Investment in equity method investment

6 Months Ended

Dec. 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

Investment in equity method investment

Note 3 - Investment in equity method investment

In 2019, the Company and Delaware Water Company, LLC (Delaware) formed a limited liability company called Enviro WaterTek LLC (“Enviro”). Enviro is owned 50% by the Company and 50% by Delaware, and the Company accounts for its investment in Enviro under the equity method. From 2019 to 2021, Enviro had no operations.

In September 2021, the Company and Delaware entered into a separate agreement under Enviro for a specific project (referred to as “Ameredev”). Delaware has certain contracts in place to provide recycled water to operators of certain active oil and gas wells. Under the agreement, the Company contributed $1.2 million that was used by Ameredev to increase the capacity of certain pipelines and water treatment facilities operated by Delaware. Pursuant to the agreement, for each barrel of recycled water that Ameredev sells, Delaware will receive $0.10 per barrel, and the Company will receive $0.05 per barrel (referred to as usage fees), with the balance of net income (loss) from Ameredev being allocated 70% to Delaware and 30% to the Company. The Ameredev agreement will terminate the earlier of three years (unless extended by unanimous agreement of the Board and Members of Ameredev) from the date of the agreement or by unanimous agreement of the Board and Members of Ameredev.

During the six months ended December 31, 2022, the Company recorded total revenues from Ameredev of $17,000 from usage fees. There was no usage fee recorded during the three months ended December 31, 2022.

During the three and six months ended December 31, 2022, the Company recognized a loss of $11,000 and $29,000, respectively, to account for the Company’s 30% share in the net loss from the equity method investment.

The following table summarizes the activity of the Company’s equity method investment:

	December 31, 2022
Balance at beginning of period	$	1,149,000
Contributions to equity method investment		–
Equity in earnings and losses of equity method investment		(29,000	)
Balance at end of period	$	1,120,000

A summarized balance sheet as of December 31, 2022, for Ameredev, and a summarized statement of operations for the six-months ended December 31, 2022, for Ameredev is presented below:

Balance Sheet:

	Amount
Cash	$	1,000
Accounts receivable		23,000
Property and equipment		1,190,000
Total assets	$	1,214,000
Partners equity	$	1,214,000
Total liabilities and equity	$	1,214,000

Income Statement:

	Amount
Revenue	$	24,000
Usage fees paid to Cavitation and Delaware		(62,000	)
Operating expenses		(57,000	)
Net loss	$	(95,000	)