CADIZ INC

NOTE1 – DESCRIPTION OF BUSINESS

Cadiz Inc. (“Cadiz or the “Company”) is a water solutions provider with a unique combination of land, water, pipeline and water filtration technology assets strategically located in Southern California between major water systems serving population centers in the Southwestern United States. The Company’s portfolio of assets includes 2.5 million acre-feet of water supply,220 miles of existing, buried pipeline,1 million acre-feet of groundwater storage capacity, versatile, scalable, and cost-effective water filtration technology. The Company provides products and services to public water systems, government agencies and commercial clients that address the emerging threat of water scarcity and affordability in a region of the world facing severe challenges from climate change.

The Company owns approximately 46,000 acres of land with high-quality, naturally-recharging groundwater resources in Southern California’s Mojave Desert (“Cadiz Property”). Land holdings with vested water rights were assembled by the Company’s founders in the early1980s, relying on NASA imagery that identified a significant desert aquifer system at the base of a vast Southern California watershed.

Since its founding in1983, the Company has developed its land assets in California for sustainable farming and groundwater management, and in recent years, has invested in wellfield and pipeline infrastructure as well as water filtration technology that will enable The Company to play a critical role in serving the needs of people and communities that lack access to clean, reliable and affordable water.

The Company’s supply, storage and pipeline assets are located in a remote area of eastern San Bernardino County that sits at the crossroads of major highway, rail, energy, and water infrastructure between California’s primary water supply systems, the Colorado River Basin and the State Water Project. As a result, the Cadiz Water Conservation and Storage Project is well positioned to assist public water agencies in storing and managing unpredictable water supplies and provide reliable, affordable water supplies to chronically underserved areas of California.

NOTE2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Consolidated Financial Statements of the Company have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company incurred losses of $31.4 million and $24.8 million for the years ended* December 31, 2023and2022,* respectively. The Company had working capital of $2.2 million at* December 31, 2023and used cash in operations of $20.9 million for the year ended December 31, 2023.The higher loss in2023* was primarily due to a loss on extinguishment of debt 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* February 2023.*

F-8

Cash requirements during the year ended* December**31,2023,* primarily reflect certain operating and administrative costs related to development of the Company’s land, water, infrastructure and technology assets for water solutions including the Cadiz Water Conservation & Storage Project (“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 an urgent need for groundwater storage capacity in Southern California and growing demand for affordable, reliable, long-term water supplies before the next drought strikes the Southwestern United States.

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 net 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”)(see Note8* – "Long-Term Debt”, below).

On* March 6, 2024,the Company entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund2012* (“Heerema”). 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 (see Note15* – “Subsequent Events”).

The Company* maymeet 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 senior secured debt donot* prohibit the Company’s use of additional equity financing and allow the Company to retain100% of the proceeds of any common equity financing. The Company doesnot expect the loan covenants to materially limit its ability to finance its water and agricultural development activities.

F-9

Management assesses whether the Company has sufficient liquidity to fund its costs for the nexttwelve months from the 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 judgment to estimate the significant assumptions related to the projected cash flows of the Company including the following: (i) projected cash outflows, (ii) projected cash inflows, (iii) categorization of expenditures as discretionary versus non-discretionary and (iv) 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* mayadversely 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 beno* 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 impact its viability as a company.

Principles of Consolidation

The consolidated financial statements include the accounts of Cadiz Inc. and all subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company applies the equity method of accounting for investments in which the Company has significant influence butnot a controlling interest.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these financial statements, management has made estimates with regard to goodwill and other long-lived assets, stock compensation and deferred tax assets. Actual results could differ from those estimates.

Segment Reporting

The Company currently operates intwo 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’ssecond 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 2022into its new subsidiary ATEC. There were intersegment sales of $311 thousand during the year ended December 31, 2023,*which resulted in an intercompany elimination of profits in the amount of $99 thousand.

F-10

Revenue Recognition

The Company’s revenue is currently derived from sales of water filtration systems by ATEC, sales of farm crops, and rental revenue from its agricultural lease. The Company recognizes revenue by following thefive-step model under ASC606 to achieve the core principle that an entity recognizes revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Sales of farm crops are recognized when product is shipped to customers at Cadiz Ranch, and sales at ATEC are recognized when filters are shipped to the customer.

Stock-Based Compensation

General and administrative expenses include $1.5 million and $1.9 million of stock-based compensation expenses in the years ended* December 31, 2023and2022,* respectively.

Stock-based compensation is generally based upon grants of stock awards, performance stock units (“PSU”) and restricted stock units (“RSU”) to its employees and consultants under the2019 Equity Incentive Plan. For stock awards, PSUs or RSUs granted, the Company determines the fair value of the stock award, PSUs or RSU at the date of the grant and recognizes the compensation expense over the vesting period. For PSUs or RSUs which vest upon completion of certain milestones, the fair value of the PSU or RSU is recognized when it is probable that the milestone will be achieved.

Net Loss Per Common Share

Basic net loss per share is computed by dividing the net loss applicable to common stock by the weighted-average common shares outstanding. Options, restricted stock units, convertible debt, convertible preferred shares and warrants werenot 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 5,290,000 shares and 1,814,000 shares for the years ended* December 31, 2023and2022,* respectively.

Property, Plant, Equipment and Water Programs

Property, plant, equipment and water programs are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally five toforty-five years for land improvements and buildings, andfive tofifteen years for machinery and equipment. Leasehold improvements are amortized over the shorter of the term of the relevant lease agreement or the estimated useful life of the asset.

Water rights, storage and supply programs are stated at cost. Certain costs directly attributable to the development of such programs have been capitalized by the Company. These costs, which are expected to be recovered through future revenues, consist of direct labor, drilling costs, consulting fees for various engineering, hydrological, environmental and additional feasibility studies, and other professional and legal fees. The Company hasnot commenced depreciation of these assets as they arenot yet in service as the Water Project isnot operating. While interest on borrowed funds is currently expensed, interest costs related to the construction of water project facilities will be capitalized at the time construction of these facilities commences.

F-11

Goodwill and Other Intangibles Resulting from Business Acquisitions

As a result of a merger in* May 1988betweentwo* companies which eventually became known as Cadiz Inc., goodwill in the amount of $7,006,000 was recorded. Approximately $3,193,000 of this amount was amortized prior to the adoption of Accounting Standards Codification350, “Intangibles – Goodwill and Other” (“ASC350”) on* January 1, 2002.In addition, as a result of the ATEC Acquisition (see Note3* – “Acquisitions”), tax deductible goodwill in the amount of $1.9 million was recorded in* November 2022.Since the adoption of ASC350,* there have beenno goodwill impairments recorded. The reporting units to which $5.7 million of goodwill is allocated had a positive carrying amount on* December 31, 2023and2022.*

The Company accounts for business combinations using the acquisition method, with the excess of the acquisition cost over the fair value of net tangible assets and identified intangible assets acquired considered goodwill. As a result, the Company discloses goodwill separately from other intangible assets. Other identifiable intangibles related to the ATEC acquisition included non-compete agreements. Contingent consideration arrangements are initially recorded based on management’s best estimate of the amount of contingent consideration that will be realized. Changes in fair value of contingent consideration that arenot measurement period adjustments are recognized in earnings.

Impairment of Goodwill and Long-Lived Assets

The Company assesses long-lived assets, excluding goodwill, for recoverability whenever events or changes in circumstances indicate that their carrying value* maynot* be recoverable through the estimated undiscounted future cash flows resulting from the use of the assets. If it is determined that the carrying value of long-lived assets* maynot* be recoverable, the potential impairment charge is measured by using the projected discounted cash-flow method. No impairment charge was recorded during the current fiscal year.

The Company performs an annual impairment test to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). In performing the impairment test, the Company has the option tofirst assess qualitative factors to determine whether it is necessary to perform a quantitative assessment for goodwill impairment. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value, the Company performs a quantitative assessment.

This impairment assessment is performed at least annually in thefourth quarter. An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value,not to exceed the carrying amount of goodwill in that reporting unit. The Company uses the market approach to assess impairment for the Land and Water Resources reporting unit, as its common stock price is an important component of the fair value calculation. If the Company’s stock price experiences price declines, this will impact the fair value of the reporting unit and could lead to potential impairment charges in future periods. Accordingly,no assurances can be given that the Company willnot record an impairment loss on goodwill in the future. The Company uses the income approach to assess impairment for the Water Filtration Technology reporting unit.

F-12

In the Company’s annual impairment analysis for thefourth quarter2023, the goodwill was evaluated utilizing a qualitative assessment. Based on this assessment, the Company determined that the fair value of the reporting units was more-likely-than-not greater than its respective carrying value; therefore,no impairment charge was recorded during the current fiscal year.

Debt Discount

Debt discount created upon the issuance of debt is deferred and amortized over the life of the related loan using the effective interest method and is presented as a reduction of long-term debt. The Company recorded $0.7 million of debt discount for the year ended* December 31, 2023,and $2.4 million for the year ended December 31, 2022.*Amortization of debt discounts is included in interest expense on the Consolidated Statement of Operations.

Income Taxes

Income taxes are provided for using an asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable enacted tax rates. A valuation allowance is provided when it is more likely thannot that some portion or all of the deferred tax assets willnot be realized.

Fair Value of Financial Instruments

Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and accrued liabilities due to their short-term nature. The carrying value of the Company’s secured debt approximates fair value, based on interest rates available to the Company for debt with similar terms. See Note8 – “Long-Term Debt”, for discussion of fair value of debt.

SoCal Hemp JV

In* July 2019,SoCal Hemp JV LLC (the “JV”) was created by Cadiz Real Estate LLC (a fully owned subsidiary of Cadiz Inc.) and SoCal Hemp Co, LLC (a fully owned subsidiary of Glass House Brands, Inc., which is an unrelated company to Cadiz Inc.) when thetwo* parties entered into a Limited Liability Company Agreement (“LLC Agreement”). The JV was50% owned by Cadiz Real Estate LLC and 50% owned by SoCal Hemp Co., LLC (“SCHCO”, together the “Parties”). On* December 30, 2022,the Parties entered into an Agreement and Plan of Dissolution of the JV whereby the Company purchased fixed assets with a net book value to the JV of approximately $343 thousand for $171 thousand and reclaimed the buildings, tenant improvements and machinery and equipment with fair value of approximately $1 million which is included in Property, Plant, Equipment and Water Programs at December 31, 2022.*

F-13

Prior to the dissolution of the JV, the carrying value of the investment was approximately $1 million. Loss from equity-method investments related to the JV immediately prior to the dissolution totaled $171 thousand. At the time of the dissolution, the Company recorded a gain on the dissolution of the JV of approximately $211 thousand. Total gain from equity-method investments for the year ended* December 31, 2022,was $40 thousand. The Company recorded rental income related to the JV of approximately $129 thousand for the year ended December 31, 2022.The results of the JV havenot* been separately recorded in discontinued operations as the results werenot material.

Supplemental Cash Flow Information

During the year ended* December 31, 2023,approximately $1.6 million in interest payments on the Company’s senior secured debt was paid in cash. There areno* scheduled principal payments due on the Current Senior Secured Debt prior to its maturity.

At* December 31, 2023,accruals for cash dividends payable on the Series A Preferred Stock was $1.29 million (see Note10* – “Common and Preferred Stock”). The cash dividends were paid on* January 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:

The restricted cash amounts primarily represented funds deposited into a segregated account, representing an amount sufficient to pre-fund quarterly dividend payments on Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering through approximately* July 2023.*

Cash payments for income taxes were $11 thousand and $7 thousand for the years ended* December 31, 2023and2022,* respectively.

F-14

Recent Accounting Pronouncements

Accounting GuidanceNot* Yet Adopted*

In* November 2023,the Financial Account Standards Board (“FASB”) issued an accounting standards update which modifies the disclosure and presentation requirements of reportable segments. This update 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 willnot* have a material impact on the consolidated financial statements.

In* December 2023,the FASB issued an accounting standards update which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash tax paid in the U.S. and foreign jurisdictions. This update is effective for fiscal years beginning after December 15, 2024.The Company is currently assessing this new guidance and expects this new standard willnot* have a material impact on the consolidated financial statements.

Accounting Guidance Adopted

In* June 2016,the 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, 2022,and for interim periods within those fiscal years, with early adoption permitted. The adoption of this new standard on January 1, 2023hadno* impact on the Company’s consolidated financial statements.

NOTE3 – ACQUISITIONS

On* November 9, 2022,*the Company completed the acquisition of the assets of ATEC Systems, Inc. into ATEC Water Systems, LLC (“ATEC”), a water filtration technology company, at a purchase price of up to $2.2 million (“ATEC Acquisition”). The ATEC Acquisition is intended to enable the Company to assist water agencies in increasing supplies of potable water from contaminated groundwater sources.

The table below summarizes the fair value of assets acquired and liabilities Assumed in the ATEC Acquisition:

F-15

The impact of the ATEC Acquisition, which is a new water filtration technology segment for the Company, wasnot material to the proforma net revenue or net income of the Company’s combined operations for the year ended* December 31, 2022.Net revenue and net income related to ATEC post-acquisition werenot* material to the Consolidated Statements of Income for the year ended* December 31, 2022.*

The Company recorded a contingent consideration liability in the amount of $1.45 million related to the purchase price of the ATEC Acquisition for amounts payable upon the sale of a requisite number of water filtration units under an asset purchase agreement.

Following the acquisition, the Company entered into an agreement to grant 200,000 Class P Units of ATEC to the new Chief Operating Officer of ATEC which vest ratably on an annual basis over three years. These units provide for a 20% profit participation in ATEC following a return to the Company of its initial $2.2 million investment.

NOTE4 – REPORTABLE SEGMENTS

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 year ended* December 31, 2023:*

The Company only operated inone segment during the year ended* December 31, 2022,as the water filtration technology segment didnot* exist prior to the ATEC Acquisition in* November 2022.*

Assets by operating segment, inclusive of goodwill, are as follows (dollars in thousands):

F-16

Goodwill by operating segment is as follows (dollars in thousands):

Property, plant, equipment and water programs consist of the following (dollars in thousands):

F-17

NOTE5 – PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS

Property, plant, equipment and water programs consist of the following (dollars in thousands):

Land and land improvements primarily include land acquisitions, well development, irrigation systems and other related land infrastructure. Water programs primarily include costs directly attributable to the Company’s water project development efforts, including consulting fees for various engineering, hydrological, environmental and additional feasibility studies, and other professional and legal fees.

During the year ended* December 31, 2023,*$1,906,000 of construction in progress was placed into service, which included land development, irrigation systems and stand establishment related to the planting of 150 acres of alfalfa.

Depreciation expense on land improvements, buildings, leasehold improvements, machinery and equipment and furniture and fixtures was $1.25 million and $0.7 million for thetwelve months ended* December 31, 2023and2022,* respectively.

NOTE6 – OTHER ASSETS

Other assets include the following (dollars in thousands):

Prepaid rent primarily consists of fees incurred to obtain the rights-of-way for the Water Project. Amortization of prepaid rent was approximately $115,000 for each of the years ended* December 31, 2023and2022.*

NOTE7 – ACCRUED LIABILITIES

At* December 31, 2023and2022,* accrued liabilities consist of the following (dollars in thousands):

NOTE8 – LONG-TERM DEBT

At* December 31, 2023and2022,* the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):

The carrying value of the Company’s Senior Secured Debt is approximately $19.1 million. The carrying value of the Company's convertible note instrument approximates fair value.

Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on* December 31, 2023,*are as follows:

F-19

.On* July 2, 2021,the Company entered into a $50 million senior secured credit agreement (“Credit Agreement”) with Lenders and BRS, as administrative agent for the Lenders (“Current Senior Secured Debt”). Interest is paid quarterly at a rate ofseven percent per annum. The obligations under the Current Senior Secured Debt are secured by substantially all of the Company’s assets on afirst*-priority basis. In connection with any repayment or prepayment of the debt, 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 the applicable repayment fee described above.

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, 2024to 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.

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 $220 thousand for the year ended December 31, 2023.*

F-20

On* March 6, 2024,the Company entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund2012* (“Heerema”). 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.*

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 8.875% Series A Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) by the Company, the Company will be required to, withinfive 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.

In connection with the issuance of the Current Senior Secured Debt, on* July 2, 2021 (the “Original Issue Date”) the Company issued to the Lenderstwo 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 maybe exercised any time prior to July 2, 2024 (the “Expiration Date”) and have an exercise price of $17.38 equal to 120% of the closing price per share of the Company’s common stock on the Original Issue Date. The B Warrants may*be exercised in the period from 180 days after the Original Issue Date to the Expiration Date and have an exercise price of $21.72 equal to 150% of the closing price of the Company’s common stock on the Original Issue Date.

As a result of the issuance of the 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 is being amortized over the term of the Current Senior Secured Debt.

F-21

NOTE9 – INCOME TAXES

Deferred taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities and available carryforwards. Temporary differences and carryforwards which gave rise to a significant portion of deferred tax assets and liabilities as of* December 31, 2023and2022* are as follows (dollars in thousands):

The change in deferred tax assets resulted from current year net operating losses and changes to future tax deductions resulting from expiring net operating losses, terms of stock compensation plans, fixed assets, and accrued liabilities. A full valuation allowance continues to be recorded given the Company continues to be incurring losses.

As of* December 31, 2023,the Company had net operating loss (NOL) carryforwards of approximately $334 million for federal income tax purposes and $309 million for California income tax purposes. Such carryforwards expire in varying amounts through the year2037* and2043 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 a tax ownership change that occurred in Juneof2021.*

The Company’s tax years 2020 through2023 remain subject to examination by the Internal Revenue Service, and tax years 2019 through2023 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 ofthree years for federal tax purposes andfour years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.

F-22

A reconciliation of the income tax benefit to the statutory federal income tax rate is as follows (dollars in thousands):

Because it is more likely thannot that the Company willnot realize its net deferred tax assets, it has recorded a full valuation allowance against these assets. Accordingly, no deferred tax asset has been recorded in the accompanying balance sheet.

NOTE10 – COMMON AND PREFERRED STOCK

Common Stock

The Company is authorized to issue 85 million shares of Common Stock at a $0.01 par value. As of* December 31, 2023,and December 31, 2022,*the Company had 66,710,795 and 55,823,810 shares issued and outstanding, respectively.

During2022, the Company completed the sale and issuance of 11,857,140 shares of its common stock to certain institutional and individual investors intwo registered direct offerings with net proceeds totaling $21.6 million. During2023, the Company completed the sale and issuance of 10,500,000 shares of its common stock to certain institutional investors in a registered direct offering with net proceeds totaling $38.5 million.

In* January 2013,the Company revised its then existing agreement with the law firm of Brownstein Hyatt Farber Schreck LLP (“Brownstein Agreement”), a related party. Under the Brownstein Agreement, the Company was to issue up to a total of 400,000 shares of the Company’s common stock.200,000 of these shares had been issued as of December 31, 2023and200,000* shares were to be earned upon the achievement of certain milestones. Effective* December 31, 2023,*the unearned milestone shares were cancelled upon termination of the Brownstein Agreement.

Additionally, the Company incurred direct expenses to Brownstein of approximately $0.8 million and $1.5 million in2023 and2022, respectively.

F-23

Series1* Preferred Stock*

The Company has issued a total of 10,000 shares of Series1 Preferred Stock (“Series1 Preferred Stock”) to certain holders (“Holders”) under certain conversion and exchange agreements entered into in* March 2020.Each share of Series1* Preferred Stock is convertible at any time at the option of the Holder into 405.05 shares of Common Stock. As of* December 31, 2023,Holders of Series1* Preferred Stock exercised their option to convert 9,671 shares of Series1 Preferred Stock into 3,917,235 shares of Common Stock. The Company has 329 shares of Series1 Preferred Stock issued and outstanding as of* December 31, 2023.*

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 2,000,000 depositary shares (the “Depositary Shares”), as well as up to 300,000 Depositary Shares that maybe sold pursuant to the exercise of an option to purchase additional Depositary Shares (“Depositary Share Offering”), each representing 1/1000 th of a share of the 8.875% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”). The Depositary Share Offering was completed on July 2, 2021*for net proceeds of approximately $54 million.

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 7,500 shares of the Company’s authorized shares of preferred stock, $0.01 par value per share, as Series A Preferred Stock.

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 Common Stock of the Company; (ii) junior to the Series1 Preferred Stock with respect to the distribution of assets upon the Company’s voluntary or involuntary liquidation, dissolution or winding up; (iii) senior to the Series1 Preferred Stock with respect to the payment of dividends 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 8.875% of the $25,000.00 ($25.00 per Depositary Share) liquidation preference per year (equivalent to $2,218.75 per share per year or $2.21875 per Depositary Share per year). Dividends will be payable quarterly in arrears, on or about the15th of* January,** April,** Julyand October,beginning on or about October**15,* 2021. As of* December 31, 2023,the Company has paid cash dividends in the amount of $11,661,000. On December 21, 2023,the Company’s Board of Directors declared that holders of Series A Preferred stock will receive a cash dividend equal to $560.00 per whole share; therefore, holders of Depositary Shares will receive a cash dividend equal to $0.56 per Depositary Share. The dividend was paid on January 15, 2024to respective holders of record as of the close of business on January 4, 2024.*

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At the issuance of the Series A Preferred Stock, the Company pre-fundedeight quarterly payments through* July 2023in a segregated account which appeared as Restricted Cash on the Balance Sheet. Dividends on the Series A Preferred Stock underlying the depositary shares will continue to accumulate whether ornot* (i) any of the Company’s agreements prohibit the current payment of dividends, (ii) the Company has earnings or funds legally available to pay the dividends, or (iii) the Company’s Board of Directors doesnot declare the payment of the dividends.

Holders of depositary shares representing interests in the Series A Preferred Stock generally will haveno voting rights. However, if the Company doesnot pay dividends on any outstanding shares of Series A Preferred Stock forsix or more quarterly dividend periods (whether ornot declared or consecutive), holders of the Series A Preferred Stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to electtwo additional directors to the Board of Directors to serve until all unpaid dividends have been fully paid or declared and set apart for payment.

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 $25,000.00 per share ($25.00 per Depositary Share), plus any accrued and unpaid dividends. Furthermore, upon a change of control or delisting event (each as defined in the Certificate of Designation), the Company will have a special option to redeem the Series A Preferred Stock at $25,000.00 per share ($25.00 per Depositary Share), plus any accrued and unpaid dividends.

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 hasnot 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 $25,000 liquidation preference per share plus (y) the amount of an accrued and unpaid dividends to, butnot including, the conversion date by (B) the Common Stock Purchase Price (as defined in the Certificate of Designation), and (ii)3,748.13 (the “Share Cap”), subject to certain adjustments.

The Company has 2,300 shares of Series A Preferred Stock issued and outstanding as of* December 31, 2023.*

NOTE11 – STOCK-BASED COMPENSATION PLANS

The Company has issued options and has granted stock awards pursuant to its2019 Equity Incentive Plan, as described below.

2019 Equity Incentive Plan

The2019 Equity Incentive Plan (as amended, the*“2019* EIP”) was originally approved by stockholders at the* July 10, 2019Annual Meeting, with an amendment to the plan approved by stockholders at the July 12, 2022*Annual Meeting. The plan, as amended, provides for the grant and issuance of up to 2,700,000 shares and options to the Company’s employees, directors and consultants.

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Effective* July 1, 2021,under the2019* 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 30of 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 31thatfirst* follows the award date.

Stock Awards to Directors, Officers, Consultants and Employees

The Company has granted stock awards pursuant to its2019 EIP.

Of the total 2,700,000 shares reserved under the2019 EIP,2,333,739 shares and restricted stock units (“RSUs”) have been awarded to the Company’s directors, employees and consultants as of* December 31, 2023.*

825,000 RSUs were granted to employees in* April 2021as long-term equity incentive awards ( “April 2021RSU Grant”). Of the 825,000 RSUs granted under the April 2021RSU Grant,510,000 RSUs were scheduled to vest upon completion of certain milestones, including (a)255,000 RSUs which vested in July 2021upon 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 2022upon the change of the 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, 2023and 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 2022RSU Grant”). The RSUs granted under the July 2022RSU Grant vested on January 2, 2024.*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 2021upon 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.

The Company issued 450,000 performance stock units (“PSUs”) upon achievement of certain performance events. The PSUs vest upon the Company’s common stock achieving price hurdles (“Price Hurdles”) butnot sooner thanthree years from date of grant, including (a)200,000 PSUs to vest upon a Price Hurdle of $7 per share, (b)150,000 PSUs to vest upon a Price Hurdle of $9 per share, (c)50,000 PSUs to vest upon a Price Hurdle of $11 per share, and (d)50,000 PSUs to vest upon a Price Hurdle of $13 per share and are payable, at the option of the Compensation Committee, in either common stock or cash. The PSU incentive award is subject to continued employment with the Company through the vesting date.

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Additionally,400,000 RSUs were granted to a consultant on* July 1, 2023 (** “July 2023RSU Grant). Of the 400,000 RSUs granted under the July 2023RSU Grant,200,000 RSUs were vested in March 2024upon completion of the Third Amended Credit Agreement and Assignment discussed in Note15* – “Subsequent Events”, below. 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.*

A summary of RSU activity under the plans during the years ended* December 31, 2023and2022* is presented below:

As of* December 31, 2023,*the Company had approximately $315 thousand of unrecognized stock compensation expense related to nonvested PSUs and RSUs.

NOTE12 – COMMITMENTS AND CONTINGENCIES

In the normal course of its agricultural operations, the Company handles, stores, transports and dispenses products identified as hazardous materials. Regulatory agencies periodically conduct inspections and, currently, there areno pending claims with respect to hazardous materials.

Pursuant to cost-sharing agreements that have been entered into by participants in the Company’s Water Project, $625,000 in funds have been received in order to offset costs incurred in the environmental analysis of the Water Project. These funds* mayeither be reimbursed or credited to participants participation in the Water Project and, accordingly, are fully reflected as deferred revenue as of December 31, 2023and December 31, 2022.*

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The Company recorded a contingent consideration liability in the amount of $1.45 million related to the purchase price of the ATEC Acquisition for amounts payable upon the sale of a requisite number of water filtration units under an asset purchase agreement.

The Company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business. At this time, the Company isnot aware of any other pending or threatened litigation that it expects will have a material adverse effect on its business, financial condition, liquidity, or operating results. Legal claims are inherently uncertain, however, and it is possible that the Company’s business, financial condition, liquidity and/or operating results could be adversely affected in the future by legal proceedings.

NOTE13 – LEASES

The Company has operating leases for its corporate offices and office equipment. The Company’s leases have remaining lease terms of 1 month to 34 months as of* December 31, 2023,some of which include options to extend or terminate the lease. However, the Company isnot* reasonably certain to exercise options to renew or terminate, and therefore renewal and termination options arenot included in the lease term.

The Company’s lease population doesnot include any residual value guarantees, and thereforenone were considered in the calculation of the lease balances. The Company has leases with variable payments, most commonly in the form of common area maintenance charges which are based on actual costs incurred. These variable payments were excluded from the right-of-use asset and lease liability balances since they arenot fixed or in-substance fixed payments.

The Company elected to utilize the practical expedients permitted within the leasing standard, including the practical expedientnot to reassess existing land easements, which among other things, allows the Company to carryforward the historical lease classification. The Company has lease agreements with lease and non-lease components and has elected the practical expedient to account for lease and non-lease components as a single lease component for real-estate class of leases only. For leases with terms greater than12 months, the Company records the related asset and lease liability at the present value of lease payments over the lease term. Leases with an initial term of12 months or less with purchase options or extension options that arenot reasonably certain to be exercised arenot recorded on the Consolidated Balance Sheets; the Company recognizes lease expense for these leases on a straight-line basis over the term of the lease.

Lease balances. Amounts recognized in the accompanying consolidated balance sheet as of* December 31, 2023and2022* are as follows (in thousands):

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***Lease cost.*The Company’s operating lease cost for the year ended December 31, 2023was $180 thousand.

***Lease commitments.**The table below summarizes the Company’s scheduled future minimum lease payments under operating, recorded on the balance sheet as of December 31, 2023 (*in thousands):

Most of the Company’s lease agreements donot provide a readily determinable implicit rate nor is it available to us from its lessors. Instead, the Company estimates its incremental borrowing rate based on information available at either the implementation date of Topic842 or at lease commencement for leases entered into thereafter in order to discount lease payments to present value. The table below presents additional information related to the Company’s leases as of* December 31, 2023:*

As a lessor, 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 99-year term,2,100 acres owned by Cadiz in San Bernardino County, California, to be used to plant, grow and harvest agricultural crops (“FVF Lease Agreement”). As consideration for the lease, FVF paid the Company aone*-time payment of $12.0 million upon closing. The Company expects to record rental income of $420 thousand annually over the nextfive years related to the FVF Lease Agreement.

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NOTE14 – FAIR VALUE MEASUREMENTS

Fair values determined by Level1 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 Level2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level3 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.

In2022, the Company recorded a contingent consideration liability in the amount of $1.45 million related to the purchase price of the ATEC Acquisition for amounts payable upon the sale of a requisite number of water filtration units under an asset purchase agreement.

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NOTE15 – SUBSEQUENT EVENTS

On* March 6, 2024,the Company entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund2012* (“Heerema”). Before entering into the Third Amended Credit Agreement, Heerema purchased the outstanding secured non-convertible term loans under the Credit Agreement (“Assignment”). 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 our common stock (valued at $2.89 per share, or 166,036 shares), which will be registered pursuant to a shelf registration statement on Form S-3 and a prospectus supplement thereunder.

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.*