What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-30 compared with 2022-03-29 · 105 added, 96 removed, 76 unchanged (73% of the section changed)

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

Our common stock is currently traded on The NASDAQ Global Market ("NASDAQ") under the symbol "CDZI." The following table reflects actual sales transactions for the dates that we were trading on NASDAQ, as reported by NASDAQ.

Quarter Ended

On March 24, 2022, the high, low and last sales prices for the shares were $2.30, $2.13, and $2.15, respectively.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

Our common stock is currently traded on The NASDAQ Global Market ("NASDAQ") under the symbol "CDZI."

As of March 24, 2023, the number of stockholders of record of our common stock was 60.

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. 

Dividends are 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, 2022, 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.

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 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 –

We are a water solutions provider dedicated to delivering clean, reliable, and affordable water for people through a variety of innovative water supply, storage, conveyance and treatment projects.

We are advancing human access to clean water with our unique combination of land, water, infrastructure and technology assets, cutting-edge innovation, and industry-leading standards of environmental stewardship.

We own approximately 46,000 acres of land with access to 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 land holdings with vested water rights were primarily assembled by our founders in the early 1980s, relying on NASA imagery that identified a unique desert aquifer system at the base of a vast Southern California watershed. 

This watershed underlying our property in the Cadiz Valley (“Cadiz Ranch”) presently holds 17-34 million acre-feet of groundwater in storage –

comparable in size to the largest reservoir in the United States, Lake Mead.

The aquifer system is part of a closed-basin watershed in which all water flows downgradient to desert playas where it evaporates at the surface forming what are known as “desert dry lakes”.

Water Supply –

We own vested water rights to withdraw 2.5 million acre-feet of groundwater to support farming and off property uses.

Because all water in the aquifer system will eventually be lost to evaporation, surplus water that is captured and withdrawn before it evaporates is a new water supply known as “conserved”

We have completed extensive environmental review in accordance with local, state and federal laws authorizing the management of the groundwater aquifer underlying the Cadiz Ranch to conserve an average of 50,000 acre-feet of water per year for 50 years for use in communities. 

Groundwater Storage - The alluvium aquifer that lies beneath the Cadiz Property is also large enough for conjunctive use as a water “banking”

facility, capable of storing an additional 1 million acre-feet of imported surplus water for delivery during drought periods.

Pipeline Conveyance –

We also own a 30”

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

The pipeline, originally constructed to transport fossil fuels, is idle, and we are presently preparing to convert the pipeline to transport water.

The route of the Northern Pipeline intersects three water conveyance facilities that deliver water to Southern California, the California Aqueduct, the Los Angeles Aqueduct, and the Mojave River Pipeline.

The capacity of the Northern Pipeline for water conveyance is 25,000 (“AFY”).

We are currently in discussions with multiple public water agencies to enter into agreements whereby project participating agencies would finance and operate the Northern Pipeline and lease 25,000 AFY of annual water supply from us.

In accordance with such potential agreements, we expect that we will contribute the Northern Pipeline and an annual supply of 25,000 AFY of water from us into a mutual water company to be owned jointly by the parties.  In such event, we expect that a JPA comprised of participating agencies will be able to purchase, for a 40-year term (take or pay), 25,000 AFY of water at our wellhead at an agreed upon market price estimated to start at approximately $850/AFY and subject to annual adjustment.

Through a JPA, the public water agencies would fund capital costs for conversion of the pipeline from gas to water, construction of pumping stations and appurtenant facilities, and would be able to seek infrastructure funding and grants to achieve their lowest possible cost for delivered water.

Any contracts and off take facility construction will be subject to standard environmental review and a project level permitting process.

We expect that similar agreements will be negotiated and entered into for water supplies and storage delivered via the Southern Pipeline. 

Treatment - In the fourth quarter of 2022, we completed the acquisition of the assets of ATEC Systems, Inc.

into ATEC Water Systems, LLC (“ATEC”), which provides innovative water filtration solutions for impaired or contaminated groundwater sources. 

ATEC’s specialized filtration media provide cost-effective, high-rate of removal for common groundwater impairments and contaminants that pose health risks in drinking water including iron, manganese, arsenic, Chromium-6, nitrates, and other constituents of concern. 

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).

We believe that our water supply, storage, pipeline conveyance and treatment solutions 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 our water solutions. 

In February 2023, we completed a direct offering for net proceeds of $38 million led by our largest equity shareholders to fund capital expenditures to accelerate the development of water supply, storage and conveyance infrastructure, reduce our outstanding debt from $50 million to $35 million and provide working capital to the Company (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

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

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 our agricultural leases (see “Sustainable Agricultural Development”, above).

We have not received significant revenues from our water supply, storage, treatment or conveyance assets to date.

Our revenues have been limited to rental income from our agricultural leases and from sales from our alfalfa plantings beginning in 2022.

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

The net loss totaled $24.8 million for the year ended December 31, 2022, compared with a net loss of $31.2 million for the year ended December 31, 2021.

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.

The higher loss in 2021 was primarily due to stock-based non-cash bonus awards to employees and higher interest expense in that period offset by gross margin losses from our alfalfa plantings during 2022.  

Our primary expenses are our ongoing overhead costs associated with the development of our water supply, storage or conveyance assets (i.e., general and administrative expense) and our interest expense.

We will continue to incur non-cash expense in connection with our management and director equity incentive compensation plans.

Revenue totaled $564 thousand during the year ended December 31, 2021, compared to $541 thousand during the year ended December 31, 2020.

The revenue is primarily related to rental income from our agricultural leases (see “Sustainable Agricultural Development”, above).

Revenue totaled $1.5 million during the year ended December 31, 2022, compared to $564 thousand during the year ended December 31, 2021.

The revenue is primarily related to rental income from our agricultural leases and our alfalfa crop harvest.

Cost of Sales .

Cost of sales totaled $2.1 million during the year ended December 31, 2022, compared to $0 cost of sales recorded during the year ended December 31, 2021.

In June 2021, the Company converted 610 acres of agricultural development to alfalfa commercial production.

The 2022 expense was primary due to non-recurring start-up costs and higher than expected fuel costs for the initial short year of commercial production.

General and Administrative Expenses .

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

General and administrative expenses during the year ended December 31, 2022, exclusive of stock-based compensation costs, totaled $13.5 million compared with $12.9 million for the year ended December 31, 2021.

Compensation costs from stock and option awards for the year ended December 31, 2022, totaled $1.9 million compared with $4.7 million for the year ended December 31, 2021.

The higher 2021 expense was primarily due to stock-based non-cash bonus awards to employees.

Depreciation.

Depreciation expense totaled $423 thousand for the year ended December 31, 2021, and $381 thousand for the year ended December 31, 2020.

Interest Expense .

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Amortization of deferred loan costs

Other Income.

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 $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.

Gain (Loss) from Equity-Method Investments .

Gain from equity-method investments related to our 50% ownership in the SoCal Hemp JV LLC totaled $40 thousand during the year ended December 31, 2022, compared to a $942 thousand loss during the year ended December 31, 2021. 

No plantings of hemp were made by the Joint Venture during 2022 due to continued poor market conditions for hemp prices which resulted in the Joint Venture being dissolved on December 30, 2022. 

As a result of the dissolution, we recognized a gain of $211 thousand. 

Liquidity and Capital Resources

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Current Financing Arrangements

As we have not received significant revenues from our development activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence.

As we have not received significant revenues from our development or treatment activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence.

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

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.

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

Riley Securities, Inc.

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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 –

On July 2, 2021, we entered into a $50 million new credit agreement (“Credit Agreement”) (see Note 7 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 $77.6 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 remaining proceeds were used for working capital needs and for general corporate purposes.

On March 23, 2022, we completed the sale and issuance of 6,857,140 shares of our 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”.

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

On November 14, 2022, we completed the sale and issuance of 5,000,000 shares of our common stock to certain institutional investors in a registered direct offering (“November 2022 Direct Offering”).

The shares of common stock were sold at a purchase price of $2.00 per share, for aggregate gross proceeds of $10 million and aggregate net proceeds of approximately $9.9 million.

On January 30, 2023, we completed the sale and issuance of 10,500,000 shares of our common stock to certain institutional investors in a registered direct offering (“January 2023 Direct Offering”).

The shares of common stock were sold at a purchase price of $3.84 per share, for aggregate gross proceeds of $40.32 million and aggregate net proceeds of approximately $38.5 million.

A portion of the net proceeds were used to repay our debt in the principal amount of $15 million, together with fees and interest required to be paid in connection with such repayment.

The remaining proceeds from the January 2023 Direct Offering, together with the remaining proceeds from the November 2022 Direct Offering will be used for capital expenditures to accelerate development of water supply, storage, conveyance and treatment assets, working capital and development of additional water resources to meet increase demand on an accelerated timetable.

On February 2, 2023, we entered into a First Amendment to Credit Agreement with BRF Finance Co., LLC and B.

Riley Securities, Inc., as administrative agent, to amend certain provisions of the Credit Agreement dated as of July 2, 2021 (“First Amended Credit Agreement), Under the First Amended Credit Agreement, the lenders will have a right to convert up to $15 million of outstanding principal, plus any PIK interest and any accrued and unpaid interest (the “Convertible Loan”) into shares of our common stock at a conversion price of $4.80 per share (the “Conversion Price”).

The lenders’

right to convert is conditioned upon us obtaining stockholder approval of an amendment to its certificate of incorporation to increase the number of authorized shares of the Company at its next annual meeting of stockholders, expected to be held in June 2023 (“Stockholder Approval”).

In addition, prior to the maturity of the Credit Agreement, we will have the right to require that the lenders convert the outstanding principal amount, plus any PIK Interest and accrued and unpaid interest, of the Convertible Loan if the following conditions are met:

(i) the average VWAP of the Company’s common stock on The Nasdaq Stock Market, or such other national securities exchange on which the shares of common stock are listed for trading, over 30 consecutive trading dates exceeds 115% of the then Conversion Price, (ii) a registration statement registering the resale of the shares issuable upon conversion of the Convertible Loan has been declared effective by the Securities and Exchange Commission, (iii) the Stockholder Approval has been obtained, and (iv) there is no event of default under certain provisions of the Credit Agreement.

Under the First Amended Credit Agreement, the maturity date of the Credit Agreement has been extended from July 2, 2024 to June 30, 2025.

Upon obtaining the Stock Approval and so long as there is no event of default under certain provisions of the Credit Agreement, the maturity date for the Credit Agreement will automatically be extended to June 30, 2026.

The annual interest rate will remain unchanged at 7.00%.

Interest on $20 million of the remaining principal amount will be paid in cash.

Interest on the $15 million principal amount of the Convertible Loan will be paid in kind on a quarterly basis by addition such amount to the outstanding principal amount of the outstanding Convertible Loan.

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

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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 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.

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, 2022, was $4.1 million, compared with $23.5 million for the year ended December 31, 2021.

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.

The cash used in the 2022 period primarily related to development costs for the initial planting of 760 acres of alfalfa. 

The cash used in the 2021 period primarily related to the Northern Pipeline acquisition totaling $19 million and additions to well development and water quality and structural testing of a five-mile segment of pipeline.

Cash Provided by Financing Activities .

Cash provided by financing activities totaled $16.6 million for the year ended December 31, 2022, compared with cash provided by financing activities of $15.2 million for the year ended December 31, 2021.

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.

Proceeds from financing activities for the 2022 period are related to the issuance of shares under direct 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.

(b)          

Short-Term Outlook.

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.

The November 2022 Direct Offering and the January 2023 Direct Offering provided net cash proceeds of approximately $48.4 million.

A portion of these net proceeds were used to repay our debt in the principal amount of $15 million, together with fees and interest required to be paid in connection with such repayment.

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

The Company's agricultural & farming and water treatment operations will be funded using existing capital and cash profits generated from operations.

Long-Term Outlook .

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Sufficient liquidity is critical to meet our resource development activities.

Critical Accounting Policies

(c)          

Critical Accounting Estimates

As discussed in Note 2 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies”, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements and related footnotes.

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However, application of these policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

Management has concluded that the following critical accounting policies described below affect the most significant judgments and estimates used in the preparation of the consolidated financial statements.

(1) Intangible and Other Long-Lived Assets .

Property, plant and equipment, intangible and certain other long-lived assets are depreciated or amortized over their useful lives.

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

(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.

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.

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. 

Management has concluded that the following critical accounting policy described below affect the most significant judgments and estimates used in the preparation of the consolidated financial statements.

(1) Liquidity.

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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.

In the preparation of this liquidity assessment, management applies judgement to estimate the significant assumptions related to the projected cash flows of the Company including the following:

(i) projected cash outflows, (ii) projected cash inflows, (iii) categorization of expenditures as discretionary versus non-discretionary, and (iv) the ability to raise capital.

The cash flow projections are based on known or planned cash requirements for operating costs as well as planned costs for project development.

Limitations on the Company’s liquidity and ability to raise capital may adversely affect it.

Sufficient liquidity is critical to meet the Company’s 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.

(2) Business Combinations The results of acquired businesses are included in our Consolidated Financial Statements from their acquisition date.

Assets and liabilities of an acquired business are recorded at their estimated fair values on the acquisition date.

We engage third-party valuation specialists to assist us in determining these fair values as necessary.

Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.

The allocation of purchase price, including contingent consideration arrangements, requires management to make significant estimates and assumptions.

While we believe our assumptions and estimates are reasonable, they are inherently uncertain and based in part on experience, market conditions, projections of future performance and information obtained from management of the acquired companies.

Long-Lived Assets .

Property, plant and equipment, and water program assets are depreciated or amortized over their useful lives.

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

Assets are placed into service when they are in a condition or state of readiness for a specifically assigned function on a regular and ongoing basis. 

(d)          

New Accounting Pronouncements

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

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.

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