What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-29 compared with 2021-03-26 · 89 added, 91 removed, 83 unchanged (68% of the section changed)

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As of March 24, 2022, the number of stockholders of record of our common stock was 61.

To date, we have not paid a cash dividend on our common stock and do not anticipate paying any cash dividends in the foreseeable future.

Our senior secured term loan has covenants that prohibit the payment of dividends.

To date, we have not paid a cash dividend on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. 

Our senior secured term loan has covenants that prohibit the payment of dividends on our common stock.

Holders of Series A Preferred Stock, when and as authorized by the Company’s Board of Directors, are entitled to cumulative cash dividends at the rate of 8.875% of the $25,000.00 ($25.00 per Depositary Share) liquidation preference per year (equivalent to $2,218.75 per share per year or $2.21875 per Depositary Share per year).

Dividends will be payable quarterly in arrears, on or about the 15th of January, April, July and October, beginning on or about October 15, 2021. 

All securities sold by us during the three years ended December 31, 2021, which were not registered under the Securities Act of 1933, as amended, have been previously reported in accordance with the requirements of Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

Selected Financial Data

We are a smaller reporting company as defined by Reg.

240.12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 6. 

Management ’

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We assume no duty to update these forward-looking statements to reflect new, changed or unanticipated events or circumstances, other than as may be required by law.

We are a natural resources development company committed to providing sustainable water and agricultural opportunities in California.

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 faces 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.

The Cadiz Property is currently home to our primary development activities, including water supply and storage project development and active agricultural operations.

We are focused on developing a water project that can help address California’s persistent systemic water challenges and deliver new water to California communities in need of reliable water supplies and water infrastructure. 

Through management of groundwater at the Cadiz Property, the Water Project would, in its first phase, or Phase 1, conserve and supply new water for approximately 400,000 people in communities in Southern California. 

A second phase of the Water Project, or Phase 2, would bank and store imported water for use in future dry years. 

The Water Project has completed extensive permitting and environmental review in accordance with local, state and federal law and is approved to deliver a reliable supply of 50,000 acre-feet of water per year for 50 years to communities off of the Cadiz Property.

Prior to construction and implementation, the Water Project must complete contracts with participating water agencies, conveyance arrangements to deliver water supplies to contracting water agencies, and also arrange for facility construction, improvements, and financing. 

We anticipate using two separate pipeline routes to convey water from the Cadiz Property to the service areas of our participating agencies.  The first route, or the Southern Pipeline, requires the construction of a 43-mile 55-85”

steel water conveyance pipeline within a portion of the Arizona & California Railroad Company right-of-way that crosses the Cadiz Property and intersects with the CRA in Rice, California. 

The CRA is owned by the Metropolitan Water District  and serves water providers in six southern California counties. 

The second route, or the Northern Pipeline, contemplates the use of an existing 30”

natural gas pipeline that we optioned and acquired from El Paso Natural Gas (“EPNG”) as a potential facility to convey water to the Cadiz Property for storage, or from the Cadiz Property to parties along the route.

The Northern Pipeline extends 220-miles from the Cadiz Property to Wheeler Ridge, California and crosses the Mojave River Pipeline, the Los Angeles Aqueduct and terminates near the State Water Project.

In December 2020, BLM granted to our subsidiary Cadiz Real Estate LLC two right-of-way permits that now enable us to transport water through the entire Northern Pipeline over BLM-managed lands.

The first right-of-way was issued pursuant to an assignment in October 2020 of a portion of an existing right-of-way held by EPNG and renewed by BLM under the Mineral Leasing Act that enables the continued transportation of natural gas.

The second right-of-way was issued under the Federal Land Policy and Management Act and authorizes the conveyance of water in the pipeline over BLM-managed lands.

With these BLM grants, the conditions precedent were principally satisfied allowing for completion of the Company’s acquisition of the remaining 124-mile segment of the Northern Pipeline upon final payment to EPNG of $19 million, which is required to be made no later than June 30, 2021. 

We are presently engaged in discussions with parties interested in using the Northern Pipeline for conveyance, storage and supply. 

Prior to conveyance of water through the Northern Pipeline, we must secure permits required by any definitive agreement to use the facility. 

All conveyance of water via the Northern Pipeline would be conducted in accordance with applicable local, state and federal laws.

Our agricultural operations provide the Company’s principal source of revenue, although our working capital needs are not fully supported by our lease and farming returns. 

The development of the agricultural operations in 2020 included the construction of three wells that doubled our irrigation capacity to total 25,000 acre-feet per year, an initial commercial planting of 242 acres of industrial hemp by SoCal Hemp JV LLC, our 50/50 joint venture partnership with Glass House Farms, and initial preparation of 1,000 acres of land for the farming of grain crops expected to be planted during 2021. 

We believe that the ultimate implementation of the Water Project will provide a significant source of future cash flow for the business and our shareholders.

Our current and future operations include activities that further our commitments to sustainable stewardship of our land and water resources, good governance and corporate social responsibility.

We believe these commitments are important investments that will assist in maintenance of sustained shareholder value.

We are a water resources development company and agribusiness committed to sustainable water and farming projects in California. 

We are one of the largest private landowners in the state and control significant water supply, storage and conveyance assets capable of being part of the solution to California’s systemic water challenges.

We own approximately 45,000 acres of land with high-quality, naturally recharging groundwater resources in three areas of Southern California’s Mojave Desert –

the Cadiz Valley (35,000 acres), Danby Dry Lake (2,000 acres), and the Piute Valley (9,000 acres) (“Cadiz Property”).

Our properties represent a unique private reserve of lands with vested water rights located in a remote area of eastern San Bernardino County that is at the crossroads of major highway, rail, energy, and water infrastructure supplying and delivering necessary resources to communities in California and across the Western United States.

California and the Western U.S.

face a persistent challenge in meeting the water needs of all of its residents.

While the State of California has recognized a Human Right to Water, competing municipal, agricultural and environmental demands outpace the State’s available supply limiting the ability to deliver on that promise. 

Recent analysis from the California State Water Resources Control Board estimates that more than 1 million Californians lack reliable access to water and several communities are short of long-term reliable and affordable safe-drinking supply. 

We are principally focused on developing the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project”) at our Cadiz Valley property that can help address California’s persistent systemic water challenges and deliver new water access to California communities that presently lack reliable water supplies and infrastructure. 

Through management of groundwater at the Cadiz Property, the Water Project would conserve groundwater otherwise used for agriculture to augment supply in California communities in need and utilize capacity available in the managed groundwater aquifer system at Cadiz to bank and store imported water for use in future dry years.

The Water Project has completed extensive environmental review in accordance with local, state and federal law and has secured permits to manage the groundwater aquifer in Cadiz to make available an average of 50,000 acre-feet of water per year for 50 years to communities off of the Cadiz Property.

Permitting has also authorized the storage of imported water in the aquifer system to return in future dry years. 

The Cadiz aquifer system has the capacity to store one million acre-feet of imported water. 

To deliver conserved water to communities in need or to offer storage, the Water Project must provide conveyance facilities capable of delivering water to and from the Cadiz area for participating water providers. 

We own a retired, 30”

steel natural gas pipeline (“Northern Pipeline”) that extends 220-miles from California’s Central Valley near the California Aqueduct southeast across Kern and San Bernardino Counties terminating in Cadiz. 

Engineering and technical assessments indicate that the Northern Pipeline can safely convey 25,000 acre-feet of water in either direction.

We also maintain a 99-year lease with the Arizona & California Railroad Company (“ARZC”) to co-locate and construct a 43-mile approximately 55-85”

steel water conveyance pipeline (“Southern Pipeline”) within the existing, active railroad right-of-way that intersects the Colorado River Aqueduct (“CRA”), one of Southern California’s primary sources of drinking water in Southern California. 

The Southern Pipeline is designed to convey up to 75,000 acre-feet per year in either direction. 

To utilize the Northern Pipeline for water conveyance related to the Water Project or to construct and operate the Southern Pipeline in coordination with existing water conveyance facilities, we must complete additional permitting and regulatory processes.

We expect to complete any necessary permitting in coordination with any contract to use the facility.

Our agricultural operations provide the Company’s current principal source of revenue, although our working capital needs are not fully supported by our agricultural lease and farming returns at this time.

We believe that the ultimate implementation of the Water Project will provide a significant source of future cash flow for the business and our stockholders.

We presently rely upon debt and equity financing to support our working capital needs and development of the Water Project (see “Liquidity and Capital Resources”, below).

Our current and future operations also include activities that further our commitments to sustainable stewardship of our land and water resources, good governance and corporate social responsibility.

We believe these commitments are important investments that will assist in maintenance of sustained stockholder value. 

Results of Operations

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We have not received significant revenues from our water resource and real estate development activities to date.

Our revenues have been limited to rental income from the FVF Lease (see “Sustainable Agricultural Development”, above).

Our revenues have been limited to rental income from our agricultural leases (see “Sustainable Agricultural Development”, above).

As a result, we have historically incurred a net loss from operations.

The net loss totaled $31.2 million for the year ended December 31, 2021, compared with a net loss of $37.8 million for the year ended December 31, 2020.

The higher loss in 2020 was primarily due to a loss on early extinguishment of debt in the amount of $12.4 million, which was a non-cash charge, reflecting the excess of the fair value of the new preferred stock issued over the historical book value of the related convertible debt retire pursuant to Conversion and Exchange Agreements (see Note 6 to the Condensed Consolidated Financial Statements, “Long-Term Debt”).

If the related convertible debt had been recorded at fair value and market to market over the term of the debt, the excess of the fair value of the new preferred stock issued over the value of the related convertible debt would not have been significant.

The higher 2020 loss also reflects a higher loss on equity-method investments, partially offset by a higher interest expense recorded in 2019.

The higher loss in 2020 was primarily due to a loss on early extinguishment of debt in the amount of $12.4 million, which was a non-cash charge, reflecting the excess of the fair value of the new preferred stock issued over the historical book value of the related convertible debt retire pursuant to certain conversion and exchange Agreements entered into in March 2020, offset by higher compensation costs in 2021 related to stock-based non-cash bonus awards to employees.

Our primary expenses are our ongoing overhead costs associated with the development of the Water Project (i.e., general and administrative expense) and our interest expense.

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General and administrative expenses during the year ended December 31, 2021, exclusive of stock-based compensation costs, totaled $12.9 million compared with $9.8 million for the year ended December 31, 2020.

The decrease in general and administrative expenses in 2020 primarily relates to fewer legal and professional fees related to the Water Project.

The higher general and administrative expenses in 2021 primarily related to legal fees and technical studies related to putting the Northern Pipeline into use.

Compensation costs from stock and option awards for the year ended December 31, 2021, totaled $4.7 million compared with $2.1 million for the year ended December 31, 2020.

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Amortization of deferred loan costs

The decrease of interest on outstanding debt is primarily due to a lower long-term debt balance following the exchange and conversion of our Convertible Senior Notes in March 2020.

See Note 6 to the Consolidated Financial Statements, “Long-Term Debt".

Other Income.

Other income totaled $33 thousand during the year ended December 31, 2020, and $226 thousand for the year ended December 31, 2019.

Other income totaled $0 during the year ended December 31, 2021, and $33 thousand for the year ended December 31, 2020.

Loss from Equity-Method Investments.

Loss from equity-method investments related to our 50% ownership in the SoCal Hemp JV LLC totaled $2.2 million during the year ended December 31, 2020, compared to $490 thousand during the year ended December 31, 2019. 

The losses resulted from higher growing costs and lower yields in this initial startup year of commercial hemp 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.

Loss from equity-method investments related to our 50% ownership in the SoCal Hemp JV LLC totaled $942 thousand during the year ended December 31, 2021, compared to $2.2 million during the year ended December 31, 2020 resulting from a reduction in acres planted in 2021 to 50 acres from 242 acres in 2020 and continued market price pressures on hemp biomass in 2021.

Liquidity and Capital Resources

(a)          

Current Financing Arrangements

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Historically, we have addressed these needs primarily through secured debt financing arrangements and private equity placements.

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. 

During the first quarter of fiscal year 2021, the Company has issued an additional 1,368,362 shares of common stock for gross proceeds of $15.2 million and net proceeds of $14.9 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 in 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, we entered into a $60 million credit agreement with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced our then existing $45 million senior secured mortgage debt and provided $15 million of new senior debt to fund immediate construction related expenditures (“Senior Secured Debt”).

Additionally, we entered into an agreement with Apollo that allows us to extend the maturity of the Apollo debt from its current maturity of May 2021 to November 2022 at our option (see Note 14 to the Consolidated Financial Statements, “Subsequent Events”). 

At December 31, 2020, we were in compliance with our debt covenants.

In July 2020, we entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $30 million from time to time in an “at-the-market”

offering (the “July 2020 ATM Offering”) for further development of our land and agricultural assets, and for working capital purposes. 

The Company completed the offering in July 2021, having issued a total of 2,748,339 shares of common stock in the July 2020 ATM Offering for gross proceeds of $30 million and aggregate net proceeds of approximately 29.2 million. 

On June 7, 2021, we completed the sale and issuance of 1,219,512 shares of the Company’s common stock to certain institutional investors under a placement agent agreement with B.

Riley Securities, Inc.

(“BRS”).

The shares of common stock were sold at a purchase price of $12.30 per share, for aggregate gross proceeds of $15 million and aggregate net proceeds of approximately $14.1 million.

We used the net proceeds from this offering, together with cash on hand, to fund the $19 million payment made on June 30, 2021 to complete the acquisition of a 124-mile extension of the Northern Pipeline.

On June 29, 2021, we entered into an Underwriting Agreement with BRS as representative of the several underwriters named therein, to issue and sell an aggregate of 2,000,000 depositary shares (the “Depositary Shares”), as well as up to 300,000 Depositary Shares that may be sold pursuant to the exercise of an option to purchase additional Depositary Shares, each representing 1/1000 th of a share of Series A Preferred Stock (“Depositary Share Offering”).

The liquidation preference of each of each share of Series A Preferred Stock is $25,000 ($25.00 per Depositary Share).

The Depositary Share Offering was completed on July 2, 2021 for net proceeds of approximately $54 million.

On July 2, 2021, we entered into a $50 million new credit agreement (“Credit Agreement”) (see Note 6 to the Condensed Consolidated Financial Statements –

“Long-Term Debt”).

The proceeds of the Credit Agreement, together with the proceeds from the Depositary Share Offering, were used to (a) to repay all our outstanding obligations under the Prior Senior Secured Debt in the amount of approximately $77.5 million (b) to deposit approximately $10.2 million into a segregated account, representing an amount sufficient to pre-fund eight quarterly dividend payments on the Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering, and (c) to pay transaction related expenses.

The remaining proceeds will be used for working capital needs and for general corporate purposes.

On March 23, 2022, the Company completed the sale and issuance of 6,857,140 shares of the Company’s common stock to certain institutional and individual investors in a registered direct offering.

The shares of common stock were sold at a purchase price of $1.75 per share, for aggregate gross proceeds of $12 million and aggregate net proceeds of approximately $11.8 million.

The proceeds will be used for working capital needs and for general corporate purposes. 

See Note 14 to the Consolidated Financial Statements –

“Subsequent Events”.

Limitations on our liquidity and ability to raise capital may adversely affect us.

Sufficient liquidity is critical to meet our resource development activities.

As discussed further in “Outlook”

below, we may not have adequate resources on hand to complete the acquisition of the 124-mile extension of our Northern Pipeline, which requires a $19 million payment prior to June 30, 2021. 

To the extent additional capital is required, we may increase liquidity through a variety of means, including equity or debt placements, through the lease, sale or other disposition of assets or reductions in operating costs.

If additional capital is required, no assurances can be given as to the availability and terms of any new financing.

As we continue to actively pursue our business strategy, additional financing will continue to be required (see “Outlook”, below).  The covenants in the term debt do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any equity financing.  We do not expect the loan covenants to materially limit our ability to finance our water development activities.

As we continue to actively pursue our business strategy, additional financing will continue to be required (see “Outlook”, below).  The covenants in the Credit Agreement do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any common equity financing.  We do not expect the loan covenants to materially limit our ability to finance our water and agricultural development activities.

Cash Used for Operating Activities .

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Cash used for investing activities in the year ended December 31, 2021, was $23.5 million, compared with $9.8 million for the year ended December 31, 2020.

The 2020 period included additions to our interest in SoCal Hemp JV LLC, investments in the Northern Pipeline, well development and professional water quality and structural testing of a five-mile segment of pipeline.

The cash used in the 2021 period primarily related to the Northern Pipeline acquisition totaling $19 million and development costs for the initial planting of 760 acres of alfalfa.

The 2020 period included additions to our interests in SoCal Hemp JV LLC, well development costs for three new wells and professional water quality and structural testing of a five-mile segment of pipeline.

Cash Provided by Financing Activities .

Cash provided by financing activities totaled $51.2 million for the year ended December 31, 2021, compared with cash provided by financing activities of $14.9 million for the year ended December 31, 2020.

Proceeds from financing activities for both periods reported are primarily related to the issuance of shares under at-the-market offerings.

Proceeds from financing activities for the 2021 period are related to the completion of the Depositary Share Offering, issuance of shares under at-the market and direct offerings and refinancing of the Company’s Prior Senior Secured Debt.

Proceeds from financing activities for the 2020 period are related to the issuance of shares under at-the-market offerings.

Short-Term Outlook.

In March 2020, we entered into an agreement that allows us to extend the contractual May 2021 maturity of our Senior Secured Debt of approximately $78.5 million as of December 31, 2020 until May 2022 at our option. 

Additionally, on March 24, 2021, we entered into an agreement to further extend, in our sole discretion, the maturity date of our Senior Secured Debt to November 2022 (see Note 14 to the Consolidated Financial Statements, “Subsequent Events”).

Accordingly, we currently have no short-term portion of long-term debt obligations coming due subject to the exercise of this option which is entirely in the Company’s control.

However, in order to complete our acquisition of an additional 124-mile extension of our Northern Pipeline, we will require a further $19 million payment that will be due June 30, 2021. 

If the acquisition of the 124-mile segment is not completed, then our Northern Pipeline opportunities will be limited to the 96-mile segment we already own.

As we require additional working capital to fund operations, we expect to continue our historical practice of structuring our financing arrangements to match the anticipated needs of our development activities (see “Long-Term Outlook”, below).

offering (the “July 2020 ATM Offering”) to provide an alternative to raise capital for the Northern Pipeline acquisition payment, for further development of our land and agricultural assets, and for working capital purposes.

During the first quarter of fiscal year 2021, the Company has issued a total of 1,368,362 shares of common stock in the July 2020 ATM Offering for gross proceeds of $15.2 million and net proceeds of $14.9 million. 

No assurances can be given, however, as to the availability or terms of any new financing.

The completion of both the Depositary Share Offering and the Credit Agreement (see Note 6 and Note 8 to the Consolidated Financial Statement –

“Long-Term Debt”

and “Common and Preferred Stock”) in July 2021, provided the Company with net cash proceeds of approximately $21 million.

In March 2022, the registered direct offering of common stock (see Note 14 to the Consolidated Financial Statements –

“Subsequent Events”) provided additional net cash proceeds of approximately $11.8 million.

These net cash proceeds, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs.

Long-Term Outlook .

In the longer term, we will need to raise additional capital to finance working capital needs, capital expenditures and any payments due under our Senior Secured Debt at maturity (see “Current Financing Arrangements”, above).

In the longer term, we will need to raise additional capital to finance working capital needs and capital expenditures (see “Current Financing Arrangements”, above).

Our future working capital needs will depend upon the specific measures we pursue in the entitlement and development of our water resources and other developments.

Future capital expenditures will depend primarily on the progress of the Water Project and further expansion of our agricultural assets.

Future capital expenditures will depend on the progress of the Water Project and further expansion of our agricultural assets.

We are evaluating the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis.

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Useful lives are based on management’s estimates of the period over which the assets will generate revenue.

(2) Valuation of Long-Lived Assets.

The Company assesses long-lived assets 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.

(2) Valuation of Goodwill and Long-Lived Assets.

The Company assesses long-lived assets 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 impairment is measured by using the projected discounted cash-flow method.

No impairment charge was recorded during the current fiscal year.

(3) Accounting for Debt and Equity Instruments.  

The Company performs an annual impairment test to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). 

In performing the impairment test, we have the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative assessment for goodwill impairment. 

If the qualitative assessment indicates that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value, we perform a quantitative assessment.

This impairment assessment is performed at least annually in the fourth quarter. 

An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit. 

In our annual impairment analysis for the fourth quarter 2021, the goodwill was evaluated utilizing a qualitative assessment. 

Based on this assessment, we determined that the fair value of the reporting unit was more-likely-than-not greater than its respective carrying value;

therefore, no impairment charge was recorded during the current fiscal year.

(3) Accounting for Debt and Equity Instruments .

Amendments and changes to debt and equity instruments are analyzed for correct accounting application based upon our financial condition and the changes in the debt or equity instrument features and terms. 

Accounting guidance used in the analysis includes ASC 470-60 Troubled Debt Restructuring, ASC 470-50 Modifications and Extinguishments and ASC 470-20 Accounting for Debt with Conversion or Other Options.

In March 2020, the Company entered into conversion and exchange agreements regarding its convertible notes as well as an amendment to its senior secured debt which included an option for the Company to extend the maturity date and a modification to existing warrants (see “Note 6 –

Long Term Debt”). 

Pursuant to applicable guidance, Series 1 Preferred Stock issued in the exchange was recorded at fair value, using the option-pricing model. 

A loss of $12.4 million was recorded representing the excess of fair value of the Series 1 Preferred Stock over the historical book value of the related Convertible Notes. 

The warrant modification included both a repricing of warrants and extension of their expiration date. 

Pursuant to applicable guidance, the Company recorded a warrant liability based upon fair value using the option-pricing model.  The fair value of the warrant liability is remeasured each reporting period 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.

On July 2 2021 (the “Original Issue Date”), the Company entered into a new $50 million senior secured credit agreement with lenders party thereto from time to time (“Lenders”) and BRS, as administrative agent for the Lenders (“Current Senior Secured Debt”) (see Note 2 to the Consolidated Financial Statements –

“Long-Term Debt”). 

In connection with the issuance of the Current Senior Secured Debt, on the Original Issue Date the Company issued to the Lenders two warrants (“A Warrants”

and “B Warrants”), each granting an option to purchase 500,000 shares of our common stock (collectively, the “Warrants”).

As a result of the issuance of the Warrants, the Company recorded additional paid-in capital in the amount of $1.9 million which was the fair value of the Warrants on the issuance date. 

In addition, the fair value of the Warrants was recorded as debt discount and is being amortized over the term of the Current Senior Secured Debt. 

(4) Liquidity.

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See Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies”.

Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements at this time.

Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Reg.

240.12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item.

Financial Statements and Supplementary Data

The information required by this item is submitted in response to Part IV below.

See the Index to Consolidated Financial Statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity