United States
Securities and Exchange Commission
Washington, D. C. 20549
FORM
| (Mark One) for the quarterly period ended |
OR
| for the transition period from …… to ……. |
Commission File Number
Cadiz Inc.
(Exact name of registrant specified in its charter)
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| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
| 1/1000th fractional interest in share of 8.875% Series A Cumulative Perpetual Preferred Stock, par value $0.01 per share) | | The |
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.
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).
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 ☑
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
As of November 5, 2021, the Registrant had
| Fiscal Third Quarter 2021 Quarterly Report on Form 10-Q |
Page |
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| PART I – FINANCIAL INFORMATION |
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| ITEM 1. | Financial Statements |
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| Cadiz Inc. Condensed Consolidated Financial Statements |
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| 1 |
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| 2 |
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| Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 |
3 |
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| 4 |
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| 5 |
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| 6 |
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| Unaudited Notes to the Condensed Consolidated Financial Statements |
7 |
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| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
| ITEM 3. | 27 |
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| ITEM 4. | 28 |
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| PART II – OTHER INFORMATION |
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| ITEM 1. | 29 |
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| ITEM 1A. | 29 |
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| ITEM 2 | 29 |
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| ITEM 3. | 29 |
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| ITEM 4 | 30 |
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| ITEM 5. | 30 |
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| ITEM 6. | 31 |
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Cadiz Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| ($ in thousands, except per share data) | 2021 | 2020 | ||||||
| Total revenues | $ | $ | ||||||
| Costs and expenses: | ||||||||
| General and administrative | ||||||||
| Depreciation | ||||||||
| Total costs and expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ( | ) | ||||
| Loss from equity-method investments | ( | ) | ( | ) | ||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Less: Preferred stock dividend requirements | ( | ) | ||||||
| Net loss and comprehensive loss applicable to common stock | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average shares outstanding | ||||||||
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) | 2021 | 2020 | ||||||
| Total revenues | $ | $ | ||||||
| Costs and expenses: | ||||||||
| General and administrative | ||||||||
| Depreciation | ||||||||
| Total costs and expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Loss on extinguishment of debt | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ( | ) | ||||
| Loss from equity-method investments | ( | ) | ( | ) | ||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Less: Preferred stock dividend requirements | ( | ) | ||||||
| Net loss and comprehensive loss applicable to common stock | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average shares outstanding | ||||||||
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) | 2021 | 2020 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant, equipment and water programs, net | ||||||||
| Long-term deposit/prepaid expenses | ||||||||
| Equity-method investments | ||||||||
| Goodwill | ||||||||
| Right-of-use asset | ||||||||
| Long-term restricted cash | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Current portion of long-term debt | ||||||||
| Warrant derivative liabilities | ||||||||
| Dividend payable | ||||||||
| Operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Long-term lease obligations with related party, net | ||||||||
| Long-term operating lease liabilities | ||||||||
| Deferred revenue | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock - par value; shares authorized at September 30, 2021 and December 31, 2020; shares issued and outstanding - at September 30, 2021 and at December 31, 2020 | ||||||||
| Series A cumulative, perpetual preferred stock - par value; shares authorized at September 30, 2021 and shares at December 31, 2020; shares issued and outstanding – at September 30, 2021 and at December 31, 2020 | ||||||||
| Common stock - par value; shares authorized at September 30, 2021 and December 31, 2020; shares issued and outstanding – at September 30, 2021 and at December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
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) | 2021 | 2020 | ||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of debt discount and issuance costs | ||||||||
| Amortization of right-of-use asset | ||||||||
| Interest expense added to loan principal | ||||||||
| Interest expense added to lease liability | ||||||||
| Loss on equity method investments | ||||||||
| Loss on debt conversion and extinguishment of debt | ||||||||
| Compensation charge for stock and share option awards | ||||||||
| Unrealized gain on warrant derivative liabilities | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Lease liabilities | ( | ) | ||||||
| Other accrued liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Additions to property, plant and equipment and water programs | ( | ) | ( | ) | ||||
| Contributions to equity-method investments | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net proceeds from issuance of common stock | ||||||||
| Net proceeds from the issuance of series A cumulative, perpetual preferred stock | ||||||||
| Proceeds from the issuance of long-term debt | ||||||||
| Issuance costs of long-term debt | ( | ) | ||||||
| Principal payments on long-term debt | ( | ) | ( | ) | ||||
| Costs of extinguishment of debt | ( | ) | ||||||
| Taxes paid related to net settlement of equity awards | ( | ) | ||||||
| Proceeds from the exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)
For the three and nine months ended September 30, 2021 ($ in thousands, except share data)
| 8.875% Series A | ||||||||||||||||||||||||||||||||||||
| Cumulative Perpetual | Additional | Total | ||||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Preferred Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||||||||||
| Reclassification of warrant liability | - | - | - | , | ||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to ATM offerings | ||||||||||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to ATM offerings | ||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to direct offering | ||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to exercise of warrants | ||||||||||||||||||||||||||||||||||||
| Conversion of preferred shares to common shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of shares to lenders | ||||||||||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock units | ||||||||||||||||||||||||||||||||||||
| Net settlement for taxes related to equity awards | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Issuance of shares pursuant to ATM offerings | ||||||||||||||||||||||||||||||||||||
| Conversion of preferred shares to common shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of series A cumulative perpetual preferred shares | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of warrants | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of shares to lenders | ||||||||||||||||||||||||||||||||||||
| Dividends declared on 8.875% series A cumulative perpetual preferred shares ( per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Cadiz Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)
For the three and nine months ended September, 2020 ($ in thousands, except share data)
| Additional | Total | |||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Issuance of shares pursuant to bond conversion | ||||||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||
| Issuance of shares pursuant to ATM offerings | ||||||||||||||||||||||||||||
| Reclassification of warrant liability | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of preferred shares | ||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||
| Issuance of shares pursuant to ATM offerings | ||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
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, 2020.
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, 2021 are not necessarily indicative of results for the entire fiscal year ending December 31, 2021.
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 $
Cash requirements during the nine months ended September 30, 2021 primarily reflect certain administrative costs related to the Company’s water project development efforts, the further development of its land and agricultural assets, including its
In July 2020, the Company entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $
Cadiz Inc.
On June 7, 2021, the Company completed the sale and issuance of
On June 29, 2021, the Company entered into an Underwriting Agreement with BRS as representative of the several underwriters named therein, to issue and sell an aggregate of
In May 2017, the Company entered into a $
On July 2, 2021, the Company entered into a new $
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, or reductions in operating costs. The covenants in the Current 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 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 outflows (ii) projected cash inflows and (iii) categorization of expenditures as discretionary versus non-discretionary. 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, 2021, approximately $
On May 18, 2021, the Company exercised its first extension option to extend the maturity date of the Prior Senior Secured Debt from May 25, 2021 to May 25, 2022 (“First Option Election Notice”). At the time of the First Option Election Notice, the Company paid an extension option fee equal to
In conjunction with the closing of an assignment and assumption agreement (see Note 2 – “Long-Term Debt”), on July 2, 2021, the Company issued
At September 30, 2021, accruals for cash dividends payable was $
At September 30, 2021, accruals for purchases of PP&E received was approximately $
The balance of cash, cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows is comprised of the following:
Cadiz Inc.
| Cash, Cash Equivalents and Restricted Cash | September 30, 2021 | December 31, 2020 | September 30, 2020 | |||||||||
| (in thousands) | ||||||||||||
| Cash and Cash Equivalents | $ | $ | $ | |||||||||
| Restricted Cash | ||||||||||||
| Cash, Cash Equivalents and Restricted Cash in the Condensed Consolidated Statement of Cash Flows | $ | $ | $ | |||||||||
The restricted cash primarily represents a deposit to pre-fund eight quarterly dividend payments on the Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering
Recent Accounting Pronouncements
Accounting Guidance Not Yet Adopted
In June 2016, Financial Accounting Standards Board (“FASB”) issued an accounting standards update which introduces new guidance for the accounting for credit losses on certain financial instruments. This update is effective for fiscal years beginning after December 15, 2023, and for interim periods within those fiscal years, 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.
Accounting Guidance Adopted
In December 2019, FASB issued an accounting standards update which reduces complexity in accounting standards by removing certain exceptions to the general principles in Topic 740. This update is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. The adoption of this new standard on January 1, 2021 had no impact on the Company’s condensed consolidated financial statements.
In August 2020, the FASB issued an accounting standards update which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP (“ASU 2020-6”). Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. ASU 2020-06 also removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to be eligible for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. ASU 2020-06 is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for annual reporting periods beginning after December 15, 2020. The Company early adopted the provisions of ASU 2020-06 effective January 1, 2021, on the modified retrospective transition method, to take advantage of the removal of certain conditions required for equity contracts to qualify for the derivative scope exception. Adopting ASU 2020-06 did not result in a cumulative impact of adoption during the nine months ended September 30, 2021.
Cadiz Inc.
NOTE 2 – LONG-TERM DEBT
The carrying value of the Company’s senior secured debt approximates fair value. The fair value of the Company’s senior secured debt (Level 2) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company by its lenders for similar debt instruments of comparable maturities by its lenders.
In March 2020, the Company entered into an agreement that provided it the right, at its option, to extend the contractual May 25, 2021 maturity of the Prior Senior Secured Debt to May 25, 2022. On March 24, 2021, the Company entered into an additional agreement which provided it the right, at its option, to further extend the maturity date of its the Prior Senior Secured Debt to November 25, 2022. The fee to acquire this second extension option was the adjustment of the exercise price of
As a result of the Warrant Modification, the Company reclassified the carrying value of the warrant prior to the modification from a warrant liability in the amount of $
On May 18, 2021, the Company exercised its first extension option to extend the maturity date of the Prior Senior Secured Debt to May 25, 2022 (“First Option Election Notice”). At the time of the First Option Election Notice, the Company was required to pay an extension option fee equal to
On June 28, 2021, an affiliate of BRS entered into an assignment and assumption agreement (“Assignment”) whereby it agreed to purchase all outstanding obligations under the Company’s Prior Senior Secured Debt for $
On July 2, 2021, the Company entered into a new $
Cadiz Inc.
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 debt. In the event of any additional issuance of depositary receipts (“Depositary Receipts”) representing interests in shares of
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.
While any amount remains outstanding under the debt, the Lenders will have the right to convert the outstanding principal, plus unpaid interest, on the debt into Depositary Receipts at the per share exchange price of $
| ● | on or before the 12-month anniversary of the closing of the debt, up to |
| ● | at any time after the 12-month anniversary of the closing of the debt, and on or before the 18-month anniversary of the closing of the debt, up to |
Cadiz Inc.
|
| ● | at any time after the 18-month anniversary of the closing of the debt, and on or before the 24-month anniversary of the closing of the debt, up to |
| ● | at any time after the 24-month anniversary of the closing of the debt, up to |
The proceeds of the Current Senior Secured Debt were used, together with the proceeds received from the Depositary Share Offering, (a) to repay all of the Company’s outstanding obligations under the Prior Senior Secured Debt, (b) to deposit approximately $
In connection with the issuance of the Current Senior Secured Debt, on July 2, 2021 (the “Original Issue Date”) the Company issued to the Lenders
As a result of the issuance of the Warrants, the Company recorded additional paid-in capital in the amount of $
NOTE 3 – PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS
On June 30, 2021, the Company recorded the acquisition of a 124-mile pipeline (“Pipeline”). Depreciation on the Pipeline will commence when construction is completed and required permits are secured in order to use the facility for the conveyance of water.
Property, plant, equipment and water programs consist of the following (dollars in thousands) as of September 30, 2021 and December 31, 2020:
Cadiz Inc.
| September 30, 2021 | December 31, 2020 | |||||||
| Land and land improvements | $ | $ | ||||||
| Water programs | ||||||||
| Buildings | ||||||||
| Leasehold improvements | ||||||||
| Pipeline | ||||||||
| Furniture and fixtures | ||||||||
| Machinery and equipment | ||||||||
| Construction in progress | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense was $
NOTE 4 – STOCK-BASED COMPENSATION PLANS
The Company has issued options and has granted stock awards pursuant to its 2009 Equity Incentive Plan and 2019 Equity Incentive Plan.
Stock Options to Directors, Officers and Consultants
In total, options to purchase
Stock Awards to Directors, Officers, and Consultants
The Company has granted stock awards pursuant to its 2019 Equity Incentive Plan.
Of the total
Cadiz Inc.
The compensation expense recognized in the nine month period ending September 30, 2021 was based on the fair value of the RSUs on grant date. The accompanying consolidated statements of operations and comprehensive loss include approximately million and million of stock-based compensation expense related to stock awards in the nine months ended September 30, 2021 and 2020, respectively. Of the $
As of September 30, 2021,
NOTE 5 – INCOME TAXES
As of September 30, 2021, the Company had net operating loss (“NOL”) carryforwards of approximately $
As of September 30, 2021, the Company possessed unrecognized tax benefits totaling approximately $
The Company's tax years through 2020 remain subject to examination by the Internal Revenue Service, and tax years through 2020 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 years for federal tax purposes and 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 these assets. Accordingly, deferred tax asset has been reflected in the accompanying condensed consolidated balance sheet.
NOTE 6 – NET LOSS PER COMMON SHARE
Basic net loss per share is computed by dividing the net loss by the weighted-average common shares outstanding. Options, restricted stock units, convertible debt, convertible preferred shares and warrants were not considered in the computation of net loss per share because their inclusion would have been antidilutive. Had these instruments been included, the fully diluted weighted average shares outstanding would have increased by approximately
Cadiz Inc.
NOTE 7 – LEASES
The Company has operating leases for right-of-way agreements, corporate offices, vehicles and office equipment. The Company’s leases have remaining lease terms of
During the nine months ended September 30, 2021, the Company entered into new operating leases which resulted in recording right-of-use assets and lease liabilities in the amount of $
Lease balances. Amounts recognized in the accompanying consolidated balance sheet as of September 30, 2021 and December 31, 2020 are as follows (in thousands):
| As of September 30, 2021 | |||||
| Activity | Balance Sheet Location | Balance | |||
| ROU assets | Right-of-use asset | $ | |||
| Short-term lease liability | Operating lease liabilities | $ | |||
| Long-term lease liability | Long-term operating lease liabilities | $ | |||
| As of December 31, 2020 | |||||
| Activity | Balance Sheet Location | Balance | |||
| ROU assets | Right-of-use asset | $ | |||
| Short-term lease liability | Operating lease liabilities | $ | |||
| Long-term lease liability | Long-term operating lease liabilities | $ | |||
Lease cost. The Company’s operating lease cost for the nine months ended September 30, 2021 was $
Lease commitments. The table below summarizes the Company’s scheduled future minimum lease payments under operating, recorded on the balance sheet as of September 30, 2021 (in thousands):
Cadiz Inc.
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025+ | ||||
| Total lease payments | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of lease payments | ||||
| Less: current maturities of lease obligations | ( | ) | ||
| Long-term lease obligations | $ |
The table below presents additional information related to our leases as of September 30, 2021:
| Weighted Average Remaining Lease Term Operating leases (in years) | ||||
| Weighted Average Discount Rate Operating leases | % |
On December 14, 2020, the Company entered into two
From a lessor standpoint, in February 2016, the Company entered into a lease agreement with Fenner Valley Farms LLC (“FVF”) (the “lessee”), pursuant to which FVF is leasing, for a
NOTE 8 – FAIR VALUE MEASUREMENTS
Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. The Company considers a security that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
On March 24, 2021, the Company entered into an agreement which provided it the right, at its option, to further extend the maturity date of its Prior Senior Secured Debt to November 2022. The fee to acquire this second extension option was the adjustment of the exercise price of
Cadiz Inc.
As a result of the Warrant Modification, the Company reclassified the carrying value of the warrant prior to the modification from a warrant liability in the amount of $
During the nine months ended September 30, 2021, the Company recognized an unrealized gain of $
The following table presents a reconciliation of Level 3 activity for the nine month period ended September 30, 2021:
| Level 3 Liabilities | ||||
| (in thousands) | Warrant Derivative Liabilities | |||
| Balance at December 31, 2020 | $ | |||
| Unrealized gain on warrants | ( | ) | ||
| Reclassification of warrant liability to additional paid-in capital upon Warrant Modification | ( | ) | ||
| Balance at September 30, 2021 | $ | |||
NOTE 9 – COMMON AND PREFERRED STOCK
Series 1 Preferred Stock
The Company has issued a total of
Series A Preferred Stock
On June 29, 2021, the Company entered into an Underwriting Agreement with BRS as representative of the several underwriters named there, to issue and sell an aggregate of
Cadiz Inc.
On July 1, 2021, the Company filed the Certificate of Designation (“Certificate of Designation”) for the Series A Preferred Stock with the Secretary of State of the State of Delaware, which became effective upon acceptance for record. The Certificate of Designation classified a total of
As set forth in the Certificate of Designation, the Series A Preferred Stock will rank, as to dividend rights and rights upon the Company’s liquidation, dissolution or winding up: (i) senior to all classes or series of Common Stock of the Company and to each other class or series of capital stock of the Company issued by the Company other than any class or series of capital stock of the Company issued with terms specifically providing that such securities rank senior to or on a parity with the Series A Preferred Stock; provided, however, that the Series A Preferred Stock shall rank junior to the Series 1 Preferred Stock with respect to the distribution of assets upon the Company’s voluntary or involuntary liquidation, dissolution or winding up; (ii) on a parity with each class or series of capital stock of the Company issued by the Company with terms specifically providing that such securities rank on a parity with the Series A Preferred Stock with respect to the declaration and payment of dividends and the distribution of assets upon the Company’s voluntary or involuntary liquidation, dissolution or winding up; (iii) junior to each class or series of capital stock of the Company issued by the Company with terms specifically providing that such securities rank senior to the Series A Preferred Stock with respect to the declaration and payment of dividends and the distribution of assets upon the Company’s voluntary or involuntary liquidation, dissolution or winding up, none of which exists on the original effective date of this Certificate of Designation except the Series 1 Preferred Stock, which ranks junior to the Series A Preferred Stock with respect to the payment of dividends and senior to the Series A Preferred Stock with respect to the distribution of assets upon the Company’s voluntary or involuntary liquidation, dissolution or winding up; and (iv) effectively junior to all the Company’s existing and future indebtedness (including indebtedness convertible into Common Stock or preferred stock) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) the Company’s existing or future subsidiaries.
Holders of Series A Preferred Stock, when and as authorized by the Company’s Board of Directors, are entitled to cumulative cash dividends at the rate of
On and after July 2, 2026, the shares of Series A Preferred Stock will be redeemable at the Company’s option, in whole or in part, at a redemption price equal to $
Cadiz Inc.
Shares of Series A Preferred Stock are convertible into shares of Common Stock if, and only if, a change of control or delisting event (each as defined in the Certificate of Designation) has occurred, and the Company has not elected to redeem the Series A Preferred Stock prior to the applicable conversion date. Upon any conversion, each share of Series A Preferred Stock will be converted into that number of shares of Common Stock equal to the lesser of (i) the quotient obtained by dividing (A) the sum of (x) the $
The Company has
Cadiz Inc.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the following discussion contains trend analysis and other forward-looking statements. Forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. These include, among others, our ability to maximize value from our land and water resources and our ability to obtain new financings as needed to meet our ongoing working capital needs. See additional discussion under the heading "Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. Our forward-looking statements are made only as of the date hereof. We assume no duty to update these forward-looking statements to reflect new, changed or unanticipated events or circumstances, other than as may be required by law.
We are a natural resources development company committed to providing sustainable water and agricultural opportunities in California.
We own approximately 45,000 acres of land with high-quality, naturally recharging groundwater resources in three areas of Southern California’s Mojave Desert – the Cadiz Valley (35,000 acres), Danby Dry Lake (2,000 acres), and the Piute Valley (9,000 acres) (“Cadiz Property”). Our properties represent a unique private reserve of lands with vested water rights located in a remote area of eastern San Bernardino County that is at the crossroads of major highway, rail, energy, and water infrastructure supplying and delivering necessary resources to communities in California and across the Western United States. Our main objective is to realize the highest and best use of our land, water, and related infrastructure assets in an environmentally responsible way. Our present activities are focused on managing our assets to meet growing long-term demand for access to sustainable water supplies and agricultural products.
California faces systemic water challenges and is not able to safely, sustainably and reliably meet the water needs for all of its communities. We believe that the highest and best use of our assets will be realized by offering a combination of water supply, storage and conveyance projects and agricultural development at our properties in ways that are sustainable and responsive to California’s resource needs.
We are principally focused on developing a water project at our Cadiz Valley property that can help address California’s persistent systemic water challenges and deliver new water to California communities in need of reliable water supplies and water infrastructure (“Water Project”). Through management of groundwater at the Cadiz Property, the Water Project would, in its first phase, or Phase 1, conserve and supply new water for approximately 400,000 people in communities in Southern California. A second phase of the Water Project, or Phase 2, would bank and store imported water for use in future dry years.
The Water Project has completed extensive permitting and environmental review in accordance with local, state and federal law and is approved to deliver a reliable supply of 50,000 acre-feet of water per year for 50 years to communities off of the Cadiz Property. Prior to construction and implementation, the Water Project must complete contracts with participating water agencies, conveyance arrangements to deliver water supplies to contracting water agencies, and arrange for facility construction, improvements, and financing. Discussions with parties interested in contracting for water and storage from the Project are ongoing.
Cadiz Inc.
We anticipate using two separate pipeline routes to convey water between the service areas of our participating agencies and the Cadiz Property. The first route, or the Southern Pipeline, requires the construction of a 43-mile, approximately 55-85” steel water conveyance pipeline within a portion of the Arizona & California Railroad Company’s railroad right-of-way that crosses the Cadiz Property and intersects with the Colorado River Aqueduct (“CRA”) in Rice, California. The CRA is owned by the Metropolitan Water District of Southern California (“MWD”) and serves water providers in six southern California counties. Prior to construction of the Southern Pipeline, we must secure authorizations required to convey water in the CRA, including an agreement with MWD and authorization from the California State Lands Commission under Water Code Sections 1810 - 1815.
The second route, or the Northern Pipeline, contemplates the use of an existing 220-mile, 30” steel pipeline that we acquired from El Paso Natural Gas (“EPNG”) and are working to convert to water conveyance. The Northern Pipeline extends from the Cadiz Property north-west to California’s Central Valley, crossing the Mojave River Pipeline and the Los Angeles Aqueduct before terminating near the California State Water Project in Wheeler Ridge.
The Northern Pipeline route was studied in the Water Project’s environmental documents as a potential route to accommodate imported storage of surplus water in Phase 2. The Northern Pipeline can also be utilized to convey water between parties along the 220-mile route to augment existing water conveyance infrastructure in a dry, disadvantaged area of California. Engineering and technical assessments conducted since completing the acquisition of the pipeline indicate that the pipeline can safely convey water. We are presently engaged in discussions with parties interested in using the Northern Pipeline. Prior to conveyance of water through the Northern Pipeline, we must secure permits required by any definitive agreement to use the facility. All conveyance of water via the Northern Pipeline would be conducted in accordance with applicable local, state and federal laws.
Our agricultural operations provide the Company’s current principal source of revenue, although our working capital needs are not fully supported by our agricultural lease and farming returns at this time. We believe that the ultimate implementation of the Water Project will provide a significant source of future cash flow for the business and our stockholders. We presently rely upon debt and equity financing to support our working capital needs and development of the Water Project (see “Liquidity and Capital Resources”, below).
Our current and future operations also include activities that further our commitments to sustainable stewardship of our land and water resources, good governance and corporate social responsibility. We believe these commitments are important investments that will assist in maintenance of sustained stockholder value.
Cadiz Inc.
Results of Operations
Three Months Ended September 30, 2021, Compared to Three Months Ended September 30, 2020
We have not received significant revenues from our water resource and real estate development activity to date. Our revenues have been limited to rental income from our agricultural leases. As a result, we have historically incurred a net loss from operations. We incurred a net loss of $7.8 million in the three months ended September 30, 2021, compared to a $4.5 million net loss during the three months ended September 30, 2020. The higher 2021 loss was primarily due to a loss on early extinguishment of debt in the amount of $1.4 million, together with an increase in general and administrative costs including higher stock-based non-cash bonus awards to employees.
Our primary expenses are our ongoing overhead costs associated with the development of the Water Project (i.e., general and administrative expense) and our interest expense. We will continue to incur non-cash expenses in connection with our management and director equity incentive compensation plans.
Revenues Revenue totaled $142 thousand during the three months ended September 30, 2021, compared to $139 thousand for the three months ended September 30, 2020. Revenues primarily related to rental income from our agricultural leases.
General and Administrative Expenses General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $3.5 million in the three months ended September 30, 2021, compared to $2.3 million in the three months ended September 30, 2020. The higher general and administrative expenses in 2021 primarily related to legal fees and technical studies related to putting the Northern Pipeline into use.
Compensation costs for stock and option awards for the three months ended September 30, 2021, were $696 thousand, compared to $273 thousand for the three months ended September 30, 2020. The higher 2021 expense was primarily due to stock-based non-cash bonus awards to employees.
Depreciation Depreciation expense totaled $107 thousand during the three months ended September 30, 2021, compared to $106 thousand during the three months ended September 30, 2020.
Interest Expense, net Net interest expense totaled $2.0 million during the three months ended September 30, 2021 compared to $1.9 million during the same period in 2020. The following table summarizes the components of net interest expense for the two periods (in thousands):
Cadiz Inc.
| Three Months Ended |
||||||||
| September 30, |
||||||||
| 2021 |
2020 |
|||||||
| Interest on outstanding debt |
$ | 1,461 | $ | 1,994 | ||||
| Unrealized gains on warrants, net |
- | (310 | ) |
|||||
| Amortization of debt discount |
535 | 6 | ||||||
| Amortization of deferred loan costs |
4 | 230 | ||||||
| $ | 2,000 | $ | 1,920 | |||||
Income Taxes Income tax expense was $2 thousand for each of the three months ended September 30, 2021 and 2020, and were related to state income taxes. See Note 5 to the Condensed Consolidated Financial Statements – “Income Taxes”.
Loss from Equity-Method Investments Loss from equity-method investments related to our 50% ownership in the SoCal Hemp JV LLC totaled $271 thousand for the three months ended September 30, 2021, compared to $77 thousand for the three months ended September 30, 2020.
Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020
We incurred a net loss of $25.3 million in the nine months ended September 30, 2021, compared to a $29.8 million net loss during the nine months ended September 30, 2020. The higher loss in 2020 was primarily due to a loss on early extinguishment of debt in the amount of $12.4 million, which was a non-cash charge, reflecting the excess of the fair value of new preferred stock issued over the historical book value of the related convertible debt retired pursuant to certain conversion and exchange agreements entered into in March 2020, offset by higher compensation costs related to stock-based non-cash bonus awards to employees and an increase in interest expense in 2021.
Revenues Revenue totaled $422 thousand during the nine months ended September 30, 2021, compared to $401 thousand for the nine months ended September 30, 2020. Revenues primarily related to rental income from our agricultural leases.
General and Administrative Expenses General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $9.7 million in the nine months ended September 30, 2021, compared to $7.8 million in the nine months ended September 30, 2020. The higher general and administrative expenses during the 2021 period are primarily related to (a) legal fees and technical studies related to putting the Northern Pipeline into use, (b) additional rent recorded for the Northern Pipeline right-of-way grant, and (c) an increase in cash bonus awards to employees.
Compensation costs for stock and option awards for the nine months ended September 30, 2021, were $4.1 million, compared to $1.8 million for the nine months ended September 30, 2020. The higher 2021 expense was primarily due to stock-based bonus awards to employees. Of the $4.1 million of stock-based compensation recorded in 2021, $1.2 million related to taxes withheld and paid in cash by the Company for the settlement of vested RSUs.
Cadiz Inc.
Depreciation Depreciation expense totaled $313 thousand during the nine months ended September 30, 2021, compared to $281 thousand during the nine months ended September 30, 2020.
Interest Expense, net Net interest expense totaled $9.4 million during the nine months ended September 30, 2021 compared to $7.2 million during the same period in 2020. The following table summarizes the components of net interest expense for the two periods (in thousands):
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2021 |
2020 |
|||||||
| Interest on outstanding debt |
$ | 7,062 | $ | 6,602 | ||||
| Unrealized gains on warrants, net |
(573 | ) |
(259 | ) |
||||
| Amortization of debt discount |
547 | 289 | ||||||
| Amortization of deferred loan costs |
2,364 | 534 | ||||||
| $ | 9,400 | $ | 7,166 | |||||
Income Taxes Income tax expense was $5 thousand for each of the nine months ended September 30, 2021 and 2020. See Note 5 to the Condensed Consolidated Financial Statements – “Income Taxes”.
Loss from Equity-Method Investments Loss from equity-method investments related to our 50% ownership in the SoCal Hemp JV LLC totaled $840 thousand for the nine months ended September 30, 2021, compared to $776 thousand for the nine months ended September 30, 2020.
Liquidity and Capital Resources
Current Financing Arrangements
As we have not received significant revenues from our development activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence. Historically, we have addressed these needs primarily through secured debt financing arrangements and private equity placements.
In July 2020, we entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $30 million from time to time in an “at-the-market” offering (the “July 2020 ATM Offering”) for further development of our land and agricultural assets, and for working capital purposes. As of July 2, 2021, we have sold the $30 million in common stock authorized in the July 2020 ATM Offering through the sale of 2,748,339 shares resulting in aggregate net proceeds of approximately $29.2 million.
Cadiz Inc.
On June 7, 2021, we completed the sale and issuance of 1,219,512 shares of the Company’s common stock to certain institutional investors under a placement agent agreement with B. Riley Securities, Inc. (“BRS”). The shares of common stock were sold at a purchase price of $12.30 per share, for aggregate gross proceeds of $15 million and aggregate net proceeds of approximately $14.1 million. We used the net proceeds from this offering, together with cash on hand, to fund the $19 million payment made on June 30, 2021 to complete the acquisition of a 124-mile extension of the Northern Pipeline.
On June 29, 2021, we entered into an Underwriting Agreement with BRS as representative of the several underwriters named therein, to issue and sell an aggregate of 2,000,000 depositary shares (the “Depositary Shares”), as well as up to 300,000 Depositary Shares that may be sold pursuant to the exercise of an option to purchase additional Depositary Shares, each representing 1/1000th of a share of Series A Preferred Stock (“Depositary Share Offering”). The liquidation preference of each of each share of Series A Preferred Stock is $25,000 ($25.00 per Depositary Share). The Depositary Share Offering was completed on July 2, 2021 for net proceeds of approximately $54 million.
On July 2, 2021, we entered into a $50 million new credit agreement (“Credit Agreement”) (see Note 2 to the Condensed Consolidated Financial Statements – “Long-Term Debt”). The proceeds of the Credit Agreement, together with the proceeds from the Depositary Share Offering, were used to (a) to repay all our outstanding obligations under the Prior Senior Secured Debt in the amount of approximately $77.5 million (b) to deposit approximately $10.2 million into a segregated account, representing an amount sufficient to pre-fund eight quarterly dividend payments on the Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering, and (c) to pay transaction related expenses. The remaining proceeds will be used for working capital needs and for general corporate purposes.
Limitations on our liquidity and ability to raise capital may adversely affect us. Sufficient liquidity is critical to meet our resource development activities. To the extent additional capital is required, we may increase liquidity through a variety of means, including equity or debt placements, through the lease, sale or other disposition of assets or reductions in operating costs. If additional capital is required, no assurances can be given as to the availability and terms of any new financing.
As we continue to actively pursue our business strategy, additional financing will continue to be required. See “Outlook” below. The covenants in the Credit Agreement do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any common equity financing. We do not expect the loan covenants to materially limit our ability to finance our water and agricultural development activities.
Cash Used in Operating Activities. Cash used in operating activities totaled $9.6 million and $10.3 million for the nine months ended September 30, 2021 and 2020, respectively. The cash was primarily used to fund general and administration expenses related to our water development efforts and agricultural development efforts.
Cash Used in Investing Activities. Cash used in investing activities totaled $21.5 million for the nine months ended September 30, 2021, and $7.8 million for the nine months ended September 30, 2020. The cash used in the 2021 period primarily related to the Northern Pipeline acquisition. The 2020 period included additions to our interests in SoCal Hemp JV LLC, well development and professional water quality and structural testing of a five-mile segment of pipeline.
Cadiz Inc.
Cash Provided by Financing Activities. Cash provided by financing activities totaled $52.7 million for the nine months ended September 30, 2021, compared with cash provided of $9.9 million for the nine months ended September 30, 2020. Proceeds from financing activities for the 2021 period are related to the completion of the Depositary Share Offering, issuance of shares under at-the market and direct offerings and refinancing of the Company's Prior Senior Secured Debt. Proceeds from financing activities for the 2020 period are related to the issuance of shares under at-the-market offerings.
Outlook
Short-Term Outlook. The completion of both the Depositary Share Offering and the Credit Agreement (see Note 2 and Note 9 to the Condensed Consolidated Financial Statements – “Long-Term Debt” and “Common and Preferred Stock”) in July 2021, provided the Company with net cash proceeds of approximately $20 million. These net cash proceeds, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs.
Long-Term Outlook. In the longer term, we will need to raise additional capital to finance working capital needs and capital expenditures (see “Current Financing Arrangements”, above). Our future working capital needs will depend upon the specific measures we pursue in the entitlement and development of our water resources and other developments. Future capital expenditures will depend on the progress of the Water Project and further expansion of our agricultural assets.
We are evaluating the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. We may meet any future cash requirements through a variety of means, including equity or debt placements, or through the sale or other disposition of assets. Equity placements will be undertaken only to the extent necessary, so as to minimize the dilutive effect of any such placements upon our existing stockholders. No assurances can be given, however, as to the availability or terms of any new financing. Limitations on our liquidity and ability to raise capital may adversely affect us. Sufficient liquidity is critical to meet our resource development activities.
Recent Accounting Pronouncements
See Note 1 to the Condensed Consolidated Financial Statements – “Basis of Presentation”.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Reg. 240.12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item.
Cadiz Inc.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
The Company established disclosure controls and procedures to ensure that material information related to the Company, including its consolidated entities, is accumulated and communicated to senior management, including the Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”) and to its Board of Directors. Based on their evaluation as of September 30, 2021, the Company's Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and such information is accumulated and communicated to management, including the principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Controls Over Financial Reporting
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in the Company's internal controls over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.
Cadiz Inc.
PART II - OTHER INFORMATION
| Legal Proceedings |
As described under Item 3, Legal Proceedings in our 2020 Annual Report on Form 10K, in March 2021 two lawsuits were filed by the Native American Land Conservancy/National Park Conservation Association and Center for Biological Diversity/Defenders of Wildlife/Sierra Club against the United States Department of the Interior, Bureau of Land Management (BLM) and agency decision makers in United States District Court for the Central District of California (the “Court”). The lawsuits allege violations by BLM of various regulations in its issuance to our subsidiary, Cadiz Real Estate LLC, of two right-of-way permits that now enable us to transport water through the Northern Pipeline over BLM-managed lands and seek to vacate the permits and require additional federal review. We were not a named party to these lawsuits, but in June 2021 we filed motions to intervene in each lawsuit to join the defense of these right-of-way permits. In August 2021, our motions were granted, and we were recognized by the Court as an Intervening Defendant.
In October 2021, counsel for BLM filed a joint status report and proposed schedule with the Court requesting that the cases be consolidated and also indicating that it intends to file a motion for voluntary remand prior to filing a reply brief in the cases. If granted, a motion for voluntary remand would provide BLM an opportunity to re-evaluate the permits and determine if any additional regulatory review is required. We believe the record reflects that the permits were lawfully issued to us and that our conversion of this pipeline to water conveyance will not cause any disturbance to the public lands or harm to the environment. We expect to oppose the motion for voluntary remand, subject to a review of the motion once filed.
While we continue to believe the lawsuits are without merit, we cannot reasonably predict the outcome of the motion or the cases at this time.
| Risk Factors |
We are a smaller reporting company as defined by Reg. 240.12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item.
| Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable.
| Defaults Upon Senior Securities |
Not applicable.
Cadiz Inc.
| Mine Safety Disclosures |
Not applicable.
| Other Information |
Not applicable.
Cadiz Inc.
| Exhibits |
The following exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.
| ** 3.1 |
|
| ** 3.2 |
Certificate of Designation of 8.875% Series A Cumulative Perpetual Preferred Stock of Cadiz Inc. |
| ** 4.1 |
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| ** 4.2 |
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| ** 4.3 |
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| ** 4.4 |
Warrant No. W-1 to Purchase Common Stock of Cadiz Inc. dated as of July 2, 2021 |
| ** 4.5 |
Warrant No. W-2 to Purchase Common Stock of Cadiz Inc. dated as of July 2, 2021 |
| ** 10.1 |
|
| ** 10.2 |
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| ** 10.3 |
|
| * 31.1 |
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| * 31.2 |
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| * 32.1 |
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| * 32.2 |
Cadiz Inc.
| * 101.INS |
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| * 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
| * 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| * 101.DEF |
Inline XBRL Extension Definition Linkbase Document |
| * 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
| * 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * |
Filed concurrently herewith. |
| ** |
Previously filed. |
Cadiz Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cadiz Inc.
| By: | /s/ Scott S. Slater | November 12, 2021 | ||
| Scott S. Slater | Date | |||
| Chief Executive Officer and President | ||||
| (Principal Executive Officer) | ||||
| By: | /s/ Stanley E. Speer | November 12, 2021 | ||
| Stanley E. Speer | Date | |||
| Chief Financial Officer and Secretary | ||||
| (Principal Financial Officer) |