CADIZ INC
For the period ended Sep 30, 2024. Filed Nov 13, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 13, 2024
CDZI$3.58+5.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001437749-24-026172
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001437749-24-034919
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 67 current paragraphs.
26 unchanged; 32 reworded; 7 added; 10 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
We estimate that it would cost approximately $800 million for the construction of the facilities required to deliver water supplies and fully operationalize our groundwater banking project in the Mojave Desert (the “Mojave Groundwater Banking Project” or “Water Project”). In October 2024, we announced our intent to establish and manage a new entity, which is anticipated to be a limited partnership or limited liability company (“Newco”), with the participation of public sector or non-profit investors acting as limited partners to mobilize capital for the construction, ownership, and operation of the Mojave Groundwater Banking Project and its capital facilities in exchange for a share of revenues received by the Water Project. Newco is not expected to be a consolidating entity for accounting purposes with us. Newco partners are expected to contribute up to approximately $401 million to Newco and coordinate with us to seek available grant funding for remaining construction costs. Under the Newco structure, we would contribute our infrastructure assets, including the Northern Pipeline and the Southern Pipeline right-of-way and a share of the long-term cash flows from the groundwater banking operations to Newco in exchange for the capital funding provided by the limited partners In consideration of such transfer of assets, Newco is expected to pay us approximately $51 million upon closing of definitive agreements among other consideration and we would retain 49% of the water storage rights. Water supply purchase contracts entered into among us and public water providers will not be contributed to Newco.
Current report
We are expected to serve as the general partner or managing member of Newco. The distribution of profits from revenues anticipated to be received by Newco once the infrastructure is online would prioritize the Newco investors until they achieve an agreed annual yield with incremental distributions thereafter to us as the general partner/managing member, the investors and other Newco partners.
Current report
On October 30, 2024, we entered into a letter of intent (the “LOI”) with a non-profit investment fund that is a beneficiary of a federal grant award and is dedicated to financing sustainable infrastructure projects (the “Fund”). The LOI outlines the terms of a prospective investment by the Fund of up to $150 million as a limited partner in Newco subject to ongoing due diligence. We are in discussions with several additional potential qualified investors to fund all the capital required for Newco.
Current report
On November 10, 2024, we entered into an agreement that grants us an exclusive option to purchase 180 miles of existing 36-inch steel pipe expected to be utilized in the construction of the Mojave Groundwater Banking Project. This agreement has an initial two-year option term with a right to extend for up to an additional year through three 120-day extensions. We will make an initial payment of $5,000,000 to secure the option, with a $1,000,000 payment required for each extension. If the purchase option is exercised during the option term, we can acquire all or part of the pipeline assets at $155 per linear foot, with credits that could reduce the final purchase price depending on when the option is exercised. Additionally, we hold a right of first refusal to purchase the pipeline assets during the option term if the current owners receive a third-party offer for all or a portion of the remaining pipeline assets.
Current report
In October 2024, we entered into an agreement with a subsidiary of RIC Energy to build a hydrogen production facility at the Cadiz Ranch. As part of this agreement, Cadiz plans to supply land via a lease agreement and sell water to RIC Energy for its hydrogen development. Once the facility is operational following the current anticipated 6-year developmental and construction stages, we will be able to access hydrogen and solar energy from the facility to power our water operations and explore the use of onsite natural gas pipelines to store and transport hydrogen.
Current report
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Current report
We intend to use the proceeds from the November 2024 Direct Offering to advance development of our water supply and groundwater banking project which may include acquisition of equipment and materials intended to be used in construction of facilities related to our northern and/or southern pipeline projects which we expect to begin in 2025. Net proceeds from the offering may also be used for the equipment and materials related to wellfield infrastructure on land owned by us and our subsidiaries, business development activities, other capital expenditures, working capital, and general corporate purposes.
Removed paragraphs (10)
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Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023
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Reworded paragraphs (32)
Previous wording
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, 2023. 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.*
Current wording
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 as well as Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. 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.*
Previous wording
We are a water solutions provider with a unique combination of land, water, pipeline and water filtration technology assets located in Southern California between water systems serving population centers in the Southwestern United States. Our portfolio of assets includes 2.5 million acre-feet of water supply (permits complete), 220 miles of existing, buried pipeline, 1 million acre-feet of groundwater storage capacity, versatile, scalable and cost-effective water filtration technology.
Current wording
We are a water solutions provider with a unique combination of land, water, pipeline and water filtration technology assets principally located in Southern California between water systems serving population centers in the Southwestern United States. Our portfolio of assets includes 2.5 million acre-feet of water supply (permits complete), 220 miles of existing, buried pipeline, 1 million acre-feet of groundwater storage capacity, and versatile, scalable and cost-effective water filtration technology.
Previous wording
We manage our landholdings, pipeline and water filtration technology assets to offer a suite of integrated products and services to public water systems, government agencies and commercial customers that include reliable water supply, groundwater storage, water conveyance and custom-designed water filtration technology systems.
Current wording
We manage our landholdings, groundwater supply, pipeline and water filtration technology assets to offer a suite of integrated products and services to public water systems, government agencies and commercial customers that include reliable water supply, water storage, water conveyance and custom-designed water filtration technology systems.
Previous wording
Water Supply – We own vested water rights to withdraw 2.5 million acre-feet of groundwater for beneficial uses, including agricultural development on our property and export to serve communities across Southern California. Because water in the aquifer system will continue to be lost to evaporation, surplus water that is captured and withdrawn before it evaporates is a new water supply (“conserved” water). We have completed environmental review in accordance with local, state and federal laws authorizing the management of the groundwater aquifer underlying our property in the Cadiz Valley (“Cadiz Property” or “Cadiz Ranch”) which is expected to produce an average of 50,000 acre-feet of water per year (“AFY”) for 50 years for beneficial use in Southern California communities.
Current wording
Water Supply – We own vested water rights to withdraw 2.5 million acre-feet of groundwater at our property in the Cadiz Valley (“Cadiz Property” or “Cadiz Ranch”) for beneficial uses, including agricultural development on the Cadiz Property and to export to serve communities across Southern California. Because groundwater in the alluvium aquifer system beneath the Cadiz Property will continue to be lost to evaporation, surplus water that is captured and withdrawn before it evaporates is a new water supply (“conserved” water). We have completed environmental review in accordance with local, state and federal laws authorizing the management of the groundwater aquifer underlying the Cadiz Property which is expected to produce an average of 50,000 acre-feet of water per year (“AFY”) for 50 years for beneficial use in Southern California communities.
Previous wording
Water Storage – The alluvium aquifer that lies beneath the Cadiz Property is also large enough for use as a water “banking” facility, capable of storing water “in-lieu” for supply customers and up to 1 million acre-feet of imported surplus water for return during drought periods. For comparison, Metropolitan Water District of Southern California stores approximately 1.2 million acre-feet of water in the largest surface reservoir in the United States, Lake Mead.
Current wording
Water Storage – The aquifer beneath the Cadiz Property is part of a watershed estimated to contain 30-50 million acre-feet of groundwater already in storage and has been permitted for use as a water “banking” facility, capable of storing water “in-lieu” for supply customers and also up to 1 million acre-feet of imported surplus water for return during drought periods. For comparison, Lake Mead – the largest surface reservoir in the United States – can store up to 26 million acre-feet of water and is used by the Metropolitan Water District of Southern California to store approximately 1.2 million acre-feet of surface water.
Previous wording
Water Conveyance Infrastructure – We own an existing 220-mile 30-inch steel pipeline (“Northern Pipeline”), that intersects several water storage and conveyance facilities in Southern California, including the California Aqueduct, the Los Angeles Aqueduct, and the Mojave River Pipeline. We also own a 99-year lease with the Arizona & California Railroad Company that will allow us to construct a 43-mile water conveyance pipeline (“Southern Pipeline”) within the existing, active railroad right-of-way that extends from the Cadiz Ranch to the Colorado River Aqueduct. The capacity of the Northern Pipeline for water conveyance is 25,000 AFY. The capacity of the Southern Pipeline ranges from 75,000 AFY to 150,000 AFY depending on the pipeline diameter (54-inch to 84-inch) selected to accommodate imported water storage.
Current wording
Water Conveyance Infrastructure – We own an existing 220-mile 30-inch steel pipeline (“Northern Pipeline”), that intersects several water storage and conveyance facilities in Southern California, including the California Aqueduct, the Los Angeles Aqueduct, and the Mojave River Pipeline. We also own a 99-year lease with the Arizona & California Railroad Company that will allow us to construct a 43-mile water conveyance pipeline (“Southern Pipeline”) within an existing, active railroad right-of-way that extends from the Cadiz Ranch to the Colorado River Aqueduct. The capacity of the Northern Pipeline for water conveyance is 25,000 AFY. The capacity of the Southern Pipeline ranges from 75,000 AFY to 150,000 AFY depending on the pipeline diameter (54-inch to 84-inch) selected to accommodate imported water storage.
Previous wording
In the first two quarters of 2024, we entered into agreements with multiple public water systems to purchase 16,275 AFY of annual water supply from us to be delivered via the Northern Pipeline. These agreements cumulatively represent 65% of the full capacity (25,000 AFY) of the Northern Pipeline.
Current wording
In the first three quarters of 2024, we entered into agreements with multiple public water systems to purchase 21,275 AFY of annual water supply from us to be delivered via the Northern Pipeline. These agreements cumulatively represent approximately 85% of the full capacity (25,000 AFY) of the Northern Pipeline.
Previous wording
Through membership in Fenner Gap Mutual Water Company, a mutual water company to be owned by the participating water agencies, these agreements provide for delivery of purchased annual water supply over a 40-year term (take or pay), at an agreed upon market price estimated to start at approximately $850/AFY at the wellhead, subject to annual adjustment. In addition, participating public agencies are expected to fund costs of delivery of water from the Cadiz Property to their service area, and the capital costs for conversion of the Northern Pipeline from gas to water, including construction of pumping stations and appurtenant facilities. We anticipate that a portion of capital costs would be eligible for public infrastructure funding and grants. Also, forming a Master Limited Partnership (“MLP”) entity may allow for public agency partners and investors to act as limited partners and commit funding for the capital infrastructure costs required for the Water Project and/or obtain grant funding in exchange for an agreed-upon cash flow share from the project. Under an MLP structure, traditionally used for pipeline and real estate assets, we would act as General Partner and contribute our infrastructure assets to the partnership and a share of the long-term cash flows from the groundwater banking operations in exchange for the capital funding provided by the limited partners. We are in discussions with parties that could participate in establishing a MLP.
Current wording
Through membership in Fenner Gap Mutual Water Company, a mutual water company to be owned by the participating water agencies, these agreements provide for delivery of purchased annual water supply over a 40-year term (take or pay), at an agreed upon market price estimated to start at approximately $850/AFY at the wellhead, subject to annual adjustment. In addition, participating public agencies are expected to fund costs of delivery of water from the Cadiz Property to their service area, and the capital costs for conversion of the Northern Pipeline from gas to water, including construction of pumping stations and appurtenant facilities. We anticipate that the capital costs would be funded by Newco as discussed below and could be eligible for public infrastructure funding and grants. Final agreements and facility construction are subject to standard environmental review and a project-level permitting process.
Previous wording
In the second quarter we also executed Letters of Intent with communities in San Bernardino County reserving up to 100,000 acre-feet of surplus water over the life of the Water Project for the benefit of local disadvantaged communities as part of the Mojave-San Bernardino County One Water Project (“One Water”) launched by the Victor Valley Wastewater Reclamation Authority (“VVWRA”). One Water is a collaboration among public agencies and water providers in San Bernardino County’s High Desert region to develop a regional, integrated and sustainably managed water system to preserve access and affordability for area communities. Under the program, we would make surplus available at cost after all first priority contracts are served and the One Water partners will join efforts to access grants and funding to support Northern Pipeline development.
Current wording
We have also executed Letters of Intent with communities in San Bernardino County reserving up to 100,000 acre-feet of surplus water over the life of the Water Project for the benefit of local disadvantaged communities as part of the Mojave-San Bernardino County One Water Project (“One Water”) launched by the Victor Valley Wastewater Reclamation Authority (“VVWRA”). Under the program, we would make surplus available at cost after all first priority contracts are served. The One Water partners will join efforts to access grants and funding to support Northern Pipeline development.
Previous wording
We have not received significant revenues from our water supply, storage, or conveyance assets to date. Our revenues have been limited to rental income from our agricultural leases, sales from our alfalfa plantings and ATEC sales. As a result, we have historically incurred a net loss from operations. We incurred a net loss of $8.9 million in the three months ended June 30, 2024, compared to a $7.1 million net loss during the three months ended June 30, 2023. The higher 2024 loss was primarily due to higher stock compensation expense and increased interest expense related to the Third Amended Credit Agreement in 2024.
Current wording
We have not received significant revenues from our water supply, storage, or conveyance assets to date. Our revenues have been limited primarily to ATEC sales and sales from our alfalfa plantings and rental income from our agricultural leases. As a result, we have historically incurred a net loss from operations. We incurred a net loss of $6.8 million in the three months ended September 30, 2024, compared to a $6.9 million net loss during the three months ended September 30, 2023.
Previous wording
Our primary expenses are our ongoing overhead costs associated with the development of our water supply, storage, conveyance (i.e., general and administrative expense), farming expenses at the Cadiz Ranch, manufacturing operations of ATEC and our interest expense. We will continue to incur non-cash expenses in connection with our equity incentive compensation plan.
Current wording
Our primary expenses are our ongoing overhead costs associated with the development of our water supply, storage, conveyance (i.e., general and administrative expense), farming expenses at the Cadiz Ranch, manufacturing operations of ATEC and our interest expense. We will continue to incur non-cash expenses in connection with our equity incentive compensation plan and PIK interest on our Convertible Debt.
Previous wording
Revenues Revenue totaled $0.5 million during the three months ended June 30, 2024, primarily related to ATEC sales totaling $0.2 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.2 million and rental income from our agricultural leases totaling $0.1 million. Revenue totaled $0.8 million during the three months ended June 30, 2023, primarily related to ATEC sales totaling $0.4 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.3 million and rental income from our agricultural leases totaling $0.1 million.
Current wording
Revenues Revenue totaled $3.2 million during the three months ended September 30, 2024, primarily related to ATEC sales totaling $2.8 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.3 million and rental income from our agricultural leases totaling $0.1 million. Revenue totaled $0.4 million during the three months ended September 30, 2023, primarily related to ATEC sales totaling $0.2 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.1 million and rental income from our agricultural leases totaling $0.1 million. The increase in ATEC sales primarily relates to revenues under a contract to deliver 320 filters for the Central Utah Water Conservancy District’s Vineyard Wellfield Groundwater Polishing Project (“Utah Project”) announced in 2023 and now being delivered.
Previous wording
Cost of Sales** **Cost of sales totaled $0.9 million during the three months ended June 30, 2024, comprised of $0.7 million related to our alfalfa crop harvest and $0.2 million related to ATEC. Cost of sales totaled $0.8 million during the three months ended June 30, 2023, which comprised of $0.4 million related to our alfalfa crop harvest and $0.4 million related to ATEC.
Current wording
Cost of Sales** **Cost of sales totaled $2.4 million during the three months ended September 30, 2024, which comprised of $1.9 million related to ATEC (32.1% gross margin) and $0.5 million related to our alfalfa crop harvest. Cost of sales totaled $0.7 million during the three months ended September 30, 2023, which comprised of $0.5 million related to our alfalfa crop harvest and $0.2 million related to ATEC.
Previous wording
General and Administrative Expenses*** ***General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $5.2 million in the three months ended June 30, 2024, compared to $5.2 million in the three months ended June 30, 2023.
Current wording
General and Administrative Expenses*** ***General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $4.1 million in the three months ended September 30, 2024, compared to $4.5 million in the three months ended September 30, 2023. The decrease in 2024 is primarily related to nonrecurring corporate communications modernization expenses to our online, print, digital and social materials in 2023.
Previous wording
Compensation costs for stock and option awards for the three months ended June 30, 2024, were $1.1 million, compared to $0.2 million for the three months ended June 30, 2023. The higher 2024 expense was primarily due to stock-based non-cash awards to employees.
Current wording
Compensation costs for stock and option awards for the three months ended September 30, 2024, were $1.2 million, compared to $0.7 million for the three months ended September 30, 2023. The higher 2024 expense was primarily due to stock-based non-cash awards to employees and consultants.
Previous wording
Interest Expense, net Net interest expense totaled $1.9 million during the three months ended June 30, 2024 compared to $1.1 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):
Current wording
Interest Expense, net Net interest expense totaled $2.0 million during the three months ended September 30, 2024 compared to $1.2 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):
Previous wording
We incurred a net loss of $15.7 million in the six months ended June 30, 2024, compared to a $17.8 million net loss during the six months ended June 30, 2023. The higher 2023 loss 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, offset by a higher stock compensation expense and increased interest expense related to the Third Amended Credit Agreement in 2024.
Current wording
We incurred a net loss of $22.5 million in the nine months ended September 30, 2024, compared to a $24.7 million net loss during the nine months ended September 30, 2023. The higher 2023 loss 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, offset by a higher stock compensation expense and increased interest expense related to the Third Amended Credit Agreement in 2024.
Previous wording
Revenues Revenue totaled $1.6 million during the six months ended June 30, 2024, primarily related to and ATEC sales totaling $0.6 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.8 million and rental income from our agricultural leases totaling $0.2 million. Revenue totaled $0.9 million during the six months ended June 30, 2023, primarily related to ATEC sales totaling $0.4 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.3 million and rental income from our agricultural leases totaling $0.2 million.
Current wording
Revenues Revenue totaled $4.9 million during the nine months ended September 30, 2024, primarily related to ATEC sales totaling $3.5 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $1.1 million and rental income from our agricultural leases totaling $0.3 million. Revenue totaled $1.3 million during the nine months ended September 30, 2023, primarily related to ATEC sales totaling $0.6 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.4 million and rental income from our agricultural leases totaling $0.3 million. The increase in ATEC sales primarily relates to revenues under our contract for the Utah Project.
Previous wording
Cost of Sales*** ***Cost of sales totaled $1.9 million during the six months ended June 30, 2023, which comprised of $0.5 million related to ATEC and $1.4 million related to our alfalfa crop harvest . The 2024 alfalfa crop harvest net operating loss to date of $1.0 million primarily relates to continued suppressed market conditions for alfalfa on the West Coast. Cost of sales totaled $0.8 million during the six months ended June 30, 2023, which comprised of $0.4 million related to ATEC and $0.4 million related to our alfalfa crop harvest.
Current wording
Cost of Sales*** ***Cost of sales totaled $4.3 million during the nine months ended September 30, 2024, which comprised of $2.4 million related to ATEC (31.4% gross margin) and $1.9 million related to our alfalfa crop harvest. The 2024 alfalfa crop harvest net operating loss to date of $0.8 million primarily relates to continued suppressed market conditions for alfalfa on the West Coast. Cost of sales totaled $1.5 million during the nine months ended September 30, 2023, which comprised of $0.5 million related to ATEC and $1.0 million related to our alfalfa crop harvest.
Previous wording
General and Administrative Expenses*** ***General and administrative expenses, exclusive of stock-based compensation costs, totaled $8.7 million in the six months ended June 30, 2024, compared to $8.8 million in the six months ended June 30, 2023.
Current wording
General and Administrative Expenses*** ***General and administrative expenses, exclusive of stock-based compensation costs, totaled $12.7 million in the nine months ended September 30, 2024, compared to $13.2 million in the nine months ended September 30, 2023. The decrease in 2024 is primarily related to nonrecurring corporate communications modernization expenses to our online, print, digital and social materials in 2023.
Previous wording
Compensation costs for stock and option awards for the six months ended June 30, 2024, were $2.4 million, compared to $0.5 million for the six months ended June 30, 2023. The higher 2024 expense was primarily due to stock-based non-cash awards to employees.
Current wording
Compensation costs for stock and option awards for the nine months ended September 30, 2024, were $3.6 million, compared to $1.1 million for the nine months ended September 30, 2023. The higher 2024 expense was primarily due to stock-based non-cash awards to employees and consultants in 2024.
Previous wording
Depreciation*** *** Depreciation expense totaled $0.6 million during each of the six months ended June 30, 2024 and 2023.
Current wording
Depreciation*** *** Depreciation expense totaled $0.9 million during each of the nine months ended September 30, 2024 and 2023.
Previous wording
Interest Expense, net Net interest expense totaled $3.9 million during the six months ended June 30, 2024 compared to $2.5 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):
Current wording
Interest Expense, net Net interest expense totaled $5.9 million during the nine months ended September 30, 2024 compared to $3.6 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):
Previous wording
Losses on Derivative Liabilities* *Losses on derivative liabilities totaled $0 during the six months ended June 30, 2024 compared to $220 thousand during the six months ended June 30, 2023. The losses recorded in 2023 were a result of a remeasurement of a conversion option under the Company’s senior secured debt.
Current wording
Losses on Derivative Liabilities* *Losses on derivative liabilities totaled $0 during the nine months ended September 30, 2024 compared to $220 thousand during the nine months ended September 30, 2023. The losses recorded in 2023 were a result of a remeasurement of a conversion option under our senior secured debt.
Previous wording
Loss on Early Extinguishment of Debt* *Loss on early extinguishment of debt totaled $0 during the six months ended June 30, 2024 compared to $5.3 million in the six months ended June 30, 2023. The 2023 loss on early extinguishment of debt was a result 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.
Current wording
Loss on Early Extinguishment of Debt* *Loss on early extinguishment of debt totaled $0 during the nine months ended September 30, 2024, compared to $5.3 million in the nine months ended September 30, 2023. The 2023 loss on early extinguishment of debt was a result 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.
Previous wording
In January 2023, we completed the sale and issuance of 10,500,000 shares of our 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 $40.3 million and aggregate net proceeds of approximately $38.5 million. A portion of the net proceeds were used to repay our debt in the principal amount of $15 million, together with fees and interest required to be paid in connection with such repayment.
Current wording
In January 2023, we completed the sale and issuance of 10,500,000 shares of our 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 $40.3 million and aggregate net proceeds of approximately $38.5 million. A portion of the net proceeds were used to repay our debt in the principal amount of $15 million, together with fees and interest required to be paid in connection with such repayment. The remaining proceeds from the January 2023 Direct Offering were used for capital expenditures to accelerate development of water supply, storage, conveyance and treatment assets, working capital and development of additional water resources to meet increase demand on an accelerated timetable, and general corporate purposes.
Previous wording
On February 2, 2023, we entered into a First Amendment to Credit Agreement to amend certain provisions of the Credit Agreement (“First Amended 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 our common stock at a conversion price of $4.80 per share (the “Conversion Price”). In addition, prior to the maturity of the Credit Agreement, we have the right to require that the lenders convert the outstanding principal amount, plus any PIK Interest and accrued and unpaid interest, of the Convertible Loan if the following conditions are met: (i) the average VWAP of the Company’s common stock on The Nasdaq Stock Market, or such other national securities exchange on which the shares of common stock are listed for trading, over 30 consecutive trading dates exceeds 115% of the then Conversion Price and (ii) there is no event of default under certain provisions of the Credit Agreement.
Current wording
On February 2, 2023, we entered into a First Amendment to Credit Agreement to amend certain provisions of the Credit Agreement (“First Amended 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 our common stock at a conversion price of $4.80 per share (the “Conversion Price”). In addition, prior to the maturity of the Credit Agreement, we have the right to require that the lenders convert the outstanding principal amount, plus any PIK Interest and accrued and unpaid interest, of the Convertible Loan if the following conditions are met: (i) the average VWAP of our common stock on The Nasdaq Stock Market, or such other national securities exchange on which the shares of common stock are listed for trading, over 30 consecutive trading dates exceeds 115% of the then Conversion Price and (ii) there is no event of default under certain provisions of the Credit Agreement.
Previous wording
Cash Used in Operating Activities. Cash used in operating activities totaled $9.9 million for each of the six months ended June 30, 2024 and 2023. The cash was primarily used to fund general and administrative expenses related to our water development efforts, agricultural development efforts, and our ATEC business including increased working capital needs related to accounts receivable and inventory offset by increased accounts payable.
Current wording
Cash Used in Operating Activities. Cash used in operating activities totaled $15.3 million for the nine months ended September 30, 2024, and $15.4 million for the nine months ended September 30, 2023. The cash was primarily used to fund general and administrative expenses related to our water development efforts, agricultural development efforts, and our ATEC business including increased working capital needs related to accounts receivable and inventory offset by increased accounts payable.
Previous wording
Cash Used in Investing Activities. Cash used in investing activities totaled $0.5 million for the six months ended June 30, 2024, and $3.2 million for the six months ended June 30, 2023. The cash used in the 2024 period primarily related to the development cost for the planting of 125 additional acres of alfalfa. The cash used in the 2023 period primarily related to the development of three new wells.
Current wording
Cash Used in Investing Activities. Cash used in investing activities totaled $0.5 million for the nine months ended September 30, 2024, and $3.8 million for the nine months ended September 30, 2023. The cash used in the 2024 period primarily related to the development cost for the planting of 125 additional acres of alfalfa. The cash used in the 2023 period primarily related to the development of three new wells.
Previous wording
Cash Provided by Financing Activities***.***Cash provided by financing activities totaled $16.0 million for the six months ended June 30, 2024, compared with cash provided of $20.0 million for the six months ended June 30, 2023. Proceeds from financing activities for the 2024 period related to the issuance of long-term debt under the Third Amended Credit Agreement. Proceeds from financing activities for the 2023 period primarily related to the issuance of shares under direct offerings, offset by the paydown of $15 million of senior secured debt in February 2023.
Current wording
Cash Provided by Financing Activities***.***Cash provided by financing activities totaled $14.7 million for the nine months ended September 30, 2024, compared with cash provided of $18.9 million for the nine months ended September 30, 2023. Proceeds from financing activities for the 2024 period related to the issuance of long-term debt under the Third Amended Credit Agreement. Proceeds from financing activities for the 2023 period primarily related to the issuance of shares under direct offerings, offset by the paydown of $15 million of senior secured debt in February 2023.
Previous wording
***Short-Term Outlook.***The net proceeds of approximately $19.0 million from the completion of the Third Amended Credit Agreement in March 2024, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs. Our ATEC operations are expected to be funded using existing capital and cash profits generated from operations during 2024.
Current wording
***Short-Term Outlook.***The net proceeds of approximately $21.9 million from the completion of the November 2024 Direct Offering, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs. Our ATEC operations are expected to be funded using existing capital and cash profits generated from operations during 2024.
Previous wording
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 supply, storage, conveyance resources and other developments. Future capital expenditures will depend on the progress of the Water Project, further expansion of our agricultural assets, and ATEC operational needs.
Current wording
Long-Term Outlook*.* In the longer term, we may 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 supply, storage, conveyance resources and other developments. Future capital expenditures will depend on the progress of the Water Project including the funding of Newco, ATEC operational needs and any further expansion of our agricultural assets, and ATEC operational needs.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Increased interest expense is primarily due to increased borrowing under the Third Amended Credit Agreement. Interest income primarily relates to interest on investments in short-term deposits which were lower in 2024.
Current report — wording carried from elsewhere
On November 5, 2024, we completed the sale and issuance of 7,000,000 shares of our common stock to certain institutional investors in a registered direct offering (“November 2024 Direct Offering”). The shares of common stock were sold at a purchase price of $3.34 per share, for aggregate gross proceeds of $23.4 million and aggregate net proceeds of approximately $21.9 million.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Final agreements and facility construction are subject to standard environmental review and a project-level permitting process.
Previous report — wording carried elsewhere
Interest income primarily relates to interest on investments in short-term deposits.
Previous report — wording carried elsewhere
Losses on Derivative Liabilities* *Losses on derivative liabilities totaled $0 during the three months ended June 30, 2024 compared to $0.4 million in the three months ended June 30, 2023, resulting from a remeasurement of a conversion option under the Company’s senior secured debt.
Previous report — wording carried elsewhere
The remaining proceeds from the January 2023 Direct Offering were used for capital expenditures to accelerate development of water supply, storage, conveyance and treatment assets, working capital and development of additional water resources to meet increase demand on an accelerated timetable, and general corporate purposes.