CADIZ INC 10-K

ITEM 9A. Controls and Procedures   Disclosure Controls and Procedures   We have established disclosure controls and procedures to ensure that material information related to the Company, including its consolidated entities, is accumulated and communicated to senior management, including Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”) and to our Board of Directors. Based on their evaluation as of December 31, 2020, our Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and such information is accumulated and communicated to management, including the principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosures.   28     Cadiz Inc.   Management ’ s Report on Internal Control Over Financial Reporting   Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the criteria in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.    Changes in Internal Control Over Financial Reporting   In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in the Company's internal control over financial reporting that occurred during the last fiscal quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.   ITEM 9B. Other Information   Not applicable.   29   Cadiz Inc. PART III ITEM 10. Directors, Executive Officers and Corporate Governance   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2020.     ITEM 11. Executive Compensation   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2020.     ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2020.     ITEM 13. Certain Relationships and Related Transactions, and Director Independence   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2020.     ITEM 14. Principal Accounting Fees and Services   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2020.   30     Cadiz Inc.   PART IV   ITEM 15. Exhibits, Financial Statement Schedules     1. Financial Statements. See Index to Consolidated Financial Statements.         2. Financial Statement Schedule. See Index to Consolidated Financial Statements. ***         3. Exhibits.   The following exhibits are filed or incorporated by reference as part of this Form 10-K.     **3.1 Cadiz Certificate of Incorporation, as amended         **3.2 Cadiz Bylaws, as amended         **3.3 Certificate of Designation of Series 1 Preferred Stock of Cadiz Inc.         **4.1 Warrant dated May 25, 2017 issued to Apollo Special Situations Fund, L.P.         **4.2 Amendment No. 1 to Warrant, dated as of March 5, 2020, by and between Cadiz Inc. and other party thereto         *4.3 Amendment No. 2 to Warrant, dated March 24, 2021, by and among Cadiz Inc. and Apollo Special Situation Fund, L.P.         **4.4 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1924         **4.5 Form of Senior Indenture         **4.6 Form of Subordinated Indenture         **10.1 Limited Liability Company Agreement of Cadiz Real Estate LLC dated December 11, 2003         **10.2 Amendment No. 1, dated October 29, 2004, to Limited Liability Company Agreement of Cadiz Real Estate LLC         **10.3 Amendment No. 2 dated March 5, 2013, to Limited Liability Company Agreement of Cadiz Real Estate LLC         **10.4 Longitudinal Lease Agreement dated September 17, 2008 between Arizona & California Railroad Company and Cadiz Real Estate, LLC         †**10.5 2009 Equity Incentive Plan         †**10.6 2019 Equity Incentive Plan         **10.7  Form of Option Agreement with Santa Margarita Water District   31     Cadiz Inc.     **10.8 Form of Environmental Processing and Cost Sharing Agreement with Santa Margarita Water District         **10.9 Form of Environmental Processing and Cost Sharing Agreement with Three Valleys Municipal Water District         **10.10 Option Agreement with Golden State Water Company dated June 25, 2010         **10.11 Option Agreement with Suburban Water Systems dated October 4, 2010         †**10.12 Letter agreement with Scott S. Slater dated April 12, 2011         †**10.13 Letter agreement with Scott S. Slater dated January 10, 2013         **10.14 Option Agreement with California Water Service Company dated December 1, 2011         **10.15 Form of Memorandum of Understanding by and among Cadiz Inc., County of San Bernardino and Santa Margarita Water District         **10.16 Water Purchase and Sale Agreement among Cadiz Inc., Cadiz Real Estate LLC, Fenner Valley Mutual Water Company and Santa Margarita Water District dated July 31, 2012         **10.17 Groundwater Management, Monitoring, and Mitigation Plan for the Cadiz Valley Groundwater Conservation, Recovery and Storage Project approved by the Santa Margarita Water District and the County of San Bernardino Board of Supervisors effective October 1, 2012         †**10.18 Revised Terms of Engagement with Brownstein Hyatt Farber and Schreck dated January 9, 2013         **10.19  Track Utilization Agreement dated September 16, 2013, between Arizona & California Railroad Company and Cadiz Real Estate LLC         †**10.20 Amended and Restated Employment Agreement between Keith Brackpool and Cadiz Inc. dated June 13, 2014         †**10.21 Amended and Restated Employment Agreement between Timothy J. Shaheen and Cadiz Inc. dated June 13, 2014         †**10.22 Amendment No. 1 to Amended and Restated Employment Agreement between Timothy J. Shaheen and Cadiz Inc. dated March 10, 2020         †**10.23 Amendment No. 2 to Amended and Restated Employment Agreement between Timothy J. Shaheen and Cadiz Inc. dated May 21, 2020   32     Cadiz Inc.     **10.24 Form of Water Purchase and Sale Agreement, dated as of December 29, 2014, by and between Cadiz Inc. and San Luis Water District         **10.25 Lease Agreement, dated as of December 23, 2015, by and among Cadiz Real Estate LLC, Cadiz Inc. and Water Asset Management LLC         **10.26 Amended and Restated Lease Agreement, dated as of February 8, 2016, by and among Cadiz Real Estate LLC, Cadiz Inc. and Fenner Valley Farm, LLC         **10.27 $60,000,000 Credit Agreement, dated as of May 1, 2017, by and among Cadiz Inc. and Cadiz Real Estate LLC as borrowers, Apollo Special Situations Fund, L.P. and the other lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent         **10.28 Security Agreement made by Cadiz Inc. and Cadiz Real Estate LLC, as loan parties, in favor of Wells Fargo Bank, National Association, as Agent, dated as of May 25, 2017         **10.29 Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing dated as of May 25, 2017 from Cadiz Inc., Cadiz Real Estate LLC, and Octagon Partners, LLC, collectively, as Trustor to Chicago Title Company, as Trustee and Wells Fargo Bank, National Association, as Agent for the Lenders from time to time under the Credit Agreement, as Beneficiary         **10.30 Letter Agreement, dated November 8, 2017, by and among Cadiz Inc., and Apollo Special Situations Fund. L.P.         **10.31 Purchase and Sale Agreement between El Paso Natural Gas Company, LLC, and Cadiz Inc. dated December 31, 2018         **10.32 First Amendment to Purchase and Sale Agreement dated February 3, 2020 by and between El Paso Natural Gas Company, LLC, a Delaware limited liability company and Cadiz Inc., a Delaware corporation         **10.33 Second Amendment to Purchase and Sale Agreement dated December 4, 2020 by and between El Paso Natural Gas Company, LLC, a Delaware limited liability company and Cadiz Inc., a Delaware corporation         **10.34 Limited Liability Company Agreement of SoCal Hemp JV LLC         **10.35 Agricultural Lease dated as of July 31, 2019 between Cadiz Real Estate LLC and SoCal Hemp JV LLC         **10.36 First Amendment to Agricultural Lease, dated as of March 1, 2020, by and between Cadiz Real Estate LLC and SoCal Hemp JV LLC   33     Cadiz Inc.     **10.37 Conversion and Exchange Agreement, dated March 5, 2020, by and between Cadiz Inc. and LC Capital Master Fund, Ltd.         **10.38 Conversion and Exchange Agreement, dated March 5, 2020, by and between Cadiz Inc. and Elkhorn Partners Limited Partnership         **10.39 Registration Rights Agreement, dated March 5, 2020, by and among Cadiz Inc. and the other parties thereto         **10.40 Waiver and Amendment No. 1 to Credit Agreement, dated as of March 5, 2020, by and among Cadiz Inc., Cadiz Real Estate LLC, the Required Lenders and Wells Fargo Bank, National Association, as administrative agent         *10.41 Amendment No. 2 to Credit Agreement, dated March 24, 2021, by and among Cadiz Inc., and Cadiz Real Estate LLC, as borrowers, Apollo Special Situation Fund, L.P., as lender, and Wells Fargo Bank, National Association, as administrative agent         **10.42 At Market Issuance Sales Agreement, dated July 31, 2020, by and between Cadiz Inc. and B. Riley Securities, Inc.         *21.1 Subsidiaries of the Registrant         *23.1 Consent of Independent Registered Public Accounting Firm         *31.1 Certification of Scott Slater, Chief Executive Officer of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002         *31.2 Certification of Stanley E. Speer, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002         *32.1 Certification of Scott Slater, Chief Executive Officer of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002         *32.2 Certification of Stanley E. Speer, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002         * 101.INS Inline XBRL Instance Document         * 101.SCH Inline XBRL Taxonomy Extension Schema         * 101.CAL Inline XBRL Taxonomy Extension Calculation   34   Cadiz Inc.   * 101.DEF Inline XBRL Extension Definition         * 101.LAB Inline XBRL Taxonomy Extension Label         * 101.PRE Inline XBRL Taxonomy Extension Presentation         104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101   †      Management contract or compensatory plan or agreement. *      Filed herewith. **    Previously filed. ***  All financial statement schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.   ITEM 16. Form 10-K Summary   None.   35     Cadiz Inc. SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.     CADIZ INC.             By: /s/  Scott S. Slater       Scott S. Slater,       Chief Executive Officer             Date: March 26, 2021     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.   Name and Position Date      /s/ Keith Brackpool March 26, 2021 Keith Brackpool, Chairman        /s/ Scott S. Slater March 26, 2021 Scott S. Slater, Chief Executive Officer, President and Director   (Principal Executive Officer)        /s/ Stanley E. Speer March 26, 2021 Stanley E. Speer, Chief Financial Officer   (Principal Financial and Accounting Officer)        /s/ Stephen E. Courter March 26, 2021 Stephen E. Courter, Director       /s/ Maria Echaveste March 26, 2021 Maria Echaveste, Director        /s/ Geoffrey T. Grant March 26, 2021 Geoffrey T. Grant, Director        /s/ Winston H. Hickox March 26, 2021 Winston H. Hickox, Director        /s/ Murray H. Hutchison March 26, 2021 Murray H. Hutchison, Director       /s/ Susan Kennedy March 26, 2021 Susan Kennedy, Director       /s/ Richard Nevins March 26, 2021 Richard Nevins, Director       /s/ Carolyn Webb de Macias March 26, 2021 Carolyn Webb de Macias, Director     36     Cadiz Inc.   Cadiz Inc. Consolidated Financial Statements     Page     Report of Independent Registered Public Accounting Firm F-2     Consolidated Statements of Operations and Comprehensive Loss for each of the two years in the period ended December 31, 2020 F-4     Consolidated Balance Sheets as of December 31, 2020 and 2019 F-5     Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020 F-6     Consolidated Statements of Stockholders’ Deficit for each of the two years in the period ended December 31, 2020 F-7     Notes to the Consolidated Financial Statements F-8     F-1     Cadiz Inc. Report of Independent Registered Public Accounting Firm   To the Board of Directors and Stockholders of Cadiz Inc.   Opinion on the Financial Statements   We have audited the accompanying consolidated balance sheets of Cadiz Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, of stockholders’ deficit and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion   These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.   F-2     Cadiz Inc.   Liquidity Assessment   As described in Note 2 to the consolidated financial statements, management has prepared the Company’s consolidated financial statements on a going concern basis, contemplating the continuity of operations, and the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred losses of $37.8 million for the year ended December 31, 2020. The Company had working capital of $4.9 million as of December 31, 2020 and used cash in operations of $13.4 million for the year ended December 31, 2020. As disclosed by management, management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from the financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is 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 projected cash flows of the Company, including the following: (i) projected cash outflows (ii) projected cash inflows and (iii) categorization of expenditures as discretionary versus non-discretionary. The cash flow projections are based on known or planned cash requirements for operating costs as well as planned costs for project development.    The principal considerations for our determination that performing procedures relating to the liquidity assessment is a critical audit matter are the significant judgment by management when assessing whether the Company has sufficient liquidity; this in turn led to a high degree of auditor subjectivity and effort in performing procedures and in evaluating audit evidence relating to management’s liquidity assessment and the estimated (i) projected cash outflows (ii) projected cash inflows and (iii) categorization of expenditures as discretionary versus non-discretionary.    Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included (i) testing management’s process for assessing whether the Company has sufficient liquidity; (ii) evaluating the appropriateness of the projected cash flow model; (iii) testing the completeness and accuracy of the underlying data used in the model; and (iv) evaluating the reasonableness of management’s significant assumptions related to projected cash outflows, projected cash inflows and categorization of expenditures as discretionary versus non-discretionary. Evaluating management’s assumptions related to projected cash outflows, projected cash inflows and categorization of expenditures as discretionary versus non-discretionary involved evaluating whether the assumptions used were reasonable considering (i) current and past performance of the Company; (ii) management’s historical forecasting accuracy; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.   /s/ PricewaterhouseCoopers LLP Los Angeles, California March 26, 2021   We have served as the Company’s auditor since at least 1995. We have not been able to determine the specific year we began serving as auditor of the Company.   F-3   Cadiz Inc.   Consolidated Statements of Operations and Comprehensive Loss     December 31,   (In thousands, except per share data)   2020     2019                     Total revenues (rental income)   $ 541     $ 441                     Costs and expenses:                 General and administrative     11,914       12,165   Depreciation     381       265                     Total costs and expenses     12,295       12,430                     Operating loss     ( 11,754 )     ( 11,989 )                   Interest expense, net     ( 11,526 )     ( 17,072 ) Other income     33       226   Debt conversion expense     -       ( 197 ) Loss on extinguishment of debt     ( 12,394 )     -   Loss before income taxes     ( 35,641 )     ( 29,032 ) Income tax expense     ( 7 )     ( 6 ) Loss from equity-method investments     ( 2,169 )     ( 490 )                   Net loss and comprehensive loss applicable to common stock   $ ( 37,817 )   $ ( 29,528 )                   Basic and diluted net loss per common share   $ ( 1.11 )   $ ( 1.11 )                   Basic and diluted weighted-average shares outstanding     34,188       26,549     See accompanying notes to the consolidated financial statements.   F-4   Cadiz Inc.   Consolidated Balance Sheets     December 31,   ($ in thousands, except per share data)   2020     2019                     ASSETS                 Current assets:                 Cash and cash equivalents   $ 7,290     $ 15,682   Accounts receivable     55       49   Prepaid expenses and other     691       386   Total current assets     8,036       16,117                     Property, plant, equipment and water programs, net     53,481       49,947   Long-term deposit/prepaid expenses     3,000       2,000   Equity-method investments     1,354       729   Goodwill     3,813       3,813   Other assets     4,679       4,118                     Total assets   $ 74,363     $ 76,724                     LIABILITIES AND STOCKHOLDERS' DEFICIT                 Current liabilities:                 Accounts payable   $ 548     $ 194   Accrued liabilities     674       4,536   Current portion of long-term debt     51       31   Warrant liabilities     1,847       -   Other liabilities     15       44                     Total current liabilities     3,135       4,805                     Long-term debt     78,596       137,565   Long-term lease obligations with related party, net     17,183       15,707   Deferred revenue     750       750   Other long-term liabilities     -       15                     Total liabilities     99,664       158,842                     Stockholders' deficit:                 Preferred stock - $ .01 par value, 100,000 shares authorized at December 31, 2020 and December 31, 2019; shares issued – 7,531 at December 31, 2020 and 0 at December 31, 2019     1       -   Common stock - $ 0.01 par value; 70,000,000 shares                 Authorized at December 31, 2020 and December 31, 2019; shares issued and outstanding: 36,902,361 at December 31, 2020, and 28,480,567 at December 31, 2019     368       285                     Additional paid-in capital     513,744       419,194   Accumulated deficit     ( 539,414 )     ( 501,597 ) Total stockholders' deficit     ( 25,301 )     ( 82,118 )                   Total liabilities and stockholders' deficit   $ 74,363     $ 76,724     See accompanying notes to the consolidated financial statements.   F-5   Cadiz Inc.   Consolidated Statements of Cash Flows     Year Ended December 31,   ($ in thousands)   2020     2019                     Cash flows from operating activities:                 Net loss   $ ( 37,817 )   $ ( 29,528 ) Adjustments to reconcile net loss to net cash used for operating activities:                 Depreciation     381       265   Amortization of deferred loan costs     766       81   Amortization of debt discount     296       3,856   Interest expense added to loan principal     7,270       10,031   Interest expense added to lease liability     1,451       1,272   Loss on equity method investments     2,169       490   Loss on debt conversion and extinguishment of debt     12,394       38   Debt conversion expense     -       197   Compensation charge for stock awards and share options     2,096       562   Unrealized gain on warrant derivative liabilities     ( 139 )     -   Changes in operating assets and liabilities:                 Accounts receivable     ( 6 )     ( 11 ) Prepaid expenses and other current assets     ( 305 )     22   Other assets     ( 605 )     ( 186 ) Accounts payable     129       ( 68 ) Accrued and other liabilities     ( 1,508 )     ( 729 )                   Net cash used for operating activities     ( 13,428 )     ( 13,708 )                   Cash flows from investing activities:                 Additions to property, plant and equipment     ( 5,729 )     ( 1,599 ) Contributions to equity-method investments     ( 3,109 )     ( 904 ) Additions to long-term investments     ( 1,000 )     -                     Net cash used for investing activities     ( 9,838 )     ( 2,503 )                   Cash flows from financing activities:                 Net proceeds from issuance of common stock     14,767       19,395   Proceeds from the issuance of long-term debt     150       -   Principal payments on long-term debt     ( 43 )     ( 59 )                   Net cash provided by financing activities     14,874       19,336                     Net (decrease) increase in cash and cash equivalents and restricted cash     ( 8,392 )     3,125                     Cash and cash equivalents and restricted cash, beginning of period     15,816       12,691                     Cash and cash equivalents and restricted cash, end of period   $ 7,424     $ 15,816     See accompanying notes to the consolidated financial statements.   F-6   Cadiz Inc.   Consolidated Statements of Stockholders ’ Deficit                                     Additional             Total       Common Stock     Preferred Stock     Paid-in     Accumulated     Stockholders ’       Shares     Amount     Shares     Amount     Capital     Deficit     Deficit   Balance as of December 31, 2018     24,654,911     $ 247       -     $ -     $ 383,521     $ ( 470,008 )   $ ( 86,240 )                                                           Issuance of shares pursuant to ATM offerings     1,863,072       19       -       -       19,376       -       19,395   Issuance of shares pursuant to bond conversion     1,918,444       19       -       -       12,809       -       12,828   Reclassification of warrant liability to additional paid-in capital (1)     -       -       -       -       2,896       ( 2,031 )     865   Impact of warrant down-round feature     -       -       -       -       30       ( 30 )     -   Stock-based compensation expense     44,140       -       -       -       562       -       562   Net loss and comprehensive loss     -       -       -             -       ( 29,528 )     ( 29,528 ) Balance as of December 31, 2019     28,480,567     $ 285       -     $ -     $ 419,194     $ ( 501,597 )   $ ( 82,118 )                                                           Issuance of shares pursuant to ATM offerings     1,508,013       15       -       -       14,752       -       14,767   Issuance of shares pursuant to bond conversion     5,766,337       57       -       -       38,843       -       38,900   Reclassification of warrant liability     -       -       -       -       ( 865 )     -       ( 865 ) Issuance of preferred shares     -       -       10,000       1       39,735       -       39,736   Conversion of preferred shares to common shares     1,000,068       10       ( 2,469 )     -       ( 10 )     -       -   Stock-based compensation expense     147,376       1       -       -       2,095       -       2,096   Net loss and comprehensive loss     -       -       -       -       -       ( 37,817 )     ( 37,817 ) Balance as of December 31, 2020     36,902,361     $ 368       7,531     $ 1     $ 513,744     $ ( 539,414 )   $ ( 25,301 )     (1) A cumulative effect adjustment of $2,031 thousand was recognized as of January 1, 2019, upon adoption of ASU 2017-11.   See accompanying notes to the consolidated financial statements.   F-7     NOTE 1 – DESCRIPTION OF BUSINESS   Cadiz Inc.  (“Cadiz”, the “Company”) is a natural resources development company committed to providing sustainable water and agricultural opportunities in California.   Cadiz owns approximately 45,000 acres of land with high-quality, naturally recharging groundwater resources in three areas of Southern California’s Mojave Desert – the Cadiz Valley ( 35,000 acres), Danby Dry Lake, ( 2,000 acres), and the Piute Valley ( 9,000 acres). Our properties represent a unique private reserve of lands with vested water rights that we own located in a remote area of eastern San Bernardino County that is at the crossroads of major highway, rail, energy and water infrastructure that supply and deliver necessary resources to communities in California and across Western States.   Our properties were primarily assembled by our founders in the early 1980s, relying on NASA imagery that identified a unique desert land position at the base of a vast and topographically diverse Southern California watershed with potential for agricultural and water development.  The Cadiz Valley property (“Cadiz Property”) is underlain by extensive, high-quality, naturally recharging groundwater able to support a variety of uses.   Our main objective is to realize the highest and best use of our land, water and related infrastructure assets in an environmentally responsible way. Our present activities are focused on developing our assets to meet growing long-term demand for access to sustainable water supplies and agricultural products.  California has systemic water challenges and is not able to ensure that all people in California can reliably access safe, clean drinking water. We believe that the highest and best use of our assets will be realized by offering a combination of water supply, water storage and agricultural projects in ways that are responsive to California’s resource needs.       NOTE 2 – 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 $ 37.8 million and $ 29.5 million for the years ended December 31, 2020 and 2019, respectively. The Company had working capital of $ 4.9 million at December 31, 2020 and used cash in operations of $ 13.4 million for the year ended December 31, 2020. Cash requirements during the year ended December 31, 2020 primarily reflect certain administrative costs related to the Company’s water project development efforts and the further development of its land and agricultural assets, including its 50 % equity investment in SoCal Hemp JV LLC. The Company’s present activities are focused on development of its assets in ways that meet growing long-term demand for access to sustainable water supplies and agricultural products.   F- 8     In July 2020, the Company entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $ 30 million from time to time in an “at-the-market” offering (the “July 2020 ATM Offering”). As of December 31, 2020, the Company issued 1,099,021 shares of common stock in the July 2020 ATM Offering for gross proceeds of $ 11.2 million and aggregate net proceeds of approximately $ 10.8 million. The Company has and may continue to issue equity securities pursuant to the July 2020 ATM Offering.   In November 2018, the Company entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $ 25 million from time to time in an “at-the-market” offering (the “November 2018 ATM Offering”). The Company completed the offering during March 2020, having issued a total of 2,369,170 shares of common stock in the November 2018 ATM Offering for gross proceeds of $ 25 million and aggregate net proceeds of approximately $ 24.2 million.   In May 2017, the Company entered into a $ 60 million credit agreement (“Credit Agreement”) with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced its then existing $ 45 million senior secured mortgage debt (“Prior Senior Secured Debt”) and provided $ 15 million of new senior debt to fund immediate construction related expenditures (“Senior Secured Debt”). The Company’s Senior Secured Debt and its convertible notes contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit the Company’s ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person.  However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on the Company’s ability to issue additional common stock to fund future working capital needs.  The debt covenants associated with the Senior Secured Debt were negotiated by the parties with a view towards the Company’s operating and financial condition as it existed at the time the agreements were executed.  In March 2020, the Company entered into an agreement with Apollo that allows the Company to extend the maturity of the Apollo debt for an additional year from its current maturity of May 2021 to May 2022 at the Company’s option.  Additionally, on March 24, 2021, the Company entered into an agreement to further extend, in its sole discretion, the Apollo debt to November 2022 ( see Note 14 – “Subsequent Events”).   On March 5, 2020, the Company entered into Conversion and Exchange Agreements (the “Exchange Agreements”) with certain holders (the “Holders”) of the Company’s 7 % Convertible Senior Notes due 2020 (the “Convertible Notes”) having an aggregate original principal amount of $ 27.4 million. Pursuant to the terms of the Exchange Agreements, the Holders exchanged an aggregate amount payable of $ 27.3 million under the Convertible Notes for an aggregate of 10,000 shares of Series 1 Preferred Stock and the Holders converted the remaining aggregate amount payable of $ 17.5 million of Convertible Notes into 2.6 million shares of common stock in accordance with the terms of the existing Indenture. Following the transactions, all of the Convertible Notes held by the Holders, as well as all the remaining Convertible Notes held by others that were converted in accordance with the existing Indenture at maturity have been satisfied in full and cancelled.   The Company’s acquisition of a 124 -mile extension of its’ Northern Pipeline will require a $ 19 million payment by June 30, 2020 under the purchase agreement with El Paso Natural Gas Company (“EPNG”). If the acquisition of the 124 -mile segment is not completed, then the Company’s Northern Pipeline opportunities will be limited to the 96 -mile segment it already owns (see Note 11 – “Commitments and Contingencies”).   F- 9     The Company may meet its debt and working capital requirements through a variety of means, including extension, refinancing, equity placements, the sale or other disposition of assets, or reductions in operating costs.   Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve 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 judgement to estimate the projected cash flows of the Company including the following: (i) projected cash outflows (ii) projected cash inflows and (iii) categorization of expenditures as discretionary versus non-discretionary. The cash flow projections are based on known or planned cash requirements for operating costs as well as planned costs for project development.     Limitations on the Company’s liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet the Company’s resource development activities. Although the Company currently expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that its liquidity requirements will continue to be satisfied. If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately 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. We apply the equity method of accounting for investments in which we have significant influence but not 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.   Revenue Recognition   The Company recognizes rental income through its agricultural leases with Fenner Valley Farms LLC and SoCal Hemp JV LLC.   F- 10     Stock-Based Compensation   General and administrative expenses include $ 2.1 million and $ 0.6 million of stock-based compensation expenses in the years ended December 31, 2020 and 2019, respectively.   Stock-based compensation is generally based upon grants of stock awards or restricted stock units (“RSU”) to its employees and consultants under the 2019 Equity Incentive Plan.  For stock awards or RSUs granted, the Company determines the fair value of the stock award or RSU at the date of the grant and recognizes the compensation expense over the vesting period.   Net Loss Per Common Share   Basic net loss per share is computed by dividing the net loss by the weighted-average common shares outstanding. Options, deferred stock units, convertible debt, convertible preferred shares and warrants were not considered in the computation of net loss per share because their inclusion would have been antidilutive. Had these instruments been included, the fully diluted weighted average shares outstanding would have increased by approximately 2,956,081 shares and 11,477,000 shares for the years ended December 31, 2020 and 2019, 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 ten to forty-five years for land improvements and buildings, and five to fifteen 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. We have not commenced depreciation of these assets as they are not yet in service. While interest on borrowed funds is currently expensed, interest costs related to the construction of project facilities will be capitalized at the time construction of these facilities commences.   Goodwill and Other Assets   As a result of a merger in May 1988 between two 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 Codification 350, “Intangibles – Goodwill and Other” (“ASC 350” ) on January 1, 2002. Since the adoption of ASC 350, there have been no goodwill impairments recorded. The Cadiz reporting unit to which $ 3.8 million of goodwill is allocated had a negative carrying amount on December 31, 2020 and 2019.   F- 11     Deferred loan costs represent costs incurred to obtain debt financing. Such costs are amortized over the life of the related loan using the effective interest method. At December 31, 2020, the deferred loan fees are not material.   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 may not 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 may not 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).  This quantitative assessment is performed at least annually in the fourth quarter and compares a reporting unit’s fair value to its carrying amount to determine if there is a potential impairment.  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. No impairment charge was recorded during the current fiscal year.   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 than not that some portion or all of the deferred tax assets will not 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 Note 6 – “Long-Term Debt”, for discussion of fair value of debt.   SoCal Hemp JV   On July 31, 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 Farms, a division of California Cannabis Enterprises, Inc., which is an unrelated company to Cadiz Inc.) when the two parties entered into a Limited Liability Company Agreement (“LLC Agreement”). The JV is 50% owned by Cadiz Real Estate LLC and 50 % owned by SoCal Hemp Co., LLC. Pursuant to the LLC Agreement, the JV profits and losses are allocated to the members based on their ownership share. The Company accounts for its investment in the JV using the equity method of accounting. Additionally, the LLC Agreement provides that, at the request of SoCal Hemp Co, LLC, their share of initial costs could be funded by Cadiz in the form of a loan which would bear interest at 8 % per annum (“Stage 1 Loan”). Repayment of the Stage 1 Loan would be through priority distribution from the JV. As of December 31 st , 2020, the Company recorded a note receivable in the amount of $ 190 thousand related to the Stage 1 Loan.   F- 12     The carrying value of the investment was $ 1.4 million at December 31, 2020, and $ 0.7 million at December 31, 2019.  During 2020, the Company made contributions to the JV of $ 2.8 million and recorded $ 2.2 million of losses.  The losses resulted from higher growing costs and lower yields in this initial startup year of commercial production coupled with a reserve for valuing inventory at lower of cost or market by the JV due to the significant market price reductions for hemp biomass experienced in 2020.   Supplemental Cash Flow Information   Under the terms of the Senior Secured Debt, the Company is required to pay 25 % of all quarterly interest payments in cash. During the year ended December 31, 2020, approximately $ 1.46 million in interest payments on the Senior Secured Debt was paid in cash. No other payments are due on the Senior Secured Debt or the Company’s Convertible Senior Notes prior to their maturities.   During the year ended December 31, 2020, approximately $ 38.9 million in convertible notes were converted into common stock by certain of the Company’s lenders. As a result, 5,766,337 shares of common stock were issued to the lenders. This conversion activity represents a non-cash financing activity. Pursuant to the terms of the Conversion and Exchange Agreements, as discussed above, approximately $ 27.3 million of Convertible Notes were exchanged for an aggregate of 10,000 shares of Series 1 Preferred Stock. As of December 31, 2020, holders of Series 1 Preferred Stock exercised their option to convert 2,469 shares of Series 1 Preferred Stock into 1,000,068 shares of common stock.   The balance of cash, cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows is comprised of the following:   Cash, Cash Equivalents and Restricted Cash   December 31, 2020     December 31, 2019   (in thousands)                                   Cash and Cash Equivalents   $ 7,290     $ 15,682   Restricted Cash included in Other Assets     134       134   Cash, Cash Equivalents and Restricted Cash in the Consolidated Statement of Cash Flows   $ 7,424     $ 15,816     The restricted cash amounts included in Other Assets primarily represent a deposit from a water project participant related to a cost-sharing agreement.   Cash payments for income taxes were $ 7 thousand and $ 6 thousand for the years ended December 31, 2020 and 2019, respectively.   F- 13     Recent Accounting Pronouncements   Accounting Guidance Not Yet Adopted   In December 2019, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which reduces complexity in accounting standards by removing certain exceptions to the general principles in Topic 740. This update is effective for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing this new guidance and expects this new standard will not have a material impact on the consolidated financial statements.   In June 2016, 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 Company is currently assessing this new guidance and expects this new standard will not have a material impact on the consolidated financial statements.   Accounting Guidance Adopted   In August 2018, the FASB issued an accounting standards update which modifies the disclosure requirements for fair value measurements. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted this guidance on January 1, 2020. The adoption of this update modified our disclosures, but had no impact on the Company’s condensed consolidated financial statements (see Note 13 – “Fair Value Measurements”).   In August 2018, the FASB issued an accounting standards update on a customer’s accounting for implementation costs incurred in a cloud computing arrangement. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted this guidance on January 1, 2020, and the new standard had no impact on the Company’s condensed consolidated financial statements.   F- 14       NOTE 3 – PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS   Property, plant, equipment and water programs consist of the following (dollars in thousands):       December 31,       2020     2019                     Land and land improvements   $ 26,798     $ 25,064   Water programs     28,323       27,127   Buildings     1,576       1,576   Leasehold improvements     570       570   Furniture and fixtures     461       461   Machinery and equipment     2,029       1,543   Construction in progress     788       299         60,545       56,640   Less accumulated depreciation     ( 7,064 )     ( 6,693 )                       $ 53,481     $ 49,947         NOTE 4 – OTHER ASSETS   Other assets consist of the following (dollars in thousands):       December 31,       2020     2019                     Prepaid rent   $ 4,110     $ 3,925   Right-of-use asset     15       59   Deposits     554       134       $ 4,679     $ 4,118     Prepaid rent primarily consists of fees incurred to obtain the right-of-ways for the Water Project. Amortization of prepaid rent was approximately $ 115,000 for each of the years ended December 31, 2020 and 2019.   Deposits as of December 31, 2020 include $ 420 toward a Performance and Reclamation Bond with the BLM (see Note 11 – “Commitments and Contingencies”).   F- 15       NOTE 5 – ACCRUED LIABILITIES   At December 31, 2020 and 2019, accrued liabilities consist of the following (dollars in thousands):       December 31,       2020     2019                     Payroll, bonus, and benefits   $ 240     $ 628   Legal and consulting     104       510   Stock-based compensation     71       71   Well development     113       1,038   Northern Pipeline quality test     -       1,868   Other accrued expenses     146       421       $ 674     $ 4,536         NOTE 6 – LONG-TERM DEBT   At December 31, 2020 and 2019, the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):       December 31,       2020     2019                     Senior secured debt due May 25, 2021   $ 78,861     $ 72,341   Interest accrues at 8 % per annum                 Convertible note instrument due March 5, 2020                 Interest accrues at 7 % per annum     -       65,514   Other loans     152       45   Debt discount and debt issuance costs, net of accumulated accretion     ( 366 )     ( 304 ) Total outstanding long-term debt     78,647       137,596                     Less current portion     51       31                     Total outstanding debt   $ 78,596     $ 137,565     The carrying value of the Company’s Senior Secured Debt approximates fair value. The fair value of the Company’s Senior Secured Debt (Level 2 ) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company by its lenders for similar debt instruments of comparable maturities by its lenders.   Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2020, are as follows:   F- 16     Year Ending December 31   ($ in thousands)             2021   $ 51   2022     78,898 (1) 2023     38   2024     26   2025+     -   Total   $ 79,013       ( 1 ) The Company has options to extend the contractual May 2021 maturity of its Senior Secured Debt until November 2022.    Accordingly, the Company has no short-term debt portion of long-term debt obligations coming due subject to the exercise of this option which is entirely in the Company ’ s control.   Credit Agreement   On May 25, 2017 ( “Closing Date”), the Company entered into a $ 60 million credit agreement with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced the Company’s then existing $ 45 million senior secured mortgage debt and provided $ 15 million of new senior debt to fund immediate construction related expenditures.   Interest on the Senior Secured Debt is due quarterly on each March 31, June 30, September 30 and December 31 ( each an “Interest Date”).  Interest on the Senior Secured Debt will (i) accrete to the outstanding principal amount at a rate per annum equal to 6 % (the “PIK Rate”) compounded quarterly on each Interest Date and (ii) accrue on the outstanding principal amount at a rate per annum equal to 2 % (the “Cash Rate”). The Company, in its discretion, may make any quarterly interest payment in cash on the applicable Interest Date at the PIK Rate, in lieu of accretion of such interest to the principal amount at the PIK Rate.   In addition to the interest expense discussed above, the Company will also owe an additional premium upon maturity of the debt.  The Accreted Loan Value plus the Applicable Prepayment Premium will be due and payable on the Maturity Date. “Accreted Loan Value” means, as of the date of determination, the outstanding principal amount of the applicable Loan, plus all accreted interest as of the calendar day immediately prior to such date of determination. “Applicable Prepayment Premium” means with respect to any repayment of the Senior Secured Debt (a) the Accreted Loan Value of the Senior Secured Debt being prepaid or repaid, as applicable, multiplied by (b) 7.00 %.  The premium has been recorded to interest expense over the term of the Senior Secured Debt consistent with the terms of the debt agreement.    On March 5, 2020, the Company entered into an agreement with Apollo in which the Company acquired the option to extend the current May 2021 maturity date of its loan to May 2022 ( “Extension Option”).  The fee to acquire the Extension Option included the repricing of 362,500 warrants held by Apollo to $ 6.75 and the extension of their expiration date from May 2022 to May 2025 ( “Warrant Modification”), together with an increase in the applicable prepayment premium of up to 7 % of the accreted value of the loan.  Additionally, if the Company exercises the Extension Option, the exercise price of the warrants automatically decreases to $ 0.01 per share and the expiration date of the warrants will automatically be extended by an additional 12 months.    F- 17     On March 24, 2021, the Company entered into an agreement with Apollo in which the Company acquired the option to further extend, in its sole discretion, the current May 2021 maturity date of its loan to November 2022 from May 2022 ( “Second Extension Option”).  The fee to acquire the Second Extension Option was the adjustment of the exercise price of 362,500 warrants held by Apollo from $ 6.75 to $ 0.01 .    At the time of the Warrant Modification, the Company recorded a warrant liability in the amount of $ 2.0 million, which was the carrying value of the warrant prior to modification in the amount of $ 0.9 million combined with the increase in fair value of the warrant in the amount of $ 1.1 million. This increase in fair value of the warrant at the time of the Warrant Modification was recorded to debt issuance costs and will be amortized over the remaining life of the Senior Secured Debt. The fair value of the warrant liability is remeasured each reporting period using an option pricing model, and the change in fair value is recorded as an adjustment to the warrant liability with the unrealized gains or losses reflected in interest expense.   Total unrealized gains of $ 139 thousand for warrant liabilities accounted for as derivatives have been recorded in interest expense for the year ended December 31, 2020.   Convertible Notes   On March 5, 2020, the Company entered into Conversion and Exchange Agreements (the “Exchange Agreements”) with certain holders (the “Holders”) of the Company’s 7 % Convertible Senior Notes due 2020 (the “Convertible Notes”) having an aggregate original principal amount of $ 27.4 million. Pursuant to the terms of the Exchange Agreements, the Holders exchanged an aggregate amount payable of $ 27.3 million under the Convertible Notes for an aggregate of 10,000 shares of Series 1 Preferred Stock and the Holders converted the remaining aggregate amount payable of $ 17.5 million of Convertible Notes into 2.6 million shares of common stock in accordance with the terms of the existing Indenture. Each preferred share is convertible at any time at the option of the Holder into 405.05 shares of Common Stock. Following the transactions, all of the Convertible Notes held by the Holders, as well as all the remaining Convertible Notes held by others that were converted in accordance with the existing Indenture at maturity have been satisfied in full and cancelled. Pursuant to applicable guidance, the Series 1 Preferred Stock was recorded in Stockholders’ Equity at fair value, which was determined using an option pricing model. A loss of $ 12.4 million was recorded in the Condensed Consolidated Statement of Operations and Comprehensive Income, representing the excess of the fair value of the Series 1 Preferred Stock over the historical book value of the related Convertible Notes. As of December 31, 2020, Holders of Series 1 Preferred Stock exercised their option to convert 2,469 shares of Series 1 Preferred Stock into 1,000,068 shares of Common Stock.      The Company’s Senior Secured Debt contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit the Company’s ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person.  However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on the Company’s ability to issue additional common stock to fund future working capital needs.  The debt covenants associated with the Senior Secured Debt were negotiated by the parties with a view towards the Company’s operating and financial condition as it existed at the time the agreements were executed.  At December 31, 2020, the Company was in compliance with its debt covenants.   F- 18       NOTE 7 – INCOME TAXES   Deferred taxes are recorded based upon differences between the financial statement and tax bases 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, 2020 and 2019 are as follows (dollars in thousands):       December 31,       2020     2019                     Deferred tax assets:                 Net operating losses   $ 75,303     $ 70,202   Fixed asset basis difference     4,555       4,547   Contributions carryover     32       30   Deferred compensation     1,289       1,098   Accrued liabilities and others     303       271                     Total deferred tax assets     81,482       76,148                     Valuation allowance for deferred tax assets     ( 81,482 )     ( 76,148 )                   Net deferred tax asset   $ -     $ -     The valuation allowance increased $ 5,334,000 and $ 4,148,000 in 2020 and 2019, respectively.  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.     As of December 31, 2020, the Company had net operating loss (NOL) carryforwards of approximately $ 325 million for federal income tax purposes and $ 237 million for California income tax purposes.  Such carryforwards expire in varying amounts through the year 2038. 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.    As of December 31, 2020, the Company possessed unrecognized tax benefits totaling approximately $ 1.2 million.  None of these, if recognized, would affect the Company's effective tax rate because the Company has recorded a full valuation allowance against these tax assets.    F- 19     The Company's tax years 2017 through 2020 remain subject to examination by the Internal Revenue Service, and tax years 2016 through 2020 remain subject to examination by California tax jurisdictions.  In addition, the Company's loss carryforward amounts are generally subject to examination and adjustment for a period of three years for federal tax purposes and four years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.   A reconciliation of the income tax benefit to the statutory federal income tax rate is as follows (dollars in thousands):       Year Ended December 31,     2020     2019                     Expected federal income tax benefit at 21%   $ ( 7,940 )   $ ( 6,200 ) Loss with no tax benefit provided     3,617       2,508   State income tax     7       6   Expiring carryforwards     1,547       2,427   Non-deductible expenses and other     2,776       1,265                     Income tax expense   $ 7     $ 6     Because it is more likely than not that the Company will not realize its net deferred tax assets, it has recorded a full valuation allowance against these assets.  Accordingly, no deferred tax asset has been recorded in the accompanying balance sheet.       NOTE 8 – COMMON AND PREFERRED STOCK   The Company is authorized to issue 70 million shares of Common Stock at a $ 0.01 par value.  As of December 31, 2020, and December 31, 2019, the Company had 36,902,361 and 28,480,567 shares issued and outstanding, respectively.    The Company has issued a total of 10,000 shares of Series 1 Preferred Stock to certain holders (“Holders”) under the Conversion and Exchange Agreements (see Note 6 – “Long-Term Debt”).  Each preferred share is convertible at any time at the option of the Holder into 405.05 shares of Common Stock.  During the year ended December 31, 2020, Holders of Series 1 Preferred Stock exercised their option to convert 2,469 shares of Series 1 Preferred Stock into 1,000,068 shares of Common Stock.   In January 2013, the Company revised its then existing agreement with the law firm of Brownstein Hyatt Farber Schreck LLP (“Brownstein”), a related party.  Under this agreement, the Company is to issue up to a total of 400,000 shares of the Company’s common stock, with 200,000 shares earned to date and 100,000 shares to be earned upon the achievement of each of two remaining milestones as follows:     i. 100,000 shares earned upon the signing of binding agreements for more than 51 % of the Water Project’s annual capacity, which is not yet earned; and   F- 20       ii. 100,000 shares earned upon the commencement of construction of all of the major facilities contemplated in the Final Environmental Impact Report necessary for the completion and delivery of the Water Project, which is not yet earned.   All shares earned upon achievement of any of the remaining two milestones will be payable three years from the date earned.   Additionally, the Company incurred direct expenses to Brownstein of approximately $ 1.5 million and $ 2.3 million in 2020 and 2019, respectively.     NOTE 9 – STOCK-BASED COMPENSATION PLANS AND WARRANTS   The Company has issued options and has granted stock awards pursuant to its 2009 Equity Incentive Plan and 2019 Equity Incentive Plan, as described below.    2009 Equity Incentive Plan   The 2009 Equity Incentive Plan was approved by stockholders at the 2009 Annual Meeting.  The plan provides for the grant and issuance of up to 850,000 shares and options to the Company’s employees and consultants.  The plan became effective when the Company filed a registration statement on Form S- 8 on December 18, 2009.  All options issued under the 2009 Equity Incentive Plan have a ten -year term with vesting periods ranging from issuance date to 24 months.       2019 Equity Incentive Plan   The 2019 Equity Incentive Plan was approved by stockholders at the July 10, 2019 Annual Meeting.  The plan provides for the grant and issuance of up to 1,200,000 shares and options to the Company’s employees, directors and consultants.    Under the 2019 Equity Incentive Plan, each outside director receives $ 50,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $ 25,000 on June 30 of each year.  The award accrues on a quarterly basis, with $ 12,500 of cash compensation and $ 6,250 of stock earned for each fiscal quarter in which a director serves.  The deferred stock award vests automatically on the January 31 that first follows the award date.    All options that have been issued under the above plans have been issued to officers, employees and consultants of the Company.  In total, options to purchase 115,000 shares were unexercised and outstanding on December 31, 2020 under the equity incentive plans.    For consultants of the Company, the fair value of each option granted under the 2009 Equity Incentive Plan is estimated at each reporting period using the option-pricing model and recorded as a liability until the award is settled.      For officers and employees of the Company, the fair value of each option granted under the plans was estimated on the date of grant using the option-pricing model.   F- 21     The risk-free interest rate is assumed to be equal to the yield of a U.S. Treasury bond of comparable maturity, as published in the Federal Reserve Statistical Release for the relevant date.  The expected life estimate is based on an analysis of the employees receiving option grants and the expected behavior of each employee.  The expected volatility is derived from an analysis of the historical volatility of the trading price per share of the Company’s common stock on the NASDAQ Global Market.  The Company does not anticipate that it will pay dividends to common stockholders in the future.    The Company recognized no stock-option-related compensation costs for the years ended December 31, 2020 and 2019 relating to these options.  No stock options were exercised during 2020.     No options were granted in 2020 and 2019.   A summary of option activity under the plans as of December 31, 2020, and changes during the year ended December 31, 2019 are presented below:                         Average     Aggregate                 Weighted-     Remaining     Intrinsic                 Average     Contractual     Value       Shares       Exercise Price     Term     ($000 ’ s)                                       Outstanding at January 1, 2019     492,500       $ 11.66       1.3     $ 3,834   Granted     -       $ -                   Forfeited, Expired or canceled     -       $ -             $ -   Exercised     -       $ -                                                       Outstanding at December 31, 2019     492,500       $ 11.66       0.3     $ 3,834   Granted     -       $ -                   Forfeited, Expired or canceled     377,500       $ 11.50             $ 2,915   Exercised     -       $ -                                                       Outstanding at December 31, 2020     115,000   (a)   $ 12.17       0.4     $ 919                                       Options exercisable at December 31, 2020     115,000       $ 12.17       0.4     $ 919                                       Weighted-average years of remaining contractual life of options outstanding at December 31, 2020     0.4                                 (a) Exercise prices vary from $ 9.88 to $ 12.51 , and expiration dates vary from April 2021 to December 2021.   Stock Awards to Directors, Officers, Consultants and Employees   The Company has granted stock awards pursuant to its 2019 Equity Incentive Plan.   Of the total 1,200,000 shares reserved under the 2019 Equity Incentive Plan, 269,563 shares have been awarded to the Company directors, employees and consultants as of December 31, 2020.  Of the 269,563 shares awarded, 19,279 shares were awarded to the Company’s directors for services performed during the plan year ended June 30, 2020.  These shares vested and were issued on January 31, 2021.   F- 22     In January 2020, the Company granted a total of 150,000 restricted stock units (“RSU”) to its employees under the 2019 Equity Incentive Plan.  These restricted stock units vest ratably in three equal annual installments on the first day of each year commencing January 1, 2020.   As of December 31, 2020, we had approximately $ 240 thousand of unrecognized compensation expense related to unvested stock-based awards, which is expected to be recognized over the remaining weighted average requisite service period of approximately 1 year.   The accompanying consolidated statements of operations and comprehensive loss include approximately $ 2,096,000 and $ 562,000 of stock-based compensation expense related to stock awards in the years ended December 31, 2020 and 2019, respectively.   A summary of stock awards activity under the plans during the years ended December 31, 2019 and 2020 is presented below:               Weighted-               Average               Grant-date       Shares     Fair Value                                       Nonvested at December 31, 2018     10,224     $ 12.71   Granted     49,228     $ 10.76   Forfeited or canceled     -     $ -   Vested     ( 44,140 )   $ 11.33                     Nonvested at December 31, 2019     15,312     $ 10.45   Granted     253,654     $ 9.31   Forfeited or canceled     -     $ -   Vested     ( 149,685 )   $ 9.60                     Nonvested at December 31, 2020     119,281     $ 9.10         NOTE 10 – SEGMENT INFORMATION   The primary business of the Company is to acquire and develop land and water resources. As a result, the Company’s financial results are reported in a single segment.       NOTE 11 – 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 are no 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, $ 750,000 in funds have been received in order to offset costs incurred in the environmental analysis of the Water Project. These funds may either be reimbursed or credited to participants participation in the Water Project and, accordingly, are fully reflected as deferred revenue as of December 31, 2020 and December 31, 2019.   F- 23     In December 2018, , the Company entered into a Purchase Agreement (“the Agreement”) with El Paso Natural Gas Company (“EPNG”) to purchase a 124 -mile segment of the 1904 Pipeline (“the Retained Pipeline”) for $ 20,000,000 . The Company currently owns a 96 mile segment of the 1904 Pipeline, and the acquisition would enable the Company to connect the two pipelines. The Company paid EPNG a non-refundable $ 2,000,000 deposit towards the purchase price which has been recorded in Other Assets. On January 24, 2020, the Agreement was amended (“the First Amendment”) resulting in an increase to the purchase price of $ 21,000,000 . The First Amendment specified conditions required by EPNG that, upon satisfaction, would allow the Company to finalize the transaction and accept ownership of and utilize the pipeline. In December 2020, the Company was informed that the United States Bureau of Land Management (“the BLM”) had renewed a Right of Way Grant for the Retained Pipeline, triggering a requirement for the Company to accelerate the close of the transaction. On December 4, 2020, in exchange for a non-refundable payment of $ 1,000,000 to EPNG which has been recorded in Other Assets, the Company entered into a Second Amendment to the Agreement, extending the close date of the transaction to June 2021. Both the $2,000,000 deposit and the $1,000,000 payment are considered to be capitalizable asset acquisition costs and will be transferred to the PP&E once the transaction is finalized and the Company accepts ownership of the property.    On December 14, 2020 the Company entered into a 30 year Right of Way Agreement with the BLM with respect to the Retained Pipeline.  The Right of Way Agreement, which is effective on January 1, 2021, has an annual rent expense of approximately $ 321,000 , with annual defined inflation increases.  The Company prepaid the 2021 rent in 2020 and has recorded the payment in Prepaid Rents.  In addition, on December 14, 2020, the Company deposited approximately $ 420,000 towards a Performance and Reclamation Bond with the BLM which has been recorded in Other Assets.   There are no material legal proceedings pending to which the Company is a party or of which any of the Company’s property is the subject.     NOTE 12 – LEASES   The Company has operating leases for corporate offices, vehicles and office equipment. The Company’s leases have remaining lease terms of 3  months to 11 months, some of which include options to extend or terminate the lease. However, the Company is not reasonably certain to exercise options to renew or terminate, and therefore renewal and termination options are not considered in the lease term or the right-of-use asset and lease liability balances. The Company’s current lease arrangements expire in 2021. The Company does not have any finance leases.   The Company’s lease population does not include any residual value guarantees, and therefore none 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 are not fixed or in-substance fixed payments.   F- 24     The Company elected to utilize the transition package of practical expedients permitted within the new standard, including the practical expedient not 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 than 12 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 of 12 months or less with purchase options or extension options that are not reasonably certain to be exercised are not 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, 2020 are as follows (in thousands):   Activity Balance Sheet Location   Balance   ROU assets Other assets   $ 15   Short-term lease liability Other liabilities   $ 15   Long-term lease liability Other long-term liabilities   $ -     Lease cost. The Company’s operating lease cost for the year ended December 31, 2020 was $ 47 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, 2020 ( in thousands):   2021     15   Total lease payments     15   Less: Imputed interest     (- ) Present value of lease payments     15   Less: current maturities of lease obligations     ( 15 ) Long-term lease obligations   $ -     Most of our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. Instead, we estimate the Company’s incremental borrowing rate based on information available at either the implementation date of Topic 842 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 our leases as of December 31, 2020:   Weighted Average Remaining Lease Term         Operating leases (years)   0.4             Weighted Average Discount Rate         Operating leases     6 %   F- 25     From a lessor standpoint, in February 2016, the Company entered into a lease agreement with Fenner Valley Farms LLC (“FVF”) (the “lessee”), pursuant to which FVF is leasing, for a 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 a one -time payment of $ 12.0 million upon closing. The Company expect to receive rental income of $ 420 thousand annually over the next five years related to the FVF Lease Agreement.     On July 31, 2019, the JV entered into a lease agreement (the “Lease Agreement”) with the Company whereby the JV will cultivate industrial hemp on up to 9,600 acres at the Company’s agricultural property in eastern San Bernardino County, California (“Cadiz Ranch”). Under the terms of the Agreement, the JV initially leased 1,280 acres at the Cadiz Ranch and holds options to lease up to 8,320 additional acres by 2022. The Lease Agreement was amended in March 2020 to reduce the initially lease acreage to 242 acres and extend the options to lease the remaining acreage until 2023. The Agreement has an initial term of five years and the JV has the option to extend the term for three successive periods of five years each. In consideration for the lease arrangement, the JV will provide the Company an annual rental payment equal to $ 500 per acre of leased property, subject to periodic CPI adjustment. The lease commenced on March 1, 2020 when the Company completed certain activities to bring the property to the specifications required by the JV. Assuming no further options are exercised, the Company expects to receive rental income of approximately $ 121 thousand annually over the next five years related to the JV Lease Agreement.       NOTE 13 – FAIR VALUE MEASUREMENTS   The following table presents information about warrant derivative liabilities and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value. In general, fair values determined by Level  1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. We consider a security that trades at least weekly to have an active market. Fair values determined by Level  2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level  3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.     On March 5, 2020, the Company entered into an amendment to a warrant agreement with its senior lender which, among other provisions, repriced 362,500 warrants held by the senior lender to $ 6.75 (the “Warrant”) (see Note 6 – “Long-Term Debt”, above). As a result, the Company reclassified the carrying value of the Warrant prior to the modification from additional paid-in capital in the amount of $ 865 thousand to a warrant liability, as the Warrant met the definition of a derivative. In addition, the Company recorded debt issuance costs in the amount of $ 1.1 million, which was the increase in fair value of the warrant at the time of the modification. The fair value of the warrant liability is remeasured each reporting period using an option pricing model, and the change in fair value is recorded as an adjustment to the warrant liability with the unrealized gains or losses reflect in interest expense. The Company recognized an unrealized gain of $ 139  thousand related to the remeasurement of the warrant derivative liability at fair value during the year ended December 31, 2020.   F- 26         Derivatives at Fair Value as of December 31, 2020   (in thousands)   Level 1     Level 2     Level 3     Total                                     Warrant liabilities     -       -       1,847       1,847   Total warrant liabilities   $ -     $ -     $ 1,847     $ 1,847     The following table presents a reconciliation of Level 3 activity for the years ended December 31, 2019 and 2020:       Level 3 Liabilities   (in thousands)   Warrant Liabilities             Balance at January 1, 2019   $ ( 865 ) Reclassification of warrant liability to additional paid-in capital upon adoption of ASU 2017-11     865   Balance at December 31, 2019     -             Reclassification of warrant liability     1,986   Unrealized gains, net     ( 139 ) Balance at December 31 ,2020   $ 1,847         NOTE 14 – SUBSEQUENT EVENTS   On March 24, 2021, the Company entered into an agreement with Apollo in which the Company acquired the option to further extend, in its sole discretion, the current May 2021 maturity date of its loan to November 2022 from May 2022 ( “Second Extension Option”).  The fee to acquire the Second Extension Option was the adjustment of the exercise price of 362,500 warrants held by Apollo from $ 6.75 to $ 0.01 .    During the first quarter of fiscal year 2021, the Company issued 1,368,362  shares of common stock in its July 2020 ATM Offering for gross proceeds of $ 15.2 million and net proceeds of $ 14.9 million.    F-27