -21 243 -31 743 | |||||
| Adjustments to reconcile profit before tax to net cash flows: | ||||||
| Net financial income/expense | -8 603 | 902 -13 795 | 555 | -1 550 | ||
| Depreciation and amortisation | 1 707 | -212 | 4 294 | 229 | 1 544 | |
| Impairment | - | - | - | - | 658 | |
| Share-based payment expense | 33 | 139 | 157 | 672 | 811 | |
| Working capital adjustments: | ||||||
| Changes in accounts receivable and other receivables | 1 241 | -1 272 | -1 313 -9 653 -4 139 | |||
| Changes in trade payables, duties and social security payables | -552 | -211 | 842 | -683 | 2 292 | |
| Changes in other current liabilities and contract liabilities | -546 | -270 | -872 | 6 714 | 2 579 | |
| Net cash flows from operating activities | -21 445 -9 479 -65 909 -23 410 -29 547 | |||||
| Cash flows from investing activities | ||||||
| Purchase of property, plant and equipment | -2 643 | -2 828 -13 798 | -3 242 -10 632 | |||
| Purchase of financial instruments | 247 | - | 36 744 -90 000 -77 009 | |||
| Proceeds from sale of property, plant and equipment | 890 | - | 890 | - | 300 | |
| Interest received | 594 | 295 | 594 | 295 | 462 | |
| Net cash flow from investing activities | -912 -2 534 24 430 -92 948 -86 879 | |||||
| Cash flow from financing activities | ||||||
| Proceeds from issuance of equity | 3 | - | - | 1 200 000 200 000 | ||
| Transaction costs on issue of shares | 3 | - | - | -10 093 -10 093 | ||
| Lease payments | -824 | -727 | -1 551 | -1 087 | -1 098 | |
| Interest paid | 3 | -3 | -232 | -28 | 462 | |
| Net cash flows from financing activities | -821 | -730 | -1 782 188 792 189 271 | |||
| Net increase/(decrease) in cash and cash equivalents | -23 178 -12 743 -43 261 72 435 72 845 | |||||
| Cash and cash equivalents at beginning of the year/period | 4 82 023 114 551 101 923 28 935 28 935 | |||||
| Net foreign exchange difference | 608 | -636 | 790 | -197 | 144 | |
| Cash and cash equivalents, end of period | 59 453 101 173 59 453 101 173 101 923 |
| (Amounts in NOK thousand, unaudited) | Quarters First nine months |
Full Year | ||||
|---|---|---|---|---|---|---|
| Cash flows from operating activities | Notes Q3 2022 Q3 2021 | 2022 | 2021 | 2021 | ||
| Profit or loss before tax | -14 725 -8 555 -55 223 -21 243 -31 743 | |||||
| Adjustments to reconcile profit before tax to net cash flows: | ||||||
| Net financial income/expense | -8 603 | 902 -13 795 | 555 | -1 550 | ||
| Depreciation and amortisation | 1 707 | -212 | 4 294 | 229 | 1 544 | |
| Impairment | - | - | - | - | 658 | |
| Share-based payment expense | 33 | 139 | 157 | 672 | 811 | |
| Working capital adjustments: | ||||||
| Changes in accounts receivable and other receivables | 1 241 | -1 272 | -1 313 -9 653 -4 139 | |||
| Changes in trade payables, duties and social security payables | -552 | -211 | 842 | -683 | 2 292 | |
| Changes in other current liabilities and contract liabilities | -546 | -270 | -872 | 6 714 | 2 579 | |
| Net cash flows from operating activities | -21 445 -9 479 -65 909 -23 410 -29 547 | |||||
| Cash flows from investing activities Purchase of property, plant and equipment Purchase of financial instruments Proceeds from sale of property, plant and equipment |
-2 643 247 890 |
- - |
-2 828 -13 798 890 |
36 744 -90 000 -77 009 - |
-3 242 -10 632 300 |
|
| Interest received | 594 | 295 | 594 | 295 | 462 | |
| Net cash flow from investing activities | -912 -2 534 24 430 -92 948 -86 879 | |||||
| Cash flow from financing activities | ||||||
| Proceeds from issuance of equity 3 |
- | - | 1 200 000 200 000 | |||
| Transaction costs on issue of shares 3 |
- | - | -10 093 -10 093 | |||
| Lease payments | -824 | -727 | -1 551 | -1 087 | -1 098 | |
| Interest paid | 3 | -3 | -232 | -28 | 462 | |
| Net cash flows from financing activities | -821 | -730 | -1 782 188 792 189 271 | |||
| Net increase/(decrease) in cash and cash equivalents | -23 178 -12 743 -43 261 72 435 72 845 | |||||
| Cash and cash equivalents at beginning of the year/period | 4 82 023 114 551 101 923 28 935 28 935 | |||||
| Net foreign exchange difference | 608 | -636 | 790 | -197 | 144 | |
| Cash and cash equivalents, end of period | 59 453 101 173 59 453 101 173 101 923 |
| Cumulative | |||||
|---|---|---|---|---|---|
| (Amounts in NOK thousand, unaudited) | Share capital | Share premium |
translation differences |
Retained earnings |
Total equity |
| Balance at 1 January 2020 | 68 | 43 537 | - | -301 | 43 304 |
| Profit (loss) for the year | -4 209 | -7 020 | -11 229 | ||
| Other comprehensive income | -35 | -35 | |||
| Issue of share capital (Note 4.5) | 1 | 1 719 | 1 720 | ||
| Transaction costs | -52 | -52 | |||
| Share based payments (Note 4.8) | 1 608 | 1 608 | |||
| Balance at 31 December 2020 | 70 | 40 994 | -35 | -5 713 | 35 316 |
| Profit (loss) for the year | -31 743 | -31 743 | |||
| Other comprehensive income | -72 | 53 | -19 | ||
| Issue of share capital (Note 4.5) | 53 | 199 948 | 200 000 | ||
| Transaction costs | -10 093 | -10 093 | |||
| Share based payments (Note 4.8) | 811 | 811 | |||
| Balance at 31 December 2021 | 122 | 230 849 | -107 | -36 592 | 194 272 |
| Profit (loss) for the year | -55 223 | -55 223 | |||
| Other comprehensive income | -5 945 | -5 945 | |||
| Issue of share capital (Note 4.5) | 1 | - | 1 | ||
| Transaction costs | - | ||||
| Share based payments (Note 4.8) | 157 | 157 | |||
| Balance at 30 September 2022 | 123 | 230 849 | -6 052 | -91 658 | 133 262 |
The consolidated financial statements of Desert Control AS and its subsidiaries (collectively, "the Group" or "Desert Control") for the third quarter period ended 30 September 2022 were authorised for issue by a Board meeting held on 25 November 2022.
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.
LNC enables sand and degraded soil to retain water and nutrients, thus increasing crop yields and ecosystem resilience while preserving water resources by up to 50%.
Agriculture and food production already consume more than 70% of all available freshwater. Desertification and soil degradation drive a negative spiral of increasing water consumption and decreasing yields for global food production. Feeding our planet's growing population will require more food in the next 40 years than was produced over the last 500 years, putting even more pressure on vital resources such as water. This is the problem Desert Control is determined to solve. According to the United Nations, thirty million acres of fertile land (equal to Pennsylvania) perish to desertification annually, representing an annual loss of \$490 billion to the global economy. Desert Control's vision is to make our planet earth green again.
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 2021. 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 figures for Q3 2021 and the first nine months 2021 are restated due to the first time adoption of IFRS.
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.
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. The Group has generally concluded that it is the principle in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer.
The Group's revenue from contracts with customers has been disaggregated and presented in the tables below:
| Quarters | First nine months | Full Year | |||
|---|---|---|---|---|---|
| By area of operation: (Amounts in NOK thousand) | Q3 2022 | Q3 2021 | 2022 | 2021 | 2021 |
| Liquid NaturalClay (LNC) | 129 | 2 277 | 1 182 | 2 277 | 3 127 |
| Total | 129 | 2 277 | 1 182 | 2 277 | 3 127 |
| Quarters | First nine months | Full Year | |||
| By geographic market: | Q3 2022 | Q3 2021 | 2022 | 2021 | 2021 |
| Norway | - | - | 331 | - | 223 |
| USA | - | - | - | - | |
| UAE | 129 | 2 277 | 851 | 2 277 | 2 903 |
| Total | 129 | 2 277 | 1 182 | 2 277 | 3 127 |
Finance income consist of unrealized exchange income from intercompany loans.
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 2020 | 22 681 | 3,00 | 68 043 |
| Share issue | 497 | 3,00 | 1 491 |
| At 31 December 2020 | 23 178 | 3,00 | 69 534 |
| Share split 1:1 000 | 23 178 000 | 0,003 | 69 534 |
| Share issue 22 February 2021 | 340 000 | 0,003 | 1 020 |
| Share issue 9 April 2021 | 17 108 640 | 0,003 | 51 326 |
| Share issue 6 August 2021 | 98 000 | 0,003 | 294 - |
| At 31 December 2021 | 40 724 640 | 0,003 | 122 174 |
| Share issue 10 March 2022 | 375 040 | 0,003 | 1 125 |
| At 30 September 2022 | 41 099 680 | 0,003 | 123 299 |
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 30.09.2022 | Ownership/ Total shares Voting rights |
|
|---|---|---|
| Olesen Consult HVAC AS | 5 900 000 | 14,4 % |
| J.P. Morgan SE | 2 481 900 | 6,0 % |
| Ole Morten Olesen | 1 650 000 | 4,0 % |
| Nordnet Livsforsikring AS | 1 463 587 | 3,6 % |
| Lithinon AS | 1 423 706 | 3,5 % |
| Idland | 1 406 580 | 3,4 % |
| JPMorgan Chase Bank, N.A., London | 1 380 432 | 3,4 % |
| Nesse & Co AS | 1 360 000 | 3,3 % |
| Beyond Centauri AS | 1 243 371 | 3,0 % |
| LIN AS | 1 215 275 | 3,0 % |
| Monsunen Forvaltning AS | 1 146 158 | 2,8 % |
| DNB BANK ASA | 1 007 574 | 2,5 % |
| Jakob Hatteland Holding AS | 1 000 000 | 2,4 % |
| Clearstream Banking S.A. | 958 819 | 2,3 % |
| The Northern Trust Comp, London Br | 958 275 | 2,3 % |
| Investore Finans AS | 883 147 | 2,1 % |
| OKS Consulting AS | 805 000 | 2,0 % |
| Sortun Invest AS | 677 715 | 1,6 % |
| Glomar AS | 627 715 | 1,5 % |
| Others | 7 527 678 | 18,3 % |
| Totalt | 41 099 680 | 100% |
| No of shares | % | Origin | # shareholders |
|---|---|---|---|
| 34 863 011 | 82 | Norway | 3 723 |
| 3 707 688 | 9 | Luxembourg | 18 |
| 2 424 285 | 6 | UK | 12 |
| 500 055 | 1 | Sweden | 11 |
| 604 640 | 1 | Others | 48 |
| 41 099 679 | 100 | Total | 3 812 |
Cash and cash equivalents in the statement of financial position comprise cash at banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. 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 (Amounts in NOK thousand) | |
|---|---|
| -- | ----------------------------------------------------- |
| 58 832 | 100 911 | |
|---|---|---|
| 101 303 | ||
| 621 | 262 | 621 |
| 59 453 | 101 173 | 101 924 |
Bank deposits earns a low interest at floating rates based on the bank deposit rates.
SHARE PRICE AS OF 21 November 2022: NOK 21,0
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.
Making earth green again to foster the prosperity of life
• We aim to reclaim 100 million hectares of degraded land and
• We strive to create sustainable social impact, immense water savings, global food security, and regeneration of ecosystems to sequester carbon and balance our climate
• We aim to establish a Sub-Sahara social impact initiative by 2025
We combat desertification, land degradation, and water scarcity by;
• Restoring and enhancing soil ecosystems to protect vital topsoil;
• Reclaiming degraded land – turning sand into soil;
• Regenerating soil biodiversity and natural ecosystems;
• Reducing the consumption of water, fertilizers, and natural resources; for agriculture, forests, and green landscapes
resources.
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 the usage of and improve the efficiency of; water, 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%.
From sand to soil in 7 hours.
How
What
Everything we do must connect to a bigger picture and ultimately to our vision of making earth green again.
With the big picture (destination) in mind, we start small with laser focus and avoid spreading our resources too thin. Our business plan starts with a 2 + 2 strategy, focusing first on two segments and two countries; agriculture and landscaping in the United Arab Emirates and the United States, to ensure a successful foundation before expanding.
Everything we do is with a sense of urgency. Once we reach our ambition, we level up quickly. With a good foundation for 2 + 2, we move on to 4 + 4, always accelerating with strong resolve.
Everything we do must be scalable. The positive impact of our innovation must grow at an increasingly rapid rate in proportion to time. Climate change is a battle against time. With less than 60 years left before we run out of fertile topsoil, the only way to succeed is by solutions that can scale exponentially.
Keeping it simple is vital to achieving exponential scalability. In everything we do, we prepare for the future without "over-engineering" by the principle of simplicity. We constantly consider what happens if we multiply what we do today by thousands. By always preparing for the impact of growth, we cost-effectively design for efficiency at scale.
Desert Control's strategy is to build the foundation to bring our innovation to global markets with exponential scalability. The fundamental principles for executing our strategy are:
Leadership Inspirational pro-active execution
Curious and solution-oriented
Challenge status-quo | create value
Integrity Keep promises | grow strong relationships
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 Middle East LLC Arenco Towers, Office No.1408 Dubai Media City, Dubai, UAE
Desert Control Americas Inc 1219 E 21st St Yuma, AZ 85365, USA
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