Desert Control : Download Q1 2022 Report and Financial Results (ENG PDF)

report

2022

Desert Control AS | Q1 Report 2022

Contents
Q1 2022 REPORT AND FINANCIAL RESULTS............................................................................................	4
Q1 HIGHLIGHTS........................................................................................................................................	5
FINANCIAL KEY FIGURES..........................................................................................................................	6
COMPANY UPDATE Q1 2022.....................................................................................................................	7
1. Building commercialization readiness in the United Arab Emirates......................................................................	7
2. Expanding validation and pilot initiatives to the United States..............................................................................	9
3. Building the team and driving the transition from start-up to scale-up..............................................................	11
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)........................................................................	37
VISION AND MISSION............................................................................................................................	38
OUR STRATEGY.......................................................................................................................................	39
OUR CORE VALUES.................................................................................................................................	40

2

Desert Control AS | Q1 Report 2022

Q1 2022 Report and

Financial Results

Sandnes, Norway, 25 May 2022 -

Desert Control AS (DSRT) today

Q1 Highlights

Solid progress towards commercialization readiness:

announced its Q1 2022 Report and Financial Results for the first fiscal quarter, ending 31 March 2022.

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. With solid progress during Q1 2022,

the company is now entering the commercial stage in the Middle East and preparing to accelerate its activities in the United States.

• Completed incorporation (29 March) of the sales and distribution company Mawarid Desert Control LLC to start the commercialization of Liquid Natural Clay (LNC) in the United Arab Emirates
• Achieved further positive results from pilots with date palms reaching water saving of 50% and a public park in Abu Dhabi exceeding 40% water savings
• Executed field initiatives to increase LNC application capacity and capabilities(video: https://youtu.be/ q3velIaEK5Y)

• Developed a new prototype LNC production unit for pilot projects in the U.S.
• Completed the first deployment of LNC on American soil for a field study in collaboration with the University of Arizona(video: https://youtu.be/ PZ3heTEMtlE)
• Continued building LNC production capacity to be deployed for the UAE and U.S.

Strengthening of the team to prepare for scale-up:

• Strengthened the executive leadership team with Chief Strategy Officer, Chief Operations Officer, and Chief Commercial Officer, all joining on 1 July 2022
• Hired CEO for Desert Control Americas Inc. to build the team, drive validation initiatives and pilots, and spearhead the company's activities in the United States

• Attracted new talent joining in Q2 to establish a business development team and
  fill key roles to accelerate commercialization and go-to- market activities
• Ramped up Desert Control Academy to accelerate the onboarding of personnel and to drive training and field readiness initiatives

4

Webcast presentation for Desert Control Q1 2022 Report and Financial Results is hosted on 25 May 2022 at 10.00 AM, Central European Time (CET).

Register:https://bit.ly/3MbkEt0

50%

water saving

5

Desert Control AS | Q1 Report 2022

Financial key figures

Company Update

Q1 2022

Financial Highlights first quarter 2022

[first quarter 2021 in brackets]

Desert Control has developed Liquid Natural Clay (LNC) to restore soil and reduce water usage for agriculture, forests, and green landscapes. The

in December 2021. The UAE team grew from 35 to 46 people during Q1 2022. The operations team went through rigorous training

• Revenue NOK 0.6M [NOK 0.0M]
• EBITDA NOK -22.8M [NOK -9.2M]
• Net Income NOK -23.7M [NOK -9.3M]
• Gross R&D expenses NOK 1.6M [NOK 3.9M]
• Innovation Norway / Skattefunn grants NOK 1.9M [NOK 0.0M]

• Net proceeds from capital injection NOK 0.0
  [NOK 190M]
• Total cash balance 31.03.22 (bank deposits and funds) NOK 153.3M [NOK 25.2M]
• Equity 31.03.22 NOK 170.6M (equity ratio 92.5%)
  [NOK 28.0 (63.2%)]

innovation has been undergoing external validation, feasibility studies, and pilot projects in the United Arab Emirates (UAE) from 2019 throughout 2021. The company is now entering the commercialization stage in the UAE while preparing

to accelerate validation initiatives, pilots, and business activities in the United States.

The priorities for 2022 are to commercialize in the UAE, validate in the U.S., and build the team

coordinated under the newly formed Desert Control Academy, combining theoretical sessions and exams with workshops and practical field training and assessments. The team made significant progress

on standardizing and improving operational processes to ensure efficiency within project planning, mobilization, and production of LNC to drive optimized cluster utilization as commercialization commences and demand increases.

company with exclusive rights to serve the UAE market. The sales and distribution company, Mawarid

NOK

to ensure a robust and effective organization to drive the continued transition from start-up to scale-up. The company made solid progress on all priorities in Q1.

Obtaining the license to sell

Desert Control LLC, was awarded its business license on 29 March 2022. Mawarid Desert Control LLC is a limited liability company incorporated in Abu Dhabi under 51/49 shareholding of Mawarid

40

30	SHARE PRICE AS OF
24 MAY 2022: NOK 30.95

20

ISSUE PRICE AS OF

14 APRIL 2021: NOK 11.69

10

April 21

May 22

1. Building commercialization readiness in the United Arab Emirates

Desert Control Middle East continued hiring the remaining positions to ensure full staffing for the LNC production clusters added

Desert Control decided to change its go-to-market strategy for the UAE in the second half of 2021. The business plan updated for the IPO in Q1-21 targeted a direct sales model with Desert Control delivering end-to-end turnkey projects for LNC treatment of soil and land areas directly to clients. On 15 December 2021, the shift to an indirect sales model for the UAE was executed by entering into a partnership with Abu Dhabi based nature conservation and agriculture giant Mawarid Holding Investment.

The indirect sales model for the UAE allows Desert Control to focus on its core business, developing and producing LNC and accelerating global expansion. Sales and distribution of LNC will run through a dedicated sales and distribution

Holding Investment LLC and Desert Control AS.

Desert Control Middle East LLC in Abu Dhabi will operate Desert Control's mobile fleet of clusters to produce and deliver LNC to Mawarid Desert Control LLC on commercial terms.

Mawarid Desert Control will operate as an independent company and establishes its own workforce to autonomously sell and deliver

LNC projects to clients in the UAE. The company will utilize the field workforce and resources of Mawarid and its subsidiaries while building its dedicated team for the successful execution of projects.

6

7

Desert Control AS | Q1 Report 2022

The holy month of Ramadan commenced on 1 April 2022, directly after the award of the Mawarid Desert Control business license, slowing down activities in the UAE until 9 May. General Manager and an interim Operations Manager are appointed for Mawarid Desert Control and will onboard

in early May. The following steps include hiring the Head of Business Development and Sales, recruiting the sales team and operational staff, and finalizing administrative matters. Mawarid Desert Control anticipates operational readiness activities to start from the second half of May, with commercial activity commencing from the end of Q2.

The company anticipates the prolonged impacts of Covid-19 and change of go-to-market strategy for the UAE to adjust the business plan with commercial activities in the UAE commencing from the end of Q2. The company anticipates the long-term benefits of an indirect sales model in the UAE to offset the short-term impact.

Achieved further positive results from pilots

During Q1, the company continued achieving positive results from pilots. Water savings for date palms reached 50% showing significant economic and cultural value potential for millions of date palms and palm trees in the UAE.

The pilot project for a central public park in Abu Dhabi exceeded 40% water savings for LNC treated lawn areas compared to identical control areas.

Some of our pilot references and water saving achievements in the UAE

CROPS/VEGETATION	WATER SAVINGS	SEGMENT	LOCATION
Carrots, Cauliflower, Green Pepper and Lady Fingers	40%	Agriculture	Private farm in Al Ain, Abu Dhabi
Pearl Millet, Zucchini and Watermelon		40%	Agriculture	ICBA* in Dubai (Independent validation)
Cucumber, Basil, and Beetroot		50%	Agriculture	Research farm in Al Ain, Abu Dhabi
Sweet Corn		35%	Agriculture	Private farm in Dubai
Date Palms		50%	Agriculture	Private farm in Al Ain, Abu Dhabi
Salvadora, Ghaf, and Ziziphus (native forest trees)	40%	Forest/trees	Forest in Al Ain, Abu Dhabi
Palm Trees		50%	Landscaping	Luxury residential resort in Dubai
Paspalum Grass		45%	Landscaping	Investment and real-estate firm in Dubai
Paspalum Grass		40%	Landscaping	Luxury residential resort in Dubai
Lawn Area		35%	Landscaping	VIP area in Abu Dhabi
Bermuda Grass		47%	Landscaping	ICBA* in Dubai (Independent validation)
Turf Grass / Lawn Area		40%	Landscaping	Public park in Abu Dhabi
*ICBA - International Centre for Biosaline Agriculture

Pilots have mainly utilized soil moisture based irrigation and compare water consumption required to maintain equal soil moisture at levels required to maintain plant growth for an LNC treated area versus a comparable control area. Water savings achieved represent the stable state over time after irrigation levels are adjusted to the LNC impact.

Pilot projects and commercial opportunities previously developed by Desert Control will transfer to Mawarid Desert Control once the company is in operation.

Field initiatives to increase LNC application capacity and capabilities

(video: https://youtu.be/ q3velIaEK5Y)

Mawarid Desert Control will

About Mawarid:

• More than 11,000 employees from 23 countries
• 438 forests and protected areas spread over 200,000 hectares in Abu Dhabi
• 80 private farms 30 organic farms

• More than 13 million forest trees and over 630,000 palm trees
• More than 1,000,000 m2 of green areas
• More than 3000 pieces of machinery and equipment
• 160,000 km of irrigation pipelines

• More than 5000 wells
• 8 large nurseries for local plants with a capacity of more than 10 million seedlings per year
• 3 nurseries with more than 15 million seedlings annually

Operational bottlenecks to be solved shifted from LNC production to effective application of LNC for large areas after completing two additional production clusters in December 2021. Development of new application methods, testing of various equipment, and multiple field initiatives to increase LNC application capacity and capabilities were executed during Q1-22.

take over the responsibility for distributing, deploying, and applying LNC in the field for the UAE. Desert Control will continue driving initiatives to align application capabilities with production capacity but will not focus on developing specialized LNC application equipment in-house. The focus will be to utilize existing agricultural and landscaping solutions and foster partnerships with equipment manufacturers across the relevant sectors. Desert Control will dedicate its resources to core business activities such as developing formulation (recipes turned into algorithms), methodologies, and protocols for optimal context-based application of LNC independently of the physical equipment.

2. Expanding validation and pilot initiatives to the United States

The United States is a pivotal part of Desert Control's strategy and a stepping-stone for the company's global expansion. More than 40% of the continental United States is at risk of desertification. Since farming began in the Midwest, more than 50 billion tons of topsoil are estimated to have eroded. Increasing droughts and water scarcity further add to the challenges farmers and landowners currently face in the U.S.

In Q4 2021, Desert Control Americas

8

9