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Table of Contents
united states
Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-Q
(Mark One)
| ☑ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended September 30, 2024
OR
| ☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from …… to …….
Commission File Number 0-12114
Cadiz Inc.
(Exact name of registrant specified in its charter)
Delaware | 77-0313235 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
550 South Hope Street, Suite 2850 | |
Los Angeles, California | 90071 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (213) 271-1600
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | CDZI | The NASDAQ Global Market |
Depositary Shares (each representing a 1/1000th fractional interest in share of 8.875% Series A Cumulative Perpetual Preferred Stock, par value $0.01 per share) | CDZIP | The NASDAQ Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
☐ Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer
☑ Smaller Reporting Company ☐ Emerging growth company
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☑
As of November 8, 2024, the Registrant had 75,184,106 shares of common stock, par value $0.01 per share, outstanding.
Fiscal Third Quarter 2024 Quarterly Report on Form 10-Q |
Page |
Cadiz Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
| | For the Three Months | |
| | Ended September 30, | |
($ in thousands, except per share data) | | 2024 | | | 2023 | |
| | | | | | | | |
Total revenues | | $ | 3,224 | | | $ | 368 | |
| | | | | | | | |
Costs and expenses: | | | | | | | | |
Cost of sales | | | 2,409 | | | | 692 | |
General and administrative | | | 5,275 | | | | 5,127 | |
Depreciation | | | 307 | | | | 308 | |
| | | | | | | | |
Total costs and expenses | | | 7,991 | | | | 6,127 | |
| | | | | | | | |
Operating loss | | | (4,767 | ) | | | (5,759 | ) |
| | | | | | | | |
Interest expense, net | | | (2,023 | ) | | | (1,173 | ) |
| | | | | | | | |
Loss before income taxes | | | (6,790 | ) | | | (6,932 | ) |
Income tax expense | | | (3 | ) | | | (4 | ) |
| | | | | | | | |
Net loss and comprehensive loss | | $ | (6,793 | ) | | $ | (6,936 | ) |
| | | | | | | | |
Less: Preferred stock dividend | | | (1,265 | ) | | | (1,265 | ) |
| | | | | | | | |
Net loss and comprehensive loss applicable to common stock | | $ | (8,058 | ) | | $ | (8,201 | ) |
| | | | | | | | |
Basic and diluted net loss per common share | | $ | (0.12 | ) | | $ | (0.12 | ) |
| | | | | | | | |
Basic and diluted weighted average shares outstanding | | | 68,020 | | | | 66,611 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
($ in thousands, except per share data) |
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
4,858 |
|
|
$ |
1,307 |
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
4,265 |
|
|
|
1,482 |
|
General and administrative |
|
|
16,310 |
|
|
|
14,378 |
|
Depreciation |
|
|
907 |
|
|
|
942 |
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
21,482 |
|
|
|
16,802 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(16,624 |
) |
|
|
(15,495 |
) |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(5,883 |
) |
|
|
(3,637 |
) |
Loss on derivative liability |
|
|
- |
|
|
|
(220 |
) |
Loss on early extinguishment of debt |
|
|
- |
|
|
|
(5,331 |
) |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(22,507 |
) |
|
|
(24,683 |
) |
Income tax expense |
|
|
(8 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss |
|
$ |
(22,515 |
) |
|
$ |
(24,691 |
) |
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividend |
|
|
(3,818 |
) |
|
|
(3,818 |
) |
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss applicable to common stock |
|
$ |
(26,333 |
) |
|
$ |
(28,509 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share |
|
$ |
(0.39 |
) |
|
$ |
(0.44 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding |
|
|
67,598 |
|
|
|
65,299 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Condensed Consolidated Balance Sheets (Unaudited)
| | September 30, | | | December 31, | |
($ in thousands, except per share data) | | 2024 | | | 2023 | |
| | | | | | | | |
ASSET | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 3,326 | | | $ | 4,502 | |
Accounts receivable | | | 3,243 | | | | 904 | |
Inventories | | | 4,346 | | | | 2,106 | |
Prepaid expenses and other current assets | | | 1,090 | | | | 508 | |
Total current assets | | | 12,005 | | | | 8,020 | |
| | | | | | | | |
Property, plant, equipment and water programs, net | | | 86,760 | | | | 87,217 | |
Long-term deposit/prepaid expenses | | | 420 | | | | 420 | |
Goodwill | | | 5,714 | | | | 5,714 | |
Right-of-use asset | | | 2,186 | | | | 431 | |
Long-term restricted cash | | | 134 | | | | 134 | |
Other assets | | | 5,334 | | | | 5,438 | |
Total assets | | $ | 112,553 | | | $ | 107,374 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 1,787 | | | $ | 1,245 | |
Accrued liabilities | | | 1,987 | | | | 1,170 | |
Current portion of long-term debt | | | 138 | | | | 182 | |
Dividend payable | | | 1,265 | | | | 1,288 | |
Contingent consideration liabilities | | | 1,450 | | | | 1,450 | |
Deferred revenue | | | 2,032 | | | | 373 | |
Operating lease liabilities | | | 186 | | | | 127 | |
Total current liabilities | | | 8,845 | | | | 5,835 | |
| | | | | | | | |
Long-term debt, net | | | 55,699 | | | | 37,711 | |
Long-term lease obligations with related party, net | | | 24,665 | | | | 22,877 | |
Long-term operating lease liabilities | | | 1,976 | | | | 318 | |
Deferred revenue | | | 625 | | | | 625 | |
Other long-term liabilities | | | 44 | | | | 41 | |
Total liabilities | | | 91,854 | | | | 67,407 | |
| | | | | | | | |
Commitments and contingencies (Note 10) | | | | | | | | |
Stockholders’ equity: | | | | | | | | |
Preferred stock - $.01 par value; 100,000 shares authorized at September 30, 2024 and December 31, 2023; shares issued and outstanding – 329 at September 30, 2024 and December 31, 2023 | | | 1 | | | | 1 | |
8.875% Series A cumulative, perpetual preferred stock - $.01 par value; 7,500 shares authorized at September 30, 2024 and December 31, 2023; shares issued and outstanding – 2,300 at September 30, 2024 and December 31, 2023 | | | 1 | | | | 1 | |
Common stock - $.01 par value; 100,000,000 shares authorized at September 30, 2024 and 85,000,000 authorized at December 31, 2023; shares issued and outstanding – 68,096,161 at September 30, 2024 and 66,710,795 at December 31, 2023 | | | 679 | | | | 665 | |
Additional paid-in capital | | | 686,201 | | | | 679,150 | |
Accumulated deficit | | | (666,183 | ) | | | (639,850 | ) |
Total stockholders’ equity | | | 20,699 | | | | 39,967 | |
Total liabilities and stockholders’ deficit | | $ | 112,553 | | | $ | 107,374 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(22,515 |
) |
|
|
(24,691 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
907 |
|
|
|
942 |
|
Amortization of debt discount and issuance costs |
|
|
959 |
|
|
|
337 |
|
Amortization of right-of-use asset |
|
|
101 |
|
|
|
90 |
|
Interest expense added to loan principal |
|
|
1,686 |
|
|
|
711 |
|
Interest expense added to lease liability |
|
|
1,770 |
|
|
|
1,570 |
|
Finance expense |
|
|
307 |
|
|
|
- |
|
Unrealized loss on derivative liability |
|
|
- |
|
|
|
220 |
|
Loss on early extinguishment of debt |
|
|
- |
|
|
|
5,331 |
|
Compensation charge for stock and share option awards |
|
|
3,566 |
|
|
|
1,142 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(2,339 |
) |
|
|
44 |
|
Inventories |
|
|
(2,240 |
) |
|
|
(1,812 |
) |
Prepaid expenses and other current assets |
|
|
(582 |
) |
|
|
(402 |
) |
Other assets |
|
|
104 |
|
|
|
(532 |
) |
Accounts payable |
|
|
564 |
|
|
|
1,312 |
|
Lease liabilities |
|
|
(139 |
) |
|
|
(80 |
) |
Deferred revenue |
|
|
1,659 |
|
|
|
93 |
|
Other accrued liabilities |
|
|
870 |
|
|
|
323 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(15,322 |
) |
|
|
(15,402 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment and water programs |
|
|
(522 |
) |
|
|
(3,815 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(522 |
) |
|
|
(3,815 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net proceeds from issuance of stock |
|
|
- |
|
|
|
38,490 |
|
Dividend payments |
|
|
(3,841 |
) |
|
|
(3,841 |
) |
Proceeds from the issuance of long-term debt |
|
|
20,000 |
|
|
|
233 |
|
Principal payments on long-term debt |
|
|
(145 |
) |
|
|
(15,119 |
) |
Issuance costs long-term debt |
|
|
(1,294 |
) |
|
|
(27 |
) |
Costs for early extinguishment of debt |
|
|
- |
|
|
|
(600 |
) |
Taxes paid related to net share settlement of equity awards |
|
|
(52 |
) |
|
|
(261 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
14,668 |
|
|
|
18,875 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
(1,176 |
) |
|
|
(342 |
) |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
4,636 |
|
|
|
13,782 |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
3,460 |
|
|
$ |
13,440 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
For the three and nine months ended September 30, 2024 ($ in thousands, except share data)
| | | | | | | | | | | | | | | | | | 8.875% Series A Cumulative | | | Additional | | | | | | | Total | |
| | Common Stock | | | Preferred Stock | | | Perpetual Preferred Stock | | | Paid-in | | | Accumulated | | | Stockholders’ | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Equity | |
Balance as of December 31, 2023 | | | 66,710,795 | | | $ | 665 | | | | 329 | | | $ | 1 | | | | 2,300 | | | $ | 1 | | | $ | 679,150 | | | $ | (639,850 | ) | | $ | 39,967 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense, net of taxes | | | 472,779 | | | | 5 | | | | - | | | | - | | | | - | | | | - | | | | 1,202 | | | | - | | | | 1,207 | |
Issuance of warrants | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 887 | | | | - | | | | 887 | |
Shares to be issued to lenders | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 480 | | | | - | | | | 480 | |
Issuance of shares to consultants | | | 100,000 | | | | 1 | | | | - | | | | - | | | | - | | | | - | | | | 256 | | | | - | | | | 257 | |
Capitalization of gain on extinguishment of debt | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,928 | | | | - | | | | 1,928 | |
Dividends declared on 8.875% series A cumulative perpetual preferred shares ($550 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,265 | ) | | | (1,265 | ) |
Net loss and comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (6,850 | ) | | | (6,850 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2024 | | | 67,283,574 | | | | 671 | | | | 329 | | | $ | 1 | | | | 2,300 | | | $ | 1 | | | | 683,903 | | | | (647,965 | ) | | | 36,611 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense, net of taxes | | | 516,614 | | | | 5 | | | | - | | | | - | | | | - | | | | - | | | | 1,116 | | | | - | | | | 1,121 | |
Dividends declared on 8.875% series A cumulative perpetual preferred shares ($560 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,288 | ) | | | (1,288 | ) |
Net loss and comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (8,872 | ) | | | (8,872 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of June 30, 2024 | | | 67,800,188 | | | | 676 | | | | 329 | | | | 1 | | | | 2,300 | | | | 1 | | | | 685,019 | | | | (658,125 | ) | | | 27,572 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | 295,973 | | | | 3 | | | | - | | | | - | | | | - | | | | - | | | | 1,182 | | | | | | | | 1,185 | |
Dividend declared on 8.875% series A cumulative perpetual preferred shares ($550 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | (1,265 | ) | | | (1,265 | ) |
Net loss and comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (6,793 | ) | | | (6,793 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of September 30, 2024 | | | 68,096,161 | | | | 679 | | | | 329 | | | | 1 | | | | 2,300 | | | | 1 | | | | 686,201 | | | | (666,183 | ) | | | 20,699 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
For the three and nine months ended September 30, 2023 ($ in thousands, except share data)
| | | | | | | | | | | | | | | | | | 8.875% Series A Cumulative | | | Additional | | | | | | | Total | |
| | Common Stock | | | Preferred Stock | | | Perpetual Preferred Stock | | | Paid-in | | | Accumulated | | | Stockholders’ | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Equity | |
Balance as of December 31, 2022 | | | 55,823,810 | | | $ | 556 | | | | 329 | | | $ | 1 | | | | 2,300 | | | $ | 1 | | | $ | 636,963 | | | $ | (603,298 | ) | | $ | 34,223 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | 217,452 | | | | 2 | | | | - | | | | - | | | | - | | | | - | | | | 63 | | | | - | | | | 65 | |
Issuance of shares pursuant to direct offerings | | | 10,500,000 | | | | 105 | | | | - | | | | - | | | | - | | | | - | | | | 38,385 | | | | - | | | | 38,490 | |
Dividends declared on 8.875% series A cumulative perpetual preferred shares ($550 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,265 | ) | | | (1,265 | ) |
Net loss and comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (10,691 | ) | | | (10,691 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2023 | | | 66,541,262 | | | | 663 | | | | 329 | | | $ | 1 | | | | 2,300 | | | $ | 1 | | | | 675,411 | | | | (615,254 | ) | | | 60,822 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | 54,344 | | | | 1 | | | | - | | | | - | | | | - | | | | - | | | | 163 | | | | - | | | | 164 | |
Dividends declared on 8.875% series A cumulative perpetual preferred shares ($560 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,288 | ) | | | (1,288 | ) |
Net loss and comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (7,064 | ) | | | (7,064 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of June 30, 2023 | | | 66,595,606 | | | | 664 | | | | 329 | | | $ | 1 | | | | 2,300 | | | $ | 1 | | | | 675,574 | | | | (623,606 | ) | | | 52,634 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | 9,375 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 652 | | | | - | | | | 652 | |
Reclassification of derivative liability | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,570 | | | | - | | | | 2,570 | |
Dividends declared on 8.875% series A cumulative perpetual preferred shares ($550 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,265 | ) | | | (1,265 | ) |
Net loss and comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (6,936 | ) | | | (6,936 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of September 30, 2023 | | | 66,604,981 | | | $ | 644 | | | | 329 | | | $ | 1 | | | | 2,300 | | | $ | 1 | | | | 678,796 | | | | (631,807 | ) | | | 47,655 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Notes to the Consolidated Financial Statements
NOTE 1 – BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements and notes have been prepared by Cadiz Inc., also referred to as “Cadiz” or “the Company”, without audit and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The foregoing Condensed Consolidated Financial Statements include the accounts of the Company and contain all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair statement of the Company’s financial position, the results of its operations and its cash flows for the periods presented and have been prepared in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements. The results of operations for the nine months ended September 30, 2024, are not necessarily indicative of results for the entire fiscal year ending December 31, 2024.
Liquidity
The Condensed Consolidated Financial Statements of the Company have been prepared using accounting principles applicable to a going concern, which assumes realization of assets and settlement of liabilities in the normal course of business.
The Company incurred losses of $22.5 million for the nine months ended September 30, 2024, compared to $24.7 million for the nine months ended September 30, 2023. The Company had working capital of $3.2 million at September 30, 2024 and used cash in its operations of $15.3 million for the nine months September 30, 2024. The lower loss in 2024 was primarily due to a 2023 loss on early extinguishment of debt recorded in the amount of $5.3 million resulting from issuance of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in 2023, and improved operating results for the water filtration technology business segment offset by higher compensation costs related to stock based non-cash bonus awards and increased interest expense related to the Third Amended Credit Agreement in 2024.
Cash requirements during the nine months ended September 30, 2024, primarily reflect certain operating and administrative costs related to the Company’s land, water, infrastructure and technology assets for water solutions including the Mojave Groundwater Banking Project (formerly called the Cadiz Water Conservation & Storage Project), ("Mojave Groundwater Banking Project" or “Water Project”), agricultural operations and water filtration business. The Company’s present activities are focused on the development of its assets in ways that meet a need for groundwater storage capacity in Southern California and growing demands for affordable, reliable, long-term water supplies in the Southwestern United States.
Cadiz Inc.
On January 30, 2023, the Company completed the sale and issuance of 10,500,000 shares of the Company’s common stock to certain institutional investors in a registered direct offering ( “January 2023 Direct Offering”). The shares of common stock were sold at a purchase price of $3.84 per share, for aggregate gross proceeds of $40.32 million and aggregate net proceeds of approximately $38.5 million. A portion of the proceeds were used to repay the Company’s debt in the principal amount of $15 million, together with fees and interest required to be paid in connection with such repayment.
On February 2, 2023, the Company and its wholly-owned subsidiary, Cadiz Real Estate LLC, as borrowers (collectively, the “Borrowers”) entered into a First Amendment to Credit Agreement with BRF Finance Co., LLC (“Lenders”) and B. Riley Securities, Inc., (“BRS”) as administrative agent, to amend certain provisions of the Credit Agreement dated as of July 2, 2021 (“First Amended Credit Agreement”). Under the First Amended Credit Agreement, the lenders will have a right to convert up to $15 million of outstanding principal, plus any PIK interest and any accrued and unpaid interest (the “Convertible Loan”) into shares of the Company’s common stock at a conversion price of $4.80 per share (the “Conversion Price”).
On March 6, 2024, the Company entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”). The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from HHC $ Fund 2012 (“Heerema”) in an aggregate principal amount of $20 million, having a maturity date of June 30, 2027 (“New Secured Convertible Debt”); (b) the aggregate principal amount of the secured non-convertible term loans acquired by Heerema from an existing lender has been increased from $20 million to $21.2 million and the applicable repayment fee in respect thereof has been eliminated; (c) the Convertible Loan existing prior to the Third Amended Credit Agreement, in an aggregate principal amount of approximately $16 million plus interest accruing thereon, has become unsecured; and (d) extension of the maturity date for the existing Convertible Loan and non-convertible loans to June 30, 2027 (see “Note 3 – Long-Term Debt”, below). The proceeds from the Third Amended Credit Agreement will be used to fund expenditures associated with development of the Company’s water supply projects, to fund working capital needs, to pay transaction related expenses and for general corporate purposes.
On November 5, 2024, the Company completed the sale and issuance of 7,000,000 shares of the Company’s common stock to certain institutional investors in a registered direct offering ( “November 2024 Direct Offering”). The shares of common stock were sold at a purchase price of $3.34 per share, for aggregate gross proceeds of $23.4 million and aggregate net proceeds of approximately $21.9 million.
The Company may meet its debt and working capital requirements through a variety of means, including extension, refinancing, equity placements, the sale or other disposition of assets, deferring the timing of preferred stock dividend payments (see Note 9 – Common and Preferred Stock) or reductions in operating costs. The covenants in the senior secured debt do not prohibit the Company’s use of additional equity financing and allow the Company to retain 100% of the proceeds of any common equity financing. The Company does not expect the loan covenants to materially limit its ability to finance its water solutions and agricultural development activities.
Cadiz Inc.
Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from each financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is a substantial doubt about the Company’s ability to continue as a going concern. In the preparation of this liquidity assessment, management applies judgement to estimate the projected cash flows of the Company including the following: (i) projected cash inflows and outflows and their timing, (ii) categorization of expenditures as discretionary versus non-discretionary and (iii) the ability to raise capital. The cash flow projections are based on known or planned cash requirements for operating costs as well as planned costs for project development.
Limitations on the Company’s liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet the Company’s resource development activities. Although the Company currently expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that its liquidity requirements will continue to be satisfied. If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately its viability as a company.
Supplemental Cash Flow Information
During the nine months ended September 30, 2024, approximately $1,116,000 in interest payments on the Company’s senior secured debt was paid in cash and approximately $1,686,000 was recorded as interest payable in kind. There are no scheduled principal payments due on the senior secured debt prior to its maturity.
At September 30, 2024, accruals for cash dividends payable on the Series A Preferred Stock was $1.27 million (see Note 9 – “Common and Preferred Stock”). The cash dividends were paid on October 15, 2024.
The balance of cash, cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows is comprised of the following:
Cash, Cash Equivalents and Restricted Cash | | September 30, 2024 | | | December 31, 2023 | | | September 30, 2023 | |
(in thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | |
Cash and Cash Equivalents | | $ | 3,326 | | | $ | 4,502 | | | $ | 13,306 | |
Restricted Cash | | | - | | | | - | | | | - | |
Long Term Restricted Cash | | | 134 | | | | 134 | | | | 134 | |
Cash, Cash Equivalents and Restricted Cash in the Consolidated Statement of Cash Flows | | $ | 3,460 | | | $ | 4,636 | | | $ | 13,440 | |
In conjunction with the Third Amended Credit Agreement, the Company issued warrants to Heerema and paid a consent fee with common stock which are non-cash financing activities. See Note 3 – “Long Term Debt” for additional discussion of these non-cash financing activities.
Cadiz Inc.
Recent Accounting Pronouncements
Accounting Guidance Not Yet Adopted
In November 2023, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ASU 2023-07, Segment Reporting (Topic 280)(“ASU 2023-07”). ASU 2023-07 modifies the disclosure and presentation requirements of reportable segments. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within those financial years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing this new guidance and expects this new standard will not have a material impact on the consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)(“ASU 2023-09”). ASU 2023-09 expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash tax paid in the U.S. and foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company is currently assessing this new guidance and expects this new standard will not have a material impact on the consolidated financial statements.
NOTE 2 – REPORTABLE SEGMENTS
The Company currently operates in two reportable segments based upon its organizational structure and the way in which its operations are managed and evaluated. The Company’s largest segment is Land and Water Resources, which comprises all activities regarding its properties in the eastern Mojave Desert including pre-revenue development of the Water Project (supply, storage and conveyance), and agricultural operations. The Company’s second operating segment is its Water Filtration Technology business, ATEC Water Systems LLC (“ATEC”) which provides innovative water filtration solutions for impaired or contaminated groundwater sources. The Company acquired the assets of ATEC Systems, Inc. in November 2022 into its new subsidiary ATEC. There were no intersegment sales during the nine months ended September 30, 2024, and $311 thousand during the nine months ended September 30, 2023.
We evaluate our performance based on segment operating (loss). Interest expense, income tax expense and losses related to equity method investments are excluded from the computation of operating (loss) for the segments. Segment net revenue, segment operating expenses and segment operating (loss) information consisted of the following for the three and nine months ended September 30, 2024 and 2023:
Cadiz Inc.
| | Three Months Ended September 30, 2024 | |
| | | | | | | | | | | | |
(in thousands) | | Land and Water Resources | | | Water Filtration Technology | | | Total | |
| | | | | | | | | | | | |
Revenues | | $ | 383 | | | $ | 2,841 | | | $ | 3,224 | |
| | | | | | | | | | | | |
Costs and expenses: | | | | | | | | | | | | |
Cost of sales | | | 557 | | | | 1,852 | | | | 2,409 | |
General and administrative | | | 4,820 | | | | 455 | | | | 5,275 | |
Depreciation | | | 292 | | | | 15 | | | | 307 | |
| | | | | | | | | | | | |
Total costs and expenses | | | 5,669 | | | | 2,322 | | | | 7,991 | |
| | | | | | | | | | | | |
Operating income (loss) | | $ | (5,286 | ) | | $ | 519 | | | $ | (4,767 | ) |
| | Three Months Ended September 30, 2023 | |
(in thousands) | | Land and Water Resources | | | Water Filtration Technology | | | Total | |
| | | | | | | | | | | | |
Revenues | | $ | 199 | | | $ | 169 | | | $ | 368 | |
| | | | | | | | | | | | |
Costs and expenses: | | | | | | | | | | | | |
Cost of sales | | | 513 | | | | 179 | | | | 692 | |
General and administrative | | | 4,927 | | | | 200 | | | | 5,127 | |
Depreciation | | | 277 | | | | 31 | | | | 308 | |
| | | | | | | | | | | | |
Total costs and expenses | | | 5,717 | | | | 410 | | | | 6,127 | |
| | | | | | | | | | | | |
Operating loss | | $ | (5,518 | ) | | $ | (241 | ) | | $ | (5,759 | ) |
| | Nine Months Ended September 30, 2024 | |
| | | | | | | | | | | | |
(in thousands) | | Land and Water Resources | | | Water Filtration Technology | | | Total | |
| | | | | | | | | | | | |
Revenues | | $ | 1,369 | | | $ | 3,489 | | | $ | 4,858 | |
| | | | | | | | | | | | |
Costs and expenses: | | | | | | | | | | | | |
Cost of sales | | | 1,896 | | | | 2,369 | | | | 4,265 | |
General and administrative | | | 15,217 | | | | 1,093 | | | | 16,310 | |
Depreciation | | | 866 | | | | 41 | | | | 907 | |
| | | | | | | | | | | | |
Total costs and expenses | | | 17,979 | | | | 3,503 | | | | 21,482 | |
| | | | | | | | | | | | |
Operating loss | | $ | (16,610 | ) | | $ | (14 | ) | | $ | (16,624 | ) |
Cadiz Inc.
| | Nine Months Ended September 30, 2023 | |
| | | | | | | | | | | | |
(in thousands) | | Land and Water Resources | | | Water Filtration Technology | | | Total | |
| | | | | | | | | | | | |
Revenues | | $ | 708 | | | $ | 599 | | | $ | 1,307 | |
| | | | | | | | | | | | |
Costs and expenses: | | | | | | | | | | | | |
Cost of sales | | | 967 | | | | 515 | | | | 1,482 | |
General and administrative | | | 13,926 | | | | 452 | | | | 14,378 | |
Depreciation | | | 826 | | | | 116 | | | | 942 | |
| | | | | | | | | | | | |
Total costs and expenses | | | 15,719 | | | | 1,083 | | | | 16,802 | |
| | | | | | | | | | | | |
Operating loss | | $ | (15,011 | ) | | $ | (484 | ) | | $ | (15,495 | ) |
Assets by operating segment are as follows (dollars in thousands):
| | September 30, 2024 | | | December 31, 2023 | |
Operating Segment: | | | | | | | | |
Water and Land Resources | | $ | 102,536 | | | $ | 101,946 | |
Water Filtration Technology | | | 10,017 | | | | 5,428 | |
| | $ | 112,553 | | | $ | 107,374 | |
Goodwill by operating segment is as follows (dollars in thousands):
| | September 30, 2024 | | | December 31, 2023 | |
Operating Segment: | | | | | | | | |
Water and Land Resources | | $ | 3,813 | | | $ | 3,813 | |
Water Filtration Technology | | | 1,901 | | | | 1,901 | |
| | $ | 5,714 | | | $ | 5,714 | |
Property, plant, equipment and water programs consist of the following (dollars in thousands):
| | September 30, 2024 | |
| | Water and Land Resources | | | Water Filtration Technology | |
| | | | | | | | |
Land and land improvements | | $ | 33,004 | | | $ | - | |
Water programs | | | 29,331 | | | | - | |
Pipeline | | | 22,099 | | | | - | |
Buildings | | | 1,805 | | | | - | |
Leasehold improvements, furniture and fixtures | | | 1,605 | | | | 4 | |
Machinery and equipment | | | 3,826 | | | | 247 | |
Construction in progress | | | 5,107 | | | | 6 | |
| | | 96,777 | | | | 257 | |
Less accumulated depreciation | | | (10,103 | ) | | | (171 | ) |
| | $ | 86,674 | | | $ | 86 | |
Cadiz Inc.
| | December 31, 2023 | |
| | Water and Land Resources | | | Water Filtration Technology | |
| | | | | | | | |
Land and land improvements | | $ | 32,357 | | | $ | - | |
Water programs | | | 29,209 | | | | - | |
Pipeline | | | 22,096 | | | | - | |
Buildings | | | 1,730 | | | | - | |
Leasehold improvements, furniture and fixtures | | | 1,605 | | | | 4 | |
Machinery and equipment | | | 3,719 | | | | 210 | |
Construction in progress | | | 5,664 | | | | - | |
| | | 96,380 | | | | 214 | |
Less accumulated depreciation | | | (9,238 | ) | | | (139 | ) |
| | $ | 87,142 | | | $ | 75 | |
NOTE 3 – LONG-TERM DEBT
The carrying value of the Company’s senior secured debt and the Company's convertible note instrument approximates fair value.
On July 2, 2021, the Company entered into a $50 million senior secured credit agreement (“Credit Agreement”). Interest is paid quarterly at a rate of seven percent per annum. The obligations under the Credit Agreement are secured by substantially all of the Company’s assets on a first-priority basis. Currently, in connection with any repayment or prepayment of the Convertible Loan (as defined below), the Company is required to pay a repayment fee equal to the principal amount being repaid or prepaid, multiplied by 6.0%. At any time, the Company will be permitted to prepay the principal of the debt, in whole or in part, provided that such prepayment is accompanied by any accrued interest on such principal amount being prepaid plus any applicable repayment fee described above.
In connection with entering into the Credit Agreement, on July 2, 2021 (the “Original Issue Date”) the Company issued to the Lenders two warrants (“A Warrants” and “B Warrants”), each granting an option to purchase 500,000 shares of the Company’s common stock (collectively, the “Warrants”). The A Warrants and B Warrants expired on July 2, 2024.
As a result of the issuance of the A and B Warrants, which met the criteria for equity classification under applicable GAAP, the Company recorded additional paid-in capital in the amount of $1.9 million which was the fair value of the Warrants on the issuance date. In addition, the fair value of the Warrants was recorded as debt discount and was amortized over the term of the related debt.
On February 2, 2023, the Company entered into a First Amendment to Credit Agreement to amend certain provisions of the Credit Agreement (“First Amended Credit Agreement”). In connection with the First Amended Credit Agreement, the Company repaid $15 million of the senior secured debt together with fees and interest required to be paid in connection with such repayment under the Credit Agreement. Under the First Amended Credit Agreement, the lenders have a right to convert up to $15 million of outstanding principal, plus any PIK interest and any accrued and unpaid interest (the “Convertible Loan”) into shares of the Company’s common stock at a conversion price of $4.80 per share (the “Conversion Price”). Additionally, the maturity date of the Credit Agreement was extended from July 2, 2024 to June 30, 2026. The annual interest rate remains unchanged at 7.00%. Interest on $20 million of the principal amount will be paid in cash. Interest on the $15 million principal amount of the Convertible Loan will be paid in kind on a quarterly basis by addition such amount to the outstanding principal amount of the outstanding Convertible Loan. The amendment was recorded as a debt extinguishment.
Cadiz Inc.
As a result of the First Amended Credit Agreement, the Company bifurcated the new conversion option from the debt and recorded a derivative liability. As of the effective date of the First Amended Credit Agreement, the derivative liability had a fair value of approximately $2.4 million which was recorded as loss on early extinguishment of debt. In addition, the loss on early extinguishment of debt included $2.0 million of repayment fees for both repaid and amended principal and $980 thousand of unamortized debt issuance costs.
The fair value of the derivative liability was remeasured each reporting period using an option pricing model, and the change in fair value was recorded as an adjustment to the derivative liability with the change in fair value recorded as income or expense. On August 14, 2023, the Credit Agreement was further amended to remove a conversion exchange cap provision (“Second Amended Credit Agreement”). As a result of the Second Amended Credit Agreement, the Company reclassified the carrying value of the bifurcated conversion option at the time of the modification from a derivative liability in the amount of $2.57 million to additional paid-in capital. Total unrealized losses of derivative liabilities accounted for as derivatives prior to the Second Amended Credit Agreement were $350 thousand and $220 thousand for the three and nine months ended September 30, 2023, respectively.
On March 6, 2024, the Company entered into the Third Amended Credit Agreement. Before entering into the Third Amended Credit Agreement, Heerema purchased the outstanding secured non-convertible term loans under the Credit Agreement (“Assignment”) at a discount on behalf of the Company. The Assignment was considered a debt extinguishment resulting in a gain of $1.9 million recorded as additional paid-in-capital as Heerema is a significant shareholder of the Company. The acquired secured non-convertible term loans were issued to Heerema at a discount which is being amortized over the term of the non-convertible term loan. In connection with the Assignment, the existing holders of both the Convertible Loan and non-convertible term loans consented to effectuate the Third Amended Credit Agreement in consideration of a consent fee in the aggregate amount of $479,845 payable in the form of the Company’s registered common stock (valued at $2.89 per share, or 166,036 shares). The consent fee was capitalized as an additional debt discount and is being amortized over the remaining term of the Convertible Loan.
The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from Heerema in an aggregate principal amount of $20 million, having a maturity date of June 30, 2027 (“New Secured Convertible Debt”); (b) the aggregate principal amount of the secured non-convertible term loans acquired by Heerema has been increased from $20 million to $21.2 million and the applicable repayment fee in respect thereof has been eliminated; (c) the Convertible Loan existing prior to the Third Amended Credit Agreement, in an aggregate principal amount of approximately $16 million plus interest accruing thereon, has become unsecured; and (d) extension of the maturity date for the existing Convertible Loan and non-convertible loans to June 30, 2027. The New Secured Convertible Debt will bear PIK interest at a rate of 7% per annum, payable quarterly in arrears. The initial conversion price of the New Secured Convertible Debt is $5.30 per share and will be subject to anti-dilution adjustments.
Cadiz Inc.
In connection with the debts issued to Heerema, the Company issued a warrant to purchase 1,000,000 shares of our common stock (the “Heerema Warrant”) to Heerema. The Heerema Warrant has an exercise price of $5.00 per share, which will be subject to anti-dilution adjustments. The Heerema Warrant expires on June 30, 2027. The Company recorded the fair value of the Heerema Warrant on the issuance date in additional paid-in capital in the amount of $0.9 million. In addition, the fair value of the Heerema Warrant was recorded as debt discount and is being amortized over the term of the secured debt issued to Heerema.
In the event of certain asset sales, the incurrence of indebtedness or a casualty or condemnation event, in each case, under certain circumstances as described in the Credit Agreement, the Company will be required to use a portion of the proceeds to prepay amounts under the secured debt. In the event of any additional issuance of depositary receipts (“Depositary Receipts”) representing interests in shares of 8.875% Series A Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) by the Company, the Company will be required to, within five business days after the receipt of the net cash proceeds, apply 75% of the net cash proceeds to prepay amounts due under the debt (including the applicable repayment fee described above).
The Credit Agreement includes customary affirmative and negative covenants, including delivery of financial statements and other reports. The negative covenants limit the ability of the Company to, among other things, incur debt, incur liens, make investments, sell assets, pay dividends and enter into transactions with affiliates. In addition, the Credit Agreement includes customary events of default and remedies. The Company was in compliance with all covenants under the Credit Agreement as of September 30, 2024.
NOTE 4 – STOCK-BASED COMPENSATION PLANS
The Company has issued options and has granted stock awards pursuant to its 2019 Equity Incentive Plan, as described below.
2019 Equity Incentive Plan
The 2019 Equity Incentive Plan (“2019 EIP”) was originally approved by stockholders at the July 10, 2019 Annual Meeting, with amendments to the plan approved by stockholders at the July 12, 2022 Annual Meeting and the June 11, 2024 Annual Meeting. The plan, as amended, provides for the grant and issuance of up to 5,200,000 shares and options to the Company’s employees, directors and consultants.
Effective July 1, 2021, under the 2019 EIP, each outside director receives $75,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $25,000 on June 30 of each year. The award accrues on a quarterly basis, with $18,750 of cash compensation and $6,250 of stock earned for each fiscal quarter in which a director serves. The deferred stock award vests automatically on the January 31 that first follows the award date.
Cadiz Inc.
Stock Awards to Directors, Officers, and Consultants
The Company has granted stock awards pursuant to its 2019 EIP.
Of the total 5,200,000 shares reserved under the 2019 Equity Incentive Plan, as amended, 4,583,847 shares and restricted stock units (“RSUs”) have been awarded to the Company directors, employees and consultants as of September 30, 2024. Of the 4,583,847 shares and RSUs awarded, 69,479 shares were awarded to the Company’s directors for services performed during the plan year ended June 30, 2024. These shares will vest and be issued on January 31, 2025.
825,000 RSUs were granted to employees in April 2021 as long-term equity incentive awards ( “April 2021 RSU Grant”). Of the 825,000 RSUs granted under the April 2021 RSU Grant, 510,000 RSUs were scheduled to vest upon completion of certain milestones, including (a) 255,000 RSUs which vested in July 2021 upon completion of refinancing of the Company’s then existing senior secured debt and funding to complete the purchase of the Northern Pipeline (“ Northern Pipeline Vesting Event”), and (b) 255,000 RSUs scheduled to vest upon completion of final binding water supply agreement(s) for the delivery of at least 9,500 acre-feet of water per annum to customers (“Supply Agreement Vesting Event”). 170,000 RSUs, including 85,000 related to the Supply Agreement Vesting Event, were accelerated and became fully vested as a result of an amended employee agreement entered into in February 2022 upon the change of the Company’s Executive Chair, 60,000 RSUs vested and were issued on January 3, 2023, and 170,000 RSUs vested and were issued on March 1, 2023. 85,000 of the RSUs related to the Supply Agreement Vesting Event were cancelled effective December 31, 2023 and the remaining 85,000 shares related to the Supply Agreement Vesting Event vested in March 2024.
Additionally, in July 2022, 60,000 RSUs were granted to employees as long-term equity incentive awards ( “July 2022 RSU Grant”). The RSUs granted under the July 2022 RSU Grant vested on January 2, 2024. In January 2024, 60,000 additional RSUs were granted to employees which vest on January 2, 2025. The RSU incentive awards are subject in each case to continued employment with the Company through the vesting date.
Of the 255,000 RSUs earned and issued in July 2021 upon the Northern Pipeline Vesting Event, the Company issued 158,673 shares net of taxes withheld and paid in cash by the Company. Of the 170,000 RSUs issued on March 1, 2023, the Company issued 102,871 shares net of taxes withheld and paid in cash by the Company. Of the 85,000 RSUs earned and issued in March 2024 upon the Supply Agreement Vesting Event, the Company issued 62,624 shares net of taxes withheld and paid in cash by the Company.
Additionally, in April 2022 the Company issued 450,000 of performance stock units (“PSUs”) upon achievement of certain performance events. The PSUs were to vest upon the Company’s common stock achieving price hurdles (“Price Hurdles”) but not sooner than three years from date of grant date. These PSUs were cancelled in April 2024 in conjunction with entering into an amended and restated employment agreement with the Company’s Chief Executive Officer which provided a grant of 1.6 million RSUs and PSUs with (a) 700,000 RSUs that vest over a three-year period from 2024 to 2026; (b) 600,000 RSUs that will vest upon achievement of milestones related to completion of certain permits, entering into binding contracts for water delivery or storage, and delivery of water, and (c) 300,000 PSUs that will vest upon a Price Hurdle of $15 per share for 20 consecutive days.
Cadiz Inc.
In September 2024, the Company granted 275,000 RSUs in conjunction with entering into an employment agreement with the Company’s Chief Operating Officer. 137,500 of these RSUs vest over a three-year period from September 2024 to September 2027 and the remaining 137,500 RSUs will vest upon achievement of milestones related to completion of certain permits, entering into binding contracts for water delivery or storage, and delivery of water.
400,000 RSUs were granted to a consultant on July 1, 2023 ( “July 2023 RSU Grant). Of the 400,000 RSUs granted under the July 2023 RSU Grant, 200,000 RSUs vested and were issued upon completion of the Third Amended Credit Agreement in March 2024. Of the remaining 200,000 RSUs granted, 100,000 RSUs vested and were issued on October 1, 2023, and 100,000 vested and were issued on February 1, 2024.
Additionally, 300,000 RSUs were granted to a consultant in January 2024 to vest upon achieving certain milestones. As of September 30, 2024, all 300,000 of these RSUs vested and were issued upon entering into binding supply agreements for the Water Project.
The accompanying consolidated statements of operations and comprehensive loss include approximately $3,566,000 and $1,142,000 of stock-based compensation expense related to stock awards in the nine months ended September 30, 2024 and 2023, respectively.
NOTE 5 – INCOME TAXES
As of September 30, 2024, the Company had net operating loss (“NOL”) carryforwards of approximately $353 million for federal income tax purposes and $328 million for California state income tax purposes. Such carryforwards expire in varying amounts through the year 2037 and 2043 for federal and California purposes, respectively. For federal losses arising in tax years ending after December 31, 2017, the NOL carryforwards are allowed indefinitely. Use of the carryforward amounts is subject to an annual limitation as a result of a previous ownership change and an ownership change that occurred in June 2021.
As of September 30, 2024, the Company’s unrecognized tax benefits were immaterial.
The Company's tax years 2021 through 2023 remain subject to examination by the Internal Revenue Service, and tax years 2020 through 2023 remain subject to examination by California tax jurisdictions. In addition, the Company's loss carryforward amounts are generally subject to examination and adjustment for a period of three years for federal tax purposes and four years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.
Because it is more likely than not that the Company will not realize its net deferred tax assets, it has recorded a full valuation allowance against all deferred assets. Accordingly, no deferred tax asset has been reflected in the accompanying condensed consolidated balance sheet.
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