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Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-29 · 338 added, 1036 removed, 669 unchanged (67% of the section changed)

1 unchanged sentence

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.

5 unchanged sentences

Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

Management’s assessment of and conclusions on the effectiveness of our internal control over financial reporting did not include the internal controls of ATEC Water Systems, LLC, which included assets acquired from ATEC Systems, Inc. in November 2022, which is included in our 2022 consolidated financial statements and constituted 1.3% of total assets as of December 31, 2022 and 0.0% of net sales for the year then ended. 

This exclusion is in accordance with the guidance issued by the U.S.

Securities and Exchange Commission that allows companies to exclude acquisitions from management’s report on internal control over financial reporting for the first year after acquisition.

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, 2021, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, excluding the acquisition of the assets of ATEC Systems, Inc.

into ATEC Water Systems, LLC, there was no change identified in the Company's internal control over financial reporting that occurred during the last fiscal quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.

Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Other Information

2 unchanged sentences

Directors, Executive Officers and Corporate Governance

Our Board of Directors currently consists of eight directors.

Set forth below is certain biographical information, the present occupation and the business experience for the past five years or more of each director.

Position with Cadiz

 Chair of the Board 

Keith Brackpool

Director 

Maria Echaveste

Geoffrey Grant

Director, President and Chief Executive Officer

Carolyn Webb de Macías

Kennedy was appointed to serve as Chair of the Board, an executive officer role, effective February 4, 2022, replacing Mr.

Brackpool in that position.

Brackpool continues to serve on the Board in a non-executive role.

Executive Officers not also on the Board of Directors:

 Position with Cadiz

Stanley Speer

 Chief Financial Officer and Secretary

Director Biographical Information and Highlights

Chair of the Board of Directors

Director Since:

Kennedy  was appointed a director of the Company on March 24, 2021.

Kennedy is an accomplished policymaker and strategist with a distinguished career as founder and chief executive of a renewable energy company, top advisor to two California Governors, former Commissioner of the California Public Utilities Commission, and advisor to high-profile governing boards in the corporate, regulatory, government, and non-profit sectors.

She currently serves as a Senior Executive at Lyft, Inc.

Previously, Ms.

Kennedy founded California renewable energy start-up Advanced Microgrid Solutions, serving as chief executive officer and board chair from 2013-2020 until it was acquired by Siemens/AES in 2020.

Prior to entering the private sector, Ms.

Kennedy served for two decades at the highest levels of government, including chief of staff to Governor Arnold Schwarzenegger (2006-2011) and cabinet secretary and deputy chief of staff to Governor Gray Davis (1999-2003).

From 2003 to 2006, Ms.

Kennedy served as Commissioner of the California Public Utilities Commission (CPUC), which regulates the state's investor-owned electricity, gas, telecommunications, and water utilities.

In this role, she oversaw the CPUC’s efforts to ensure water utilities deliver clean, safe, and reliable water to their customers at reasonable rates.

In addition to her service on the CPUC, Ms.

Kennedy was confirmed by the California Senate to serve on the California Bay-Delta Authority, the statewide body responsible for overseeing one of the largest water projects in the world — the $8 billion,10-year restoration of the San Francisco Bay Delta ecosystem.

In this role, Ms.

Kennedy was responsible for agreements among environmentalists, agricultural interests, and urban water users for multi-billion-dollar co-investments in water storage facilities, water use efficiency, and restoration of impaired waterways and fisheries.

Kennedy holds a B.A.

in Management from Saint Mary’s College of California.

Skills & Qualifications

Kennedy’s vast public service experience, including as the Commissioner of the California Public Utilities Commission, and experience founding and leading her own renewable energy company enable her to provide key leadership, public policy, strategy, and industry expertise to the Board.

Cadiz Board Committees

Keith Brackpool

Director, Former Chair of the Board of Directors

Director Since:

Keith Brackpool  is a co-founder of the Company.

Brackpool served as Chair of the Board from 2001 to 2022.

Brackpool was first appointed to the Board of Directors in 1986 and previously served as CEO from 1991 – 2013.

In addition to his role with Cadiz, Mr.

Brackpool is currently a principal of 1334 Partners L.P., a partnership that owns and develops a portfolio of destination hospitality properties in California.  Mr.

Brackpool has extensive public policy experience, particularly in California, and served as Co-Chair of the California Commission on Building for the 21st Century, a diverse panel that developed long-term policy proposals to meet the state’s future water, housing, technology and transportation needs from 2001 – 2002.   Mr.

Brackpool also served as Chair of the California Horse Racing Board from 2010 – 2013, after which he went on to serve as the Chair of west coast operations for The Stronach Group, an entertainment and real estate company in North America focused on Thoroughbred horse racing and pari-mutual wagering from 2013 – 2018. Earlier in his career, Mr.

Brackpool served as director and chief executive officer of North American Operations for Albert Fisher Group, a multi-billion dollar food company. 

Skills & Qualifications

Brackpool’s experience as a co-founder and former CEO of the Company, in addition to his extensive public and water policy experience, enables him to provide key leadership, industry, and policy perspectives to the Board.

Cadiz Board Committees

Director Since:

Courter  was appointed a director of the Company effective October 9, 2008.  Mr.

Courter was originally appointed to the Board as a designee of LC Capital Master Fund for a term expiring at the 2009 annual meeting of stockholders.  Mr.

Courter is currently on the faculty of the McCombs School of Business, University of Texas at Austin where he teaches MBA courses in strategy and new venture creation.   He also serves as a director of Upland Software, a business process software company.  Mr.

Courter has over 30 years of experience in management positions in the technology/telecommunications industry, serving most recently as CEO of Broadwing Communications from 2006 to 2007 and CEO of NEON Communications from 2000 to 2006. Mr.

Courter has also previously served as a director on several corporate boards, including NEON Communications from 2001-2006, Broadwing Communications from 2006-2007, and GLOBIX from 2006-2007.

Courter began his career as an officer in the U.S.

Army and has also held various executive positions, both in the U.S.

and Europe, at several major corporations including KPMG, IBM and Sprint.

Skills & Qualifications

Courter’s experience in the technology industry and his extensive executive and leadership experience enable him to provide valuable leadership, strategy, finance, and risk management insights to the Board.

Cadiz Board Committees

●         Audit & Risk (Chair)

●         Corporate Governance & Nominating

Maria Echaveste

Director Since:

Maria Echaveste  was elected as a director at the Company’s 2019 Annual Meeting.

Echaveste is a scholar with a distinguished career working as a community leader, public policy advisor, lecturer, senior White House official, and attorney.  She is presently President and CEO of the Opportunity Institute, a non-profit working to increase economic and social mobility focused on equity for the most vulnerable communities.  Ms.

Echaveste has been affiliated with UC Berkeley in various capacities since 2004 including:

lecturing at the School of Law and in the undergraduate division on immigration and education;

serving as program and policy director of the Law School’s Chief Justice Earl Warren Institute on Law and Social Policy from 2006 -2012;

serving as a Senior Fellow at UC Berkeley’s Center for Latin American Studies since 2008;

and as a Visiting Scholar with the Berkeley Food Institute from 2015-2016.

 Previously, from 1998 to 2001 Ms.

Echaveste served as Assistant to the President and Deputy Chief of Staff for President Bill Clinton focused on issues relating to immigration, civil rights, education, finance, Mexico and Latin America.  From 1993 to 1997 she served as Administrator of the Wage and Hour Division at the US Department of Labor.

In 2009, then-Secretary of State Hillary Clinton appointed Ms.

Echaveste as a special representative to Bolivia.

 From 2015-2017, Ms.

Echaveste served as vice-chair of the California International Trade and Investment Advisory Committee, an appointment by Governor Brown.

Echaveste presently serves on the board of directors of the Level Playing Field Institute, Mi Familia Vota and UCSF Benioff Children’s Hospitals.  

Skills & Qualifications

Echaveste’s accomplished career in public service and extensive community leadership enables her to provide valuable public policy and stakeholder insights to the Board.

Cadiz Board Committees

●         Corporate Governance & Nominating (Chair)

●         Equity, Sustainability & Environmental Justice

Geoffrey Grant

Director Since:

Geoffrey Grant  was appointed a director of the Company effective January 22, 2007.

Grant is presently a private investor.

Grant retired from Grant Capital Partners, an asset management firm founded by Mr.

Grant in 2008, where he was the Managing Partner and the Chief Investment Officer.  Prior to founding Grant Capital Partners, Mr.

Grant was a Managing Partner and the Chief Investment Officer of Peloton Partners LLP, a global asset management firm.  Mr.

Grant co-founded Peloton Partners LLP in 2005.  Mr.

Grant’s career in financial markets spans 35 years beginning at Morgan Stanley in 1982 in foreign exchange options and currency derivatives, then with Goldman Sachs from 1989 to 2004 where he ultimately served as Head of Global Foreign Exchange and Co-head of the Proprietary Trading Group in London.

Skills & Qualifications

Grant’s experience leading several asset management firms enables him to provide valuable leadership, finance, and investment perspectives to the Board.

Cadiz Board Committees

●         Compensation

●         Audit & Risk

Winston Hickox

Lead Independent Director

Director Since:

Winston Hickox  was appointed a director of the Company in October 2006.  Mr.

Hickox is currently a partner at the public policy consulting firm California Strategies, a position he has held since 2006, Mr.

Hickox also currently serves as a Member of the Strategic Advisory Group of Paladin Capital Group.  Previously, from 2007 until 2012, Mr.

Hickox chaired the FTSE Environmental Markets Committee responsible for bi-annual reset of the FTSE Environmental Markets Index Series.

 From 2004 – 2006, Mr.

Hickox served as Senior Portfolio Manager with the California Public Employees’ Retirement System (CalPERS), designing its environmentally-oriented impact investment initiatives for the fund’s now $477.3 billion investment portfolio.  Prior to CalPers, from 1999 – 2003, Mr.

Hickox served as Secretary of the California Environmental Protection Agency (CalEPA) and a member of the Governor’s cabinet.   Earlier in his career, Mr.

Hickox’s additional private sector experience includes head of Portfolio Management, Managing Director and Partner at Lasalle Investment Management from 1987 to 1998, where he managed a $2B real estate portfolio, and President of his own securities brokerage firm, the Hickox Financial Corporation.

  Mr.

Hickox has also served on numerous corporate boards, including Thomas Properties Group, a publicly traded full service real estate investment firm, and GRIDiant Corporation, a privately held corporation in the energy technology sector.  Mr.

Hickox’s prior government service includes the Board of the $12.6 billion Sacramento County Employees’ Retirement System (SCERS) from 1998 – 2012, Chair of the Market Advisory Committee, which helped prepare for the implementation of AB 32 California’s sweeping effort to address climate change, and seven years as a Special Assistant to the Governor for Environmental Affairs as well as a Deputy Secretary for Environmental Affairs.  From April 1997 to January 1999, Hickox also served as one of the California Assembly Speaker’s appointees to the California Coastal Commission.  Mr.

Hickox holds an MBA from Golden Gate University and a BS from California State University.

Skills & Qualifications

Hickox’s vast investment experience and roles with the State of California and other industry groups enable him to provide valuable leadership, public policy, investment, finance, and industry expertise to the Board.

Cadiz Board Committees

●         Compensation (Chair)

●         Audit & Risk

●         Equity, Sustainability & Environmental Justice

Chief Executive Officer (CEO)

Director Since:

Slater  is the Company’s President and Chief Executive Officer, appointed to the role of President in April 2011 and Chief Executive Officer effective February 1, 2013.  In addition, Mr.

Slater has been a member of the Company’s Board of Directors since February 2012.  Mr.

Slater is an accomplished water rights transactional attorney and litigator and, in addition to his role at the Company, is a shareholder in Brownstein Hyatt Farber Schreck LLP, the nation’s leading water law firm.  For nearly 40 years, Mr.

Slater has focused on negotiation of agreements and enacting policy related to the acquisition, distribution, and treatment of water.

He has served as lead negotiator on a number of important water transactions, including the negotiation of the largest conservation-based water transfer in U.S.

history on behalf of the San Diego County Water Authority.  Mr.

Slater serves on the Limoneira Company Board of Directors (NASDAQ:

LMNR) and sits on its Executive and Risk Committees.

Slater also has an extensive background in state, federal and international water policy and is the author of 

California Water Law and Policy , the state’s leading treatise on the subject.  He has taught water law and policy courses at University of California, Santa Barbara, Pepperdine University, and the University of Western Australia, (China) among others.

He is presently advising the nation of Tunisia on water policy.

Skills & Qualifications

Slater’s experience as the Company’s CEO and as an accomplished water rights lawyer enable him to provide the Board with valuable leadership, strategy, legal, and industry perspectives.

Cadiz Board Committees

Carolyn Webb de Mac í

Director Since:

Carolyn Webb de Mac í

as  was elected as a director at the Company’s 2019 Annual Meeting.

Carolyn Webb de Macías is a community leader with an extensive career in public policy and higher education.

Webb de Macías currently serves as Board Chair for the Partnership for Los Angeles Schools, a non-profit organization that manages 19 schools through a Memorandum Of Understanding with the Los Angeles Unified School District, and as Member of the Board of the Community Coalition of South Los Angeles, a community education and advocacy organization.

Previously Ms.

Webb de Macías served in the office of Elementary and Secondary Education in the US Department of Education as an appointee of President Barack Obama from 2010-2012.

From 1997 – 2008, Ms.

Webb de Macías served in various roles at the University of Southern California including adjunct faculty member in the USC Rossier School of Education, associate provost from 1997 – 2002 and vice president for external relations from 2002 – 2008.

Upon retirement from USC in 2008, Ms.

Webb de Macías was granted the title of Vice President Emeritus.

From 1991 – 1997 Ms.

Webb de Macías served as chief of staff for Los Angeles City Councilman Mark Ridley-Thomas.

Webb de Macías’ strong record of community service includes roles as founding member of the Board for the Alliance for Regional Collaboration to Heighten Educational Success (ARCHES), member of the Boards of the Los Angeles African American Women’s Public Policy Institute and the International Black Women’s Public Policy Institute, member of the Central City Association Executive Committee, and founding president of the Education Consortium of Central Los Angeles.

Webb de Macías has been honored for her work as a founding member of Young Black Scholars of Los Angeles and named a Black Woman of Achievement  by the NAACP Legal Defense and Education Fund.

Skills & Qualifications

Webb de Macías’ long history of public service and role as a community leader in Southern California enables her to provide valuable public policy expertise and California community insights to the Board.

Cadiz Board Committees

●         Compensation

●         Corporate Governance & Nominating

● 

 Equity, Sustainability & Environmental Justice (Chair)

Executive Officer Biographical Information and Highlights

Stanley Speer

Chief Financial Officer (CFO)

Stanley Speer  was appointed Chief Financial Officer (CFO) on May 5, 2020.  In addition to his role at the Company, Mr.

Speer is the principal of Speer and Associates, LLC, a consulting firm he founded in 2012 to provide practical operational, financial and strategic financial solutions to public and private businesses.  Mr.

Speer is also a member of the Board of Directors of Sunworks (NASDAQ:

SUNW) and the Chair of its Audit Committee.  Previously, Mr.

Speer was a Managing Director with Alvarez & Marsal (“A&M”), a global professional services firm specializing in advising and assisting boards of directors, investment groups, management groups and lenders in a wide range of turnaround, restructuring and reorganization situations.  Prior to joining A&M, Mr.

Speer served as Chief Financial Officer for Cadiz from 1997 to 2003 and its subsidiary Sun World International, a fully-integrated agriculture company.

Speer was a partner with Coopers & Lybrand (now PricewaterhouseCoopers), where he spent 14 years in the Los Angeles office specializing in business reorganizations.

Speer earned his bachelor’s degree in business administration from the University of Southern California.

Our Directors have extensive and diverse experience in a variety of fields relevant to the Company’s natural resources development and environmental sustainability focused goals and initiatives, including:

Webb de Mac í

Executive Experience

Agricultural Development

Real Estate Development

Environmental Stewardship

Finance and Capital Markets

Risk Management

Public Policy

Community Engagement

Corporate Governance & Sustainability

Legal & Regulatory

The Directors also have demonstrated significant leadership experience in the following roles at Cadiz or other companies or organizations:

Chief executive officer :

Brackpool, Mr.

Echaveste, Mr.

Hickox, , Ms.

Kennedy, and Mr.

Government Leaders, including high-ranking appointments in state and federal government administrations:

Brackpool, Ms.

Echaveste, Mr.

Kennedy, and Ms.

Webb de Macías, ),

Chairs of community and academic foundation boards :

Echaveste and Ms.

Webb de Macías).  

The Board believes that these combined skills and experiences are important for the success of the current Board of Directors.

The diversity of our Board members, including gender, ethnic, cultural and racial diversity as well as diversity of thought and perspectives, is also an implortant factor in determining board composition to ensure that our Board can offer management the benefit of difference experiences and viewpoints to best inform Company practices and strategic goals, and to ensure Board members reflect the diversity of the areas in which we operate. 

Board Diversity Matrix (as of March 24, 2022)

 Total number of Directors

Did not    Disclose Gender

 Directors

Number of Directors who identify in Any of the Categories Below:

 African American or Black

 Alaskan Native or Native American

 Asian (other than South Asian)

 South Asian

 Hispanic or Latinx

 Native Hawaiian or Pacific Islander

 Two or More Races or Ethnicities

 Persons with Disabilities

Corporate Governance

As enshrined in the Company’s bylaws, all business and affairs of the Company shall be managed by or under the direction of the Board of Directors.

The Board of Directors is responsible for the Company’s management and strategic direction and for establishing our broad corporate policies, including our leadership structure.

The Board also oversees and reviews key aspects of the Company’s risk management efforts and annually reviews our strategic business plans, which includes evaluating the objectives of and risks associated with these plans.

Directors of the Company hold office until the next annual meeting of stockholders or until their successors are elected and qualified.

There are no family relationships between any directors or current officers of the Company.

Officers serve at the discretion of the Board of Directors,

In addition, under its charter, the Audit Committee (acting on its behalf and concomitantly as the Risk Committee) reviews and discusses with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.

The Audit Committee is composed of Stephen E.

Courter, Geoffrey Grant and Winston H.

Hickox. The Board of Directors has determined that Mr.

Courter, a member of the Company's Audit Committee, is an "audit committee financial expert" as that term is defined in Item 407(d)(5) of Regulation S-K under the Securities Act.

Code of Ethics

The Company has adopted a code of conduct and ethics that applies to all our employees, including the CEO and CFO.

A copy of the code of conduct and ethics may be found on the Company’s website at http://www.cadizinc.com .

The code of conduct and ethics defines and prohibits conflicts of interest and provides for means for communicating potential conflicts.

It also prohibits using corporate opportunities, property, information, or position for personal gain.

The code of conduct and ethics also includes confidentiality restrictions, rules for protection and proper use of Company assets, fair dealing requirements for interactions with customers, suppliers, and competitors and requirements for compliance with applicable law, including insider trading laws.

Any employee who becomes aware of any existing or potential violation of the code of conduct and ethics is required to report it.

Any waivers from and amendments to the code of ethics granted to directors or executive officers will be promptly disclosed on the Company’s website at http://www.cadizinc.com .

There are no waivers from the code of conduct and ethics applicable to any employee at this time.

Anti-Bribery and Anti-Corruption Policy

Pursuant to our Anti-Bribery and Anti-Corruption Policy Statement, we prohibit all of our directors, officers, employees, and consultants from acts of bribery or corruption as defined by the policy statement.

The Anti-Bribery and Anti-Corruption policy also defines conflicts of interest and requirements to minimize such conflicts.

In addition, the policy defines and prohibits facilitation payments and outlines guidelines for acceptable behavior.

Whistleblower Policy

Pursuant to our Whistleblower Policy Statement, we encourage and enable employees and others to raise serious concerns internally so that any inappropriate conduct and actions can be addressed and corrected.

It is the responsibility of all board members, officers, employees, contractors and volunteers to report concerns about violations of the Company’s code of conduct and ethics or suspected violations of law or regulations that govern the Company’s operations.

The Whistleblower policy statement includes a non-retaliation policy and reporting procedures which provides information on how to contact the Chairman of the Audit and Risk Committee directly. 

The Audit and Risk Committee oversees treatment of all complaints.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act") requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities ("reporting persons"), to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company.

Reporting persons are required by the Commissions regulations to furnish the Company with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of reports and amendments thereto on Forms 3, 4 and 5 furnished to us by reporting persons and forms that we filed on behalf of certain directors and officers, during, and with respect to, our fiscal year ended December 31, 2021, and on a review of written representations from reporting persons to us that no other reports were required to be filed for such fiscal year, all Section 16(a) filing requirements applicable to our reporting persons were satisfied in a timely manner.

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, 2022.

Executive Compensation

Compensation Discussion and Analysis

The Company’s compensation policies and practices are developed and implemented through the Compensation Committee of the Board of Directors.

It is the Committee’s responsibility to review and consider annually the performance of the Company’s named executive officers in achieving both corporate and individual goals and objectives, and to assure that the Company’s compensation policies and practices are competitive and effective in incentivizing management.

The Compensation Discussion and Analysis section provides a description of the primary elements of the Company’s fiscal year 2021 compensation program and policies for the following individuals, who are referred to throughout this proxy statement as our current and former 2021 named executive officers:

Susan Kennedy, Chair of the Board (effective February 2022)

Scott Slater, President and Chief Executive Officer

Stanley Speer, Chief Financial Officer

Keith Brackpool, Former Chair of the Board (non-executive director effective February 2022)

It is an important recommendation of the Board that the roles of Chief Executive Officer (“CEO”) and Chair of the Board be held by two different individuals.

Slater manages the day-to-day operation of the Company and the development of its projects and Ms.

Kennedy holds the essential role of advising management regarding its project development strategy as Chair of the Board.

Brackpool, one of the Company’s founders, was Chair of the Board until February 2022 and served in an executive capacity advising management in 2021.

Brackpool remains on the Board of Directors, but no longer holds an executive position.

His compensation in 2021 as chair of the Board during that calendar year is discussed further under “Elements of 2021 Compensation”, below.

Kennedy’s compensation as Chair commenced with her appointment in February 2022 and was established in accordance with the basic principles outlined below. 

In 2021, our named executive officers effectively navigated the impacts on the Company of the COVID-19 pandemic and oversaw multiple initiatives important to the long-term success of the Company, including:

Completed the final acquisition of the Company’s Northern Pipeline asset after the completion of required diligence and satisfaction of conditions precedent.

The Company had maintained an option to acquire the pipeline since 2011.

Defended in Court the federal rights-of way necessary to operate the Company’s Northern Pipeline asset for water conveyance.

Advanced discussions with water providers interested in securing water and storage from the Water Project.

Supported studies and technical work necessary for construction and operation of the Company’s Southern Pipeline Asset and conversion of the Northern Pipeline asset to water convenience.

Improved water supply infrastructure and agricultural assets at the Cadiz Ranch property, including expansion of irrigation infrastructure to support over 3,000 acres of fruit, vegetable, grain and hemp crops.

Negotiated and executed financial transactions to improve the Company’s balance sheet.

Compensation Committee activities in 2021 included:

Evaluating the performance of the Company’s executive officers;

Reviewing, analyzing and approving the total compensation and benefits of the Company’s executive officers, including cash compensation and long-term incentive compensation;

Reviewing guidelines and standards regarding the Company’s compensation practices and philosophy.

For the Company’s named executive officers, other than Mr.

Slater, the committee established compensation levels based, in part, on the recommendations of Mr.

Slater as CEO.

This section should be read in conjunction with the “Summary Compensation Table”

and related tables pertaining to the compensation earned in 2021 by the named executive officers presented in this Annual Report under the caption “Executive Compensation”.

Compensation Philosophy

The Company’s business plan and goals have historically been and continue to be linked to the development of our diverse land and water assets, including the Water Project.  The Company’s annual cash resources have historically been focused on funding the Water Project’s development process, as well as our ongoing land management initiatives.

Due to the long-term nature of developing our assets, the progress made by the Company in the development of the Water Project and the general development of our land and water resources does not generally bear a direct relationship to quarterly and annual results of operations.

It is critical to the development of our assets and the Water Project that the Company attracts and retains well-qualified executives familiar with the agriculture and water sectors as well as with infrastructure and project development.

As a result, the Company’s executive compensation programs seek to maintain a competitive annual salary structure and emphasize long-term, equity-based incentives that are connected to the ultimate implementation of our projects.

These programs strive to align the interests of the executive officers and senior management with those of the Company’s stockholders.

In doing so, the Company intentionally reduces the risk that executives will place too much focus on short-term achievements to the detriment of the long-term plans and goals of the Company.

We welcome direct stockholder feedback on our compensation programs.

Throughout the year we met, both in person, online and via telephone calls, with stockholders representing approximately 75% of shares outstanding and have taken into consideration the issues that have been expressed as being important to them regarding executive compensation.

Elements of Compensation

The Company’s compensation program has four primary components:

cash salary, performance-based cash awards, long-term incentives through equity stock awards, and benefits.

Each element of the Company’s compensation program has been specifically chosen to reward, motivate and incentivize the executives of the Company to complete the long-term development and implementation of the Water Project and our other resource development initiatives.

The Compensation Committee determines the amount for both total compensation and each compensation element through discussions with the Company’s management, consideration of benchmarking data, past performance and future corporate and individual objectives.

The four basic elements of compensation, described in further detail below, are:

Base salaries for the Company’s named executives are determined by the Compensation Committee depending on a variety of factors including the scope of their responsibilities, their leadership skills and values, their performance and length of service.  Salaries for our named executive officers are intended to create a minimum level of compensation that is competitive with other companies deemed comparable, depending on the prior experience and position of the executive.

Salaries are typically paid in cash but could also be paid with restricted stock awards.

Decisions regarding salary increases are also affected by the named executive’s current salary and the amounts paid to their peers within and outside the Company.

LONG-TERM INCENTIVES.  The primary form of incentive compensation that is offered to the Company’s executives consists of long-term incentives in the form of equity awards.

The use of such long-term incentives is intended to focus and align goals of Company executives with those of stockholders and creates a direct interest in the results of operations, short and long-term performance and achievement of the Company’s milestones and goals.

PERFORMANCE BASED CASH AWARDS.

The Compensation Committee believes that it is sometimes important to offer cash incentives to executives for the achievement of specified objectives that yield increased value for stockholders and will utilize performance-based cash awards from time to time to provide additional incentives.

The Compensation Committee also incorporates retirement, insurance, termination and severance benefits in the compensation program for executive officers.

These benefits are offered to retain top executives, maintain their health and wellness and remain competitive in the industry.

The retirement and insurance benefits are consistent with those benefits offered more broadly to the Company’s employees.

The Company’s overall compensation packages for our named executive officers have historically emphasized equity incentives due to the long-term development timelines of our projects and the focus of the Company on achieving the implementation of these projects.

Even with the emphasis on long-term incentives, the Company’s overall compensation is established at a level comparable to our peer group of companies, which share a similar focus on long-term development of assets.

As the Water Project has finalized important permitting milestones, the Committee has also utilized performance-based cash awards to reward achieved milestones and goals in that calendar year.

Use of Peer Group

Our main asset consists of a large land position with water rights in Southeastern California and our business is primarily focused on developing this asset for its highest and best use, including a water supply and storage project at our primary property in Cadiz, California.

Because no other publicly-traded company is situated with similar assets and projects, it is difficult to identify directly comparable peer companies.

While the Company is often compared to water utility companies due to our focus on water supply development, we view our peers as operating in the property and natural resource asset development sectors specifically companies with comparable market capitalization and an emphasis on the development of property and real estate, including for agriculture, in the Southwestern United States.

This includes companies in Standard & Poor’s Global Industry Classification Standard (GICS) code 601020, Real Estate Management and Development.

We believe our peer group includes the following nine publicly traded companies:

Forestar Group, Inc.

Limoneira Company

Maui Land & Pineapple

PICO Holdings, Inc.

Pure Cycle Corp.

Stratus Properties

Tejon Ranch Co.

The Compensation Committee believes it is important to understand and analyze the current compensation programs of other companies when making compensation decisions.

We traditionally consider the compensation programs of our peers when determining compensation for the Company’s named executive officers.

This year the Committee reviewed publicly available information for our peer group companies to compare the components of our compensation program for the executive officers with those of the peer group.

In 2022, we also consulted with Coda Advisors, which reviewed our current executive compensation program and those of our peers and recommended adjustments to our programs to ensure continued competitiveness amongst our peers.

Due to the Company’s unique business plan with particular emphasis on development of the Water Project, the Compensation Committee exercises its discretion in determining compensation packages that may differ from the peer group.

Nevertheless, the peer group is instructive in assessing elements of compensation and structure for similarly situated real estate and land development companies.

Upon review of publicly available information for our peers, the Committee found the annual base salary of our CEO in 2021 was below the median among our peers and that total direct compensation of our CEO was in the second quartile, near median at the 55th percentile in the peer group.

Performance Objectives

The Committee emphasizes performance objectives for executives when granting long-term equity compensation awards from existing plans.

Currently, as described above, the Company is focused on the performance of objectives related to implementation of the Water Project and the continued success of our agricultural development, and connects equity grants to the satisfaction project development objectives utilizing both restrictions on sale and vesting schedules commensurate with the anticipated project development timelines.

Elements of 2021 Compensation

In evaluating base salaries for 2021, the Compensation Committee believed it was important to maintain competitive base salary compensation that would also keep cash compensation expenditures to a minimum.

In 2021, annual base salaries of the Company’s CEO, CFO and the Chair remained the same as in 2020.

LONG-TERM INCENTIVES.

The Committee has chosen to rely upon equity instruments, such as restricted stock and options, in designing compensation packages for executives.

The Committee views the grant of equity-based awards as an incentive for successful performance since the value of these equity-based awards will increase as the Company’s stock price increases, thereby satisfying the Committee’s goal of linking executive compensation to share price appreciation over the longer term and promoting the retention of the key executives throughout the development process of our projects.

The Committee is conscious of the potential dilutive effect arising from the use of equity incentives and tries to limit issuances to maintain appropriate ratios of overall ownership levels in the Company from year to year.

To maintain alignment with the goals of stockholders when utilizing equity-based incentive compensation, the Compensation Committee and the Board have created plans subject to stockholder approval.

The Company’s most recent equity incentive program (the “2019 Incentive Plan”) was approved at the Company’s 2019 Annual Meeting of Stockholders.

The 2019 Incentive Plan reserved 1,200,000 shares for issuance;

the plan currently has 75,061 shares available for issuance.

In April 2021, Mr.

Brackpool and Mr.

Slater each received a long-term equity incentive award of 255,000 shares of the Company’s common stock in the form of Restricted Stock Units (“RSUs”).

Under the terms and conditions and at the time of each grant of RSUs, Mr.

Brackpool and Mr.

Slater would each be issued 170,000 shares of the Company’s common stock upon achievement of certain milestone events, as described in the Employment Arrangements section of this report, and 85,000 shares on March 1, 2023.

The RSU incentive award is subject in each case to continued employment with the Company through the vesting date.

On February 4, 2022 (“Effective Date”), Mr.

Brackpool stepped down as Chair of the Board of Directors.

Brackpool remains on the Board in a non-executive role.

As of the Effective Date, Mr.

Brackpool’s existing employment arrangement with the Company was amended to reflect the modification of his duties and his unvested RSUs were accelerated and became fully vested at that time.

On February 4, 2022, Ms.

Kennedy was appointed Chair of the Board of Directors, an executive officer role.

At the time of her appointment, Ms.

Kennedy received an equity incentive award of 450,000 shares of the Company’s common stock in the form of Performance Stock Units (“PSUs”). 

Under the terms and conditions of the grant of PSUs, Ms.

Kennedy would be issued 450,000 shares of the Company’s common stock or cash, at the option of the Compensation Committee, upon achievement of certain performance events, as described in the Employment Arrangements section of this report.

The PSU incentive award is subject to continued employment with the Company through the vesting date. 

In April 2021, Mr.

Speer received a long-term equity incentive award of 127,500 shares of the Company’s common stock in the form of RSUs.

Under the terms and conditions of the grant of RSUs, Mr.

Speer would be issued 85,000 shares of the Company’s common stock upon achievement of certain milestone events, as described in the Employment Arrangements section of this report, and 42,500 shares on March 1, 2023.

The RSU incentive award is subject to continued employment with the Company through the vesting date.

While the Compensation Committee believes that equity based awards rather than cash based awards generally allow the Company to better preserve existing cash resources and, accordingly, has relied primarily upon the grant of equity based awards to reward executive performance (see "Long-Term Incentives") of named executive officers, the Compensation Committee also believes that it is important to offer cash incentives to executives for the achievement of specified objectives that yield increased value for stockholders and to reduce the tax burdens associated with the issuance of restricted equity based awards.

In April 2021, Mr.

Brackpool and Mr.

Slater were each granted a $300,000 cash award, and Mr.

Speer was granted a $150,000 cash award, by the Board for implementing Company objectives, including directing the Company through the successful acquisition of right-of-way grants for the Northern Pipeline asset, as well as for successful liquidity management through an effective at-the-market equity offering.

Per their employment arrangements described below, Mr.

Brackpool and Mr.

Speer each received retirement benefits as part of their compensation packages in 2021.

Severance and Change in Control Provisions

The Company’s compensation agreements with Messrs.

Brackpool and Speer as in effect during 2021 provided for certain severance provisions and benefits associated with various termination scenarios, as well as certain vesting acceleration for equity-based compensation in the event of a change-in-control. The severance and change in control provisions were determined largely by negotiations between the parties as one of the many elements of a larger negotiation involving the particular executive’s employment or consulting agreement with the Company.  These agreements are designed to be competitive in the marketplace and provide security for these executives in the event that the Company is acquired, and their position is impacted.

This will allow the Company’s executives to consider and implement transformative transactions of significant benefit to our stockholders without undue concern over their own financial situations.

Nevertheless, if an executive departs under circumstances that call into question whether any compensation amounts paid to him or her were validly earned, we will pursue any legal rights we deemed appropriate under the circumstances.

A summary of the severance and change-in-control provisions applicable to compensation arrangements with the Company’s named executive officers named in the Summary Compensation Table, along with a quantification of the benefits available to each named officer as of December 31, 2021, can be found in the section captioned "Potential Payments upon Termination or Change in Control".

The Company does not provide excise tax gross-ups as part of these benefits.

Tax and Accounting Considerations

Impact of Code Section 162(m)

The Compensation Committee has considered the impact of provisions of the Internal Revenue Code of 1986, specifically Code Section 162(m).

Section 162(m) limits to $1 million the Company’s deduction for compensation paid to each of our executive officers, which does not qualify as "performance based”.

The 2019 Equity Incentive Plan was designed to permit grant awards that qualify as performance-based compensation, thereby permitting the Company to receive a federal income tax deduction in connection with the awards.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management of the Company.  Based on this review and discussion, we recommend to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

THE COMPENSATION COMMITTEE 

Hickox, Chair

Geoffrey Grant

Carolyn Webb de Macías

The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such Acts.

Executive Compensation Tables

Summary Compensation Table

The following table shows the compensation awarded to, earned by, or paid during the years ended December 31, 2021, 2020 and 2019, to the Company’s current chief executive officer and president, chief financial officer and our former Chair.

Name and Principal

Compensation (3)

President and current Principal Executive Officer

Current Principal Financial Officer and Secretary

Keith Brackpool

Former Chair 

The executive officers listed in the Summary Compensation Table above were the Company’s only executive officers during the year ended December 31, 2021. Mr.

Brackpool served as chair of the Board of Directors until February 4, 2022, when the position was assumed by Ms.

Susan Kennedy.

Brackpool continues to serve on the Board in a non-executive role.

This column discloses the dollar amount of compensation cost recognized for the respective fiscal year in accordance with FASB ASC Topic 718.

The assumptions used for determining the value of stock awards and options are set forth in Note 9 to the Consolidated Financial Statements, ”Stock-Based Compensation Plans and Warrants”.

All Stock Awards listed were approved by Stockholders as part of the 2019 Equity Incentive Plan.

All Other Compensation includes a 401k match that is generally available to all employees.

Brackpool, and Speer received $11,000 and $11,600, respectively, in 401k matching contributions in 2021.

Brackpool’s Other Compensation also includes $32,030 of company paid expenses related to a leased automobile.

Speer’s Other Compensation for 2021 also includes $8,400 in a car allowance.

The value of perquisites for Mr.

Slater was less than $10,000, and thus no amount relating to perquisites is included in the Summary Compensation Table.

Grants of Plan-Based Award

The following table set forth each non-equity incentive plan award and equity incentive award granted to our named executive officers in 2021.

Estimated Future Payouts

Under Equity Incentive

Plan Awards Target

of Stock and Option

Stanley Speer

Keith Brackpool

The grant date set forth in this table is the date the grants became effective.

Restricted stock units granted by the Company under the 2019 Equity Incentive Plan.

See “Employment Arrangements”, below.

Restricted stock units subject to satisfaction of milestone-based vesting conditions granted by the Company under the 2019 Equity Incentive Plan.

See “Employment Arrangements”, below.

On February 4, 2022, these restricted stock units were accelerated and became fully vested as a result of amended employment arrangements with the Company to reflect modification of Mr.

Brackpool's duties. 

See "Employment Arrangements", below.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth certain information concerning outstanding stock and option awards as of December 31, 2021, for each named executive officer.

Option Awards

Unexercisable

Equity Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights That Have Not Vested

Equity Incentive Plan Awards:

Marked or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

Stanley Speer

Keith Brackpool

170,000 (1)(3)

656,200 (2)(3)

Unvested portion of restricted stock units granted by the Company under the 2019 Equity Incentive Plan as of December 31, 2021.

See “Grant of Plan-Based Awards”, above.

Based on $3.86 per share which was the closing market price of the Company’s common stock on December 31, 2021.

On February 4, 2022, these restricted stock unties were accelerated and became fully vested as a result of amended employment arrangements with the Company to reflect modification of Mr.

Brackpool's duties. 

See "Employment Arrangements", below.

Option Exercises and Stock Vested

The following table sets forth certain information concerning stock option exercises and restricted stock vesting during 2021 for each named executive officer.

Option Awards

Shares Acquired

on Exercise (#)

Value Realized

on Exercise ($)

Shares Acquired

on Vesting (#)

Value Realized

on Vesting ($)

Keith Brackpool

Vested portion of restricted stock units granted by the Company under the 2019 Equity Incentive Plan.

See “Grant of Plan Based Award”, above.

Pension Benefits

The Company does not have any qualified or non-qualified defined benefits plans.

Nonqualified Deferred Compensation

The Company does not have any non-qualified defined contribution plans or other deferred compensation plans.

Employment Arrangements

Slater has served with the Company since November 2008 pursuant to an agreement with the law firm Brownstein Hyatt Farber and Schreck LLP, where Mr.

Slater is also a shareholder. 

From 2008 –

Slater was primarily focused on the development of the Company's Water Project and did not receive a base salary from the Company for his role as General Counsel (2008 –

2012) and President (2011 –

Slater's compensation from the Company consisted exclusively of long-term incentives due to the nature of the development of the Water Project.

On February 1, 2013, Mr.

Slater was named Chief Executive Officer in addition to his ongoing role as President. 

As a result, Mr.

Slater's employment arrangements were amended to reflect the broadening of his responsibilities and leadership role over all of the Company's asset development initiatives.

In consideration of Mr.

Slater's agreement to serve as Chief Executive Officer and President, Mr.

Slater began to receive an annual base salary from the Company of $300,000 effective February 1, 2013.

In April 2021, Mr.

Slater received a long-term equity incentive award of 255,000 shares of the Company’s stock in the form of 255,000 Restricted Stock Units (“RSU”).

Of the 255,000 RSUs granted, 170,000 RSUs vest upon completion of certain milestones, including (a) 85,000 RSUs which vested in July 2021 upon completion of refinancing of the Company’s Prior Senior Secured Debt and funding to complete the purchase of the Northern Pipeline, and (b) 85,000 RSUs scheduled to vest upon completion of final binding water supply agreement(s) for the delivery of at least 9,500 acre-feet of water per annum to customers.

The remaining 85,000 RSUs are scheduled to vest on March 1, 2023.

The determination of whether the RSUs related to milestone events have vested will be made by the Company’s Compensation Committee.

Speer entered into an employment agreement with the Company effective May 21, 2020 (“Employment Agreement”).

Speer serves as the Chief Financial Officer of the Company and as Chair and Chief Executive Officer of the Board of Managers of Cadiz Real Estate LLC, our subsidiary holding title to the Company’s land and water assets.

Pursuant to his Employment Agreement, Mr.

Speer receives an annual base salary of $350,000, and is eligible to participate in the Company’s bonus and equity incentive programs.

In April 2021, Mr.

Speer received a long-term equity incentive award of 127,500 shares of the Company’s stock in the form of 127,500 RSUs.

Of the 127,500 RSUs granted, 85,000 RSUs vest upon completion of certain milestones, including (a) 42,500 RSUs which vested in July 2021 upon completion of refinancing of the Company’s Prior Senior Secured Debt and funding to complete the purchase of the Northern Pipeline, and (b) 42,500 RSUs scheduled to vest upon completion of final binding water supply agreement(s) for the delivery of at least 9,500 acre-feet of water per annum to customers.

The remaining 42,500 RSUs are scheduled to vest on March 1, 2023.

The determination of whether the RSUs related to milestone events have vested will be made by the Company’s Compensation Committee.

During 2021, Mr.

Keith Brackpool served as Chair of the Board of Directors pursuant to an amended and restated employment agreement effective July 1, 2014 ("2014 Amended Agreement") replacing a May 2009 employment agreement. 

The 2014 Amended Agreement provided for a new base salary compensation structure and established milestone principles for further long-term incentive equity awards. 

Effective July 1, 2014, Mr.

Brackpool's received a total of 100,000 RSUs - 20,000 in 2014 and 40,000 each in 2015 and 2016 in lieu of annual cash salary compensation.

Effective January 1, 2017, the annual base cash salary for Mr.

Brackpool was returned to $275,000.

In April 2021, Mr.

Brackpool received a long-term equity incentive award of 255,000 shares of the Company’s stock in the form of 255,000 RSUs.

Of the 255,000 RSUs granted, 170,000 RSUs vest upon completion of certain milestones, including (a) 85,000 RSUs which vested in July 2021upon completion of refinancing of the Company’s Prior Senior Secured Debt and funding to complete the purchase of the Northern Pipeline, and (b) 85,000 RSUs scheduled to vest upon completion of final binding water supply agreement(s) for the delivery of at least 9,500 acre-feet of water per annum to customers.

The remaining 85,000 RSUs were scheduled to vest on March 1, 2023.

On February 4, 2022 (“Effective Date”), Mr.

Brackpool stepped down as Chair of the Board.

Brackpool will remain on the Board in a non-executive role.

As of the Effective Date, Mr.

Brackpool’s existing employment arrangement with the Company was amended to reflect the modification of his duties.

Also upon the Effective Date, Mr.

Brackpool’s heretofore unvested restricted stock units were accelerated and became fully vested.

Susan Kennedy entered into an employment agreement with the Company effective February 4, 2022 (“Employment Effective Date”) (“2022 Employment Agreement”).

As of the Employment Effective Date, Ms.

Kennedy was appointed to serve as Chair of the Board, an executive officer role.

Pursuant to her 2022 Employment Agreement, Ms.

Kennedy receives an annual base salary of $300,000, and is entitled to performance-based bonus awards.

At the time of her appointment, Ms.

Kennedy received an equity incentive award of 450,000 shares of the Company’s stock in the form of performance stock units (“PSUs”).

The PSUs vest upon the Company’s common stock achieving price hurdles (“Price Hurdles”), including (a) 200,000 PSUs to vest upon a Price Hurdle of $7 per share, (b) 150,000 PSUs to vest upon a Price Hurdle of $9 per share, (c) 50,000 PSUs vest upon a Price Hurdle of $11 per share, and (d) 50,000 PSUs to vest upon a Price Hurdle of $13 per share and are payable, at the option of the Compensation Committee, in either common stock or cash.

The PSU incentive award is subject to continued employment with the Company through the vesting date.

Potential Payments Upon Termination or Change in Control

The following table and summary set forth estimated potential payments the Company would be required to make to our named executive officers upon termination of employment or change in control of the Company, pursuant to each executive’s employment or consulting agreement in effect at year end.

Except as otherwise indicated, the table assumes that the triggering event occurred on December 31, 2021.

Termination without

Resignation upon Company Material Breach ($)

Disability ($)

Following Change

of Control ($)

Equity Acceleration

Benefits Continuation (1)

Equity Acceleration

Benefits Continuation (1)

Keith Brackpool (2)

Equity Acceleration

Benefits Continuation (1)

The benefits continuation amounts include car allowances, 401(k) matching benefits and paid vacation.

As fo February 4, 2022, Mr.

Brackpool stepped down as Chair of the Board of Directors and his theretofore unvested these restricted stock unties were accelerated and became fully vested. 

See "Employment Arrangements", above. 

Brackpool is not currently entitled to any further required payments as a consequence of termination or change in control. 

Termination without Cause or Resignation upon Company Material Breach

Speer’s Employment Agreement provides that if Mr.

Speer were terminated by the Company without cause or if he resigns due to a breach of the Employment Agreement by us, then the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made available by the Company) for one hundred eighty days following the effective date of the termination, as though Mr.

Speer were continuing to provide services to the Company under the Employment Agreement.

Brackpool’s 2014 Amended Agreement, as in effect during 2021, provided that if Mr.

Brackpool were terminated by the Company without cause or if he resigns due to a breach of the 2014 Amended Agreement by us, then the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made available by the Company) for one year following the effective date of the termination, as though Mr.

Brackpool were continuing to provide services to the Company under his 2014 Amended Agreement.

Kennedy’s Employment Agreement, effective as of February 4, 2022, provides that if Ms.

Kennedy were terminated by the Company without cause or if she resigns due to a breach of the Employment Agreement by us, then the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made available by the Company) for one hundred eighty days following the effective date of the termination, as though Ms.

Kennedy were continuing to provide services to the Company under her Employment Agreement. 

Termination of Employment Due to Death or Disability

Speer’s Employment Agreement provides that if he dies or became disabled, he or his estate would be entitled to receive severance for one hundred eighty days consisting of his base compensation.

Brackpool’s 2014 Amended Agreement, as in effect during 2021, provided that if he dies or became disabled, he or his estate would be entitled to receive severance for two years consisting of his base compensation.

Kennedy’s Employment Agreement, effective as of February 4, 2022, provides that if she dies or became disabled, she or her estate would be entitled to receive severance for one hundred eighty days consisting of her base compensation.

Change in Control

Speer’s Employment Agreement provides that if Mr.

Speer is terminated by the Company following a change in control, the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made available by the Company) for one year following the effective date of the termination, as though Mr.

Speer were continuing to provide services to the Company under his Employment Agreement.

Brackpool's 2014 Amended Agreement, as in effect during 2021, provided that if Mr.

Brackpool is terminated by the Company following a change in control, the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made available by the Company) for two years following the effective date of the termination, as though Mr.

Brackpool were continuing to provide services to the Company under his 2014 Amended Agreement.

Kennedy’s Employment Agreement, effective as of February 4, 2022, provides that if Ms.

Kennedy is terminated by the Company following a change in control, the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made available by the Company) for one year following the effective date of the termination, as though Ms.

Kennedy were continuing to provide services to the Company under her Employment Agreement. 

Director Compensation

The following table summarizes the compensation earned by each of the non-employee directors in 2021.

Directors who are also officers or employees of the Company receive no compensation for duties performed as a director.

 No current director has an agreement or arrangement with any third party relating to compensation or other payments in connection with the director’s candidacy or service as a director.

or Paid in Cash ($)

Awards ($) (1)

Awards ($) (2)

Maria Echaveste

Geoffrey Grant

Hutchison (3 )

Richard Nevins (3)

Carolyn Webb de Macías

This column discloses the dollar amount of compensation cost recognized in 2021 based on the fair value at grant date in accordance with FASB ASC Topic 718.

These awards were valued at the market value of the underlying stock on the date of grant in accordance with FASB ASC Topic 718.

Directors of the Company do not receive stock option awards.

Hutchison and Mr.

Nevins retired from service on the Board of Directors in 2021, and did not stand for re-election at the 2021 Annual Meeting.

Director Compensation Policy

Effective July 1, 2021, all non-employee directors are entitled to receive, for each 12-month period ending June 30 of each year, the amount of $75,000, an increase from the previous year’s cash compensation of $50,000.

This amount is prorated for directors serving less than the full 12 months.

Payments will be made in 4 quarterly installments of $18,750.

A director may elect to receive any or all of his or her cash compensation earned in the form the Company’s common stock.

A director is entitled to a $18,750 fee for any quarter in which services are rendered.

Each June 30, non-employee directors are also entitled to receive a deferred stock award consisting of shares of the Company’s common stock with a value equal to $25,000 (calculated with reference to the average closing price of the Company’s common stock during the one month preceding the annual award date), prorated for directors serving less than the full 12 months.

Director Stock Ownership Policy

The Company encourages stock ownership on behalf of our directors.

Thus, the Company’s compensation structure for non-employee directors includes awards of stock as compensation for director services.

See “Director Compensation Policy", above.

Pay Ratio Disclosure

Pursuant to the Dodd-Frank Act, the Securities and Exchange Commission adopted a rule requiring annual disclosure of the ratio of the total annual compensation of the principal executive officer (“CEO”) to the median employee’s annual total compensation.

Scott Slater is the Company’s Chief Executive Officer.

In the pay ratio table below, Mr.

Slater’s total compensation as reflected in the foregoing Summary Compensation Table, is compared to the median employee’s total compensation.

For simplicity, the value of the Company’s retirement plan was excluded for Mr.

Slater and all permanent employees, as all employees, including the CEO, are offered the same benefits.

In determining the median employee, a listing was prepared of all employees that were actively employed as of December 31, 2021, with the exception of Mr.

All wages, bonuses and stock awards paid to each employee were deemed to be the employee’s total compensation.

If a permanent employee was not employed by the Company for the entirety of the year, an annualized total compensation was calculated for that employee.

The below table presents the ratio of the total annual compensation of the Company’s Chief Executive Officer, Mr.

Slater, to the median employee’s annual total compensation:

Scott Slater (CEO) total annual compensation

Median Employee total annual compensation

Ratio of CEO to Median Employee total annual compensation

Compensation Committee Interlocks and Insider Participation

In fiscal 2021, there were no Compensation Committee interlocks and no insider participation in Compensation Committee decisions that were required to be reported under the rules and regulations of the 1934 Act.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth the beneficial ownership of the Company’s voting securities, as of March 24, 2022, by each stockholder whom the Company knows to own beneficially more than five percent of our common stock or preferred stock, and by each director, each named executive officer, and all directors and executive officers as a group, excluding, in each case, rights under options or warrants not exercisable within 60 days.

All persons named have sole voting power and investment power over their shares except as otherwise noted.

Name and Address

Amount and Nature of

Beneficial Ownership (1)(2)

Heerema International Services Group SA

Jacobus Muller

Route de Florissant 81,

1206 Geneve Switzerland

17,966,965 

Keith Brackpool

Hope St., Suite 2850

Los Angeles, CA 90071

Geoffrey Grant

Hope St., Suite 2850

Los Angeles, CA 90071

 501,067 

Hope St., Suite 2850

Los Angeles, CA 90071

Hope St., Suite 2850

Los Angeles, CA  90071 

Stanley Speer

Hope St., Suite 2850

Los Angeles, CA 90071

Stephen Courter

Hope St., Suite 2850

Los Angeles, CA 90071

Maria Echaveste

Hope St., Suite 2850

Los Angeles, CA 90071

Carolyn Webb de Macías

Hope St., Suite 2850

Los Angeles, CA 90071

Hope St., Suite 2850

Los Angeles, CA 90071

All Directors and officers as a group

(nine individuals)

 (4)(5)(6)(7)

Represents less than one percent of the 50,752,203 outstanding shares of common stock of the Company as of March 24, 2022.

Does not include the Company’s currently outstanding 329 shares of Series 1 Preferred Stock, all of which are held by Elkhorn Partners L.P.

and which represent less than 1% of the voting power of the Company’s outstanding voting securities.

Does not include the Company’s outstanding Depositary Shares, which are not currently voting securities.

Based upon a Form 13D filed on December 1, 2021 with the SEC, Heerema International Services Group SA (“Heerema Group”) owns 15,109,823 shares of the Company's common stock.  Mr.

Jacobus Miller is manager of certain funds of the Heerema Group (such funds, the “Heerema Funds”).

Additionally, Heerema Group purchased 2,857,142 shares in the Company's registered direct offering completed on March 23, 2022. Pursuant to management agreements between Mr.

Miller and the Heerema Funds, the Reporting Person has voting and dispositive power of securities held directly by the Heerema Funds.

Includes 30,500 shares held in five separate trusts, each holding 6,100 shares for the benefit of Mr.

Grant's children.

The trustee of these trusts is not a member of the Reporting Person's immediate family.

Grant disclaims beneficial ownership of the shares held by these trusts.

Does not include 170,000 restricted stock units which have not yet vested.

Each restricted stock unit represents a contingent right to receive one share of Cadiz Inc.

common stock.

Slater disclaims beneficial ownership of these securities until such time, and to the extent, that ownership of these securities has vested.

Does not include 85,000 restricted stock units which have not yet vested. Each restricted stock unit represents a contingent right to receive one share of Cadiz Inc.

common stock.

Speer disclaims beneficial ownership of these securities until such time, and to the extent, that ownership of these securities has vested.

Does not include 450,000 performance rights units that have not yet vested. 

Each performance rights unit represents a contingent right to receive one share of Cadiz Inc.

common stock.

Kennedy disclaims beneficial ownership of these securities until such time, and to the extent, that ownership of these securities has vested.

Equity Compensation Plan Information

The following table provides information as of December 31, 2021 with respect to shares of the Company’s common stock that may be issued under its existing compensation plans.

The table includes plan grants to executive officers and other Company employees.

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by stockholders

___________________________

Represents 79,708 securities issuable under the Company’s 2019 Equity Incentive Plan as of December 31, 2021.

Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

There have been no transactions since the beginning of our last fiscal year with our directors and officers and beneficial owners of more than five percent of our voting securities and their affiliates requiring disclosure, except for the following:

As previously reported on Form 8K, on March 20, 2022, the Company entered into a Securities Purchase Agreement with certain institutional and individual investors relating to the sale and issuance by the Company of 6,857,140 shares of the Company’s common stock (“Shares”) to such investors in a registered direct offering (the “Purchase Agreement”).

Brackpool, the “Participating Directors”), who purchased 285,714 Shares, and (iii) the Company’s largest stockholder, a fund represented by Heerema International Group Services S.A.

(such fund referred to herein as “Heerema”), which beneficially owned approximately 34.42% of the issued and outstanding shares of the Company’s common stock prior to this offering, purchased 2,857,142 Shares in this offering. 

Following this offering, Heerema and its affiliates beneficially own approximately 35.4% of the issued and outstanding shares of the Company’s common stock representing approximately 35.33% of the voting power of the Company’s outstanding capital stock.

The Shares were sold at a purchase price of $1.75 per share, which exceeds the last consolidated closing bid price of the common stock on the Nasdaq Stock Market preceding the execution of the Purchase Agreement, for an aggregate purchase price of approximately $12 million.

The Shares were offered and sold pursuant to a prospectus dated June 25, 2021 and a prospectus supplement dated March 20, 2021 filed with the Securities and Exchange Commission (the “SEC”), pursuant to the Company’s registration statement on Form S-3 (File No. 333-257159), which was declared effective by the SEC on June 25, 2021.

In connection with this offering, the Company entered into a Board Observer and Nomination Rights Agreement which provides Heerema (i) a right to appoint one observer to attend meetings of the Company’s Board of Directors (the “Board”) and committees of the Board and, in lieu of such observer right, the right to nominate one individual for election to the Board, and (ii) a right to require the Company to seek stockholder approval of an amendment to the Company’s certificate of incorporation to permit the adoption of an amendment to our bylaws requiring the Board to call a special meeting of stockholders of the Company upon appropriate written request of a stockholder or stockholders of record of the Company owning not less than 20% of the voting power of our then outstanding shares of capital stock (such amendment to our certificate of incorporation, the “Amendment to Permit Stockholders to Call Special Meetings”), subject to and in accordance with the Delaware General Corporation Law.

In furtherance of the rights granted regarding the Amendment to Permit Stockholders to Call Special Meetings, the Company has agreed to cause its annual meeting of stockholders for 2022 (the “2022 Annual Meeting”) to be held on or before August 15, 2022 and submit the Amendment to Permit Stockholders to Call Special Meetings for adoption by our stockholders at the 2022 Annual Meeting.

This agreement will terminate if and when Heerema and its affiliates collectively hold less than 10% of the outstanding shares of common stock of the Company.

Policies and Procedures with Respect to Related Party Transactions

Our Audit and Risk Committee Charter requires that the Audit and Risk Committee review and approve all related-party transactions between the Company, on the one hand, and directors, officers, employees, consultants, and any of their family members, on the other hand.  In addition, the Company's written Code of Conduct and Ethics and Conflicts of Interest policy provides that no employee, officer or director may use or attempt to use his or her position at the Company to obtain any improper personal benefit for himself or herself, for his or her family, or for any other person.

In order to implement these requirements, the Company requires that, prior to entering into any transaction with the Company, a related party must advise Company management of the potential transaction.  Management will, in turn, provide to the Audit and Risk Committee a description of the material terms of the transaction, including the dollar amount, the nature of the related party's direct or indirect interest in the transaction, and the benefits to be received by the Company from the transaction.  The Audit and Risk Committee may make such other investigations as it considers appropriate under the circumstances.  The Audit and Risk Committee will also consider whether the benefits of the proposed transaction could be obtained by the Company upon better terms from non-related parties, and whether the transaction is one that would be reportable by the Company in our public filings.  The Audit and Risk Committee will then make a determination as to whether the proposed transaction is in the best interests of the Company and should therefore be approved.

Director Independence

Courter, Grant, and Hickox and Mses.

Echaveste and Webb de Macías have all been affirmatively determined by the Board to be “independent”

under all relevant securities and other laws and regulations, including those set forth in SEC and regulations and pertinent listing standards of the NASDAQ Global Market, as in effect from time to time. Immediately following the 2021 Annual Meeting, Mr.

Hickox became the Company’s lead independent director, after four years of service in this role by Mr.

The objective of the lead independent director is to further enhance independent board oversight of management and to provide a board liaison to stockholder interests independent of management.

The Company's independent directors meet routinely in executive session without the presence of management.

Independent directors met in executive session at each regularly scheduled meeting of the Board, at least four (4) times annually, in each case outside the presence of any director who also serves as an executive officer.

In addition to regularly scheduled board meetings, the Board of Directors and various committees of the Board regularly meet to receive and discuss operating and financial reports presented by the Chief Executive Officer and other members of management as well as reports by experts and other advisors.

Independence of Committee Members

All standing committees of the Board of Directors are comprised entirely of directors whom the Board has affirmatively determined to be independent, as they meet the objective requirements set forth by the NASDAQ Global Market and the SEC, and each of whom have no relationship, direct or indirect, to the Company other than as stockholders or through their service on the Board.

Each Board committee is chaired by an independent director and maintains a written charter detailing its authority and responsibilities.

These charters are reviewed periodically as legislative and regulatory developments and business circumstances warrant, and are available in their entirety on the Company's website at https://www.cadizinc.com/corporate-governance/ and to any stockholder otherwise requesting a copy.

Principal Accounting Fees and Services

For the fiscal years ended December 31, 2021 and 2020, professional services were performed by PricewaterhouseCoopers LLP. 

The Company's Audit and Risk Committee annually approves the engagement of outside auditors for audit services in advance. 

The Audit and Risk Committee has also established complementary procedures to require pre-approval of all audit-related, tax and permitted non-audit services provided by PricewaterhouseCoopers LLP, and to consider whether the outside auditors' provision of non-audit services to the Company is compatible with maintaining the independence of the outside auditors. 

The Audit and Risk Committee may delegate pre-approval authority to one or more of its members. 

Any such fees pre-approved in this manner shall be reported to the Audit and Risk Committee at its next scheduled meeting. 

All services described below were pre-approved by the Audit and Risk Committee.

All fees for services rendered by PricewaterhouseCoopers LLP aggregated $422,000 and $424,000 during the fiscal years ended December 31, 2021 and 2020, respectively, and were composed of the following:

Audit Fees. 

The aggregate fees accrued by the Company for the audit of the annual financial statements during the fiscal years ended December 31, 2021 and 2020, for reviews of the financial statements included in the Company's Quarterly Reports on Form 10-Q, and for assistance with and review of documents filed with the SEC were $422,000 for 2021 and $424,000 for 2020.

Audit Related Fees. 

No audit-related fees were billed by PricewaterhouseCoopers LLP to the Company during the fiscal years ended December 31, 2021 and 2020.

Tax Fees. 

No tax fees were billed by PricewaterhouseCoopers LLP to the Company during the fiscal years ended December 31, 2021 and 2020.

All Other Fees. 

No other fees were billed during the fiscal years ended December 31, 2021 and 2020.

Exhibits, Financial Statement Schedules

Financial Statements.

1.         Financial Statements.

See Index to Consolidated Financial Statements.

Financial Statement Schedule.

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.

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†**10.5

2019 Equity Incentive Plan

2019 Equity Incentive Plan, as amended

Form of Option Agreement with Santa Margarita Water District

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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

Limited Liability Company Agreement of SoCal Hemp JV LLC

Agricultural Lease dated as of July 31, 2019 between Cadiz Real Estate LLC and SoCal Hemp JV LLC

First Amendment to Agricultural Lease, dated as of March 1, 2020, by and between Cadiz Real Estate LLC and SoCal Hemp JV LLC

Conversion and Exchange Agreement, dated March 5, 2020, by and between Cadiz Inc.

and LC Capital Master Fund, Ltd.

Conversion and Exchange Agreement, dated March 5, 2020, by and between Cadiz Inc.

and Elkhorn Partners Limited Partnership

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Underwriting Agreement, dated as of June 29, 2021, by and among the Company and B.

Riley Securities, Inc.

as representative and the several underwriters named therein

Riley Securities, Inc., as representative of the several underwriters named therein

Credit Agreement, dated as of July 2, 2021, by and among Cadiz Inc.

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Riley Securities, Inc., as administrative agent

First Amendment to Credit Agreement, dated as of February 2, 2023, by and among Cadiz Inc.

and Cadiz Real Estate LLC as borrowers, the lenders from time to time party thereto, and B.

Riley Securities, Inc.

as administrative agent

Security Agreement, dated as of July 2, 2021, made by Cadiz Inc., Cadiz Real Estate LLC, in favor of B.

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Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated as of July 2, 2021

First Amendment to Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated as of February 2, 2023

†**10.37

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Kennedy dated as of February 4, 2022

†**10.40

Letter from Cadiz Inc.

to Keith Brackpool dated as of February 4, 2022

Form of Securities Purchase Agreement

Form of Boar Observer and Nomination Right Agreement

Form of Securities Purchase Agreement, dated as of March 20, 2022

Form of Board Observer and Nomination Right Agreement

Form of Securities Purchase Agreement, dated as of November 9, 2022

Form of Registration Rights Agreement

Form of Amendment No.

1 to Registration Rights Agreement

Form of Amendment No.

2 to Registration Rights Agreement

Asset Purchase Agreement, dated as of October 21, 2022, between ATEC Systems, Inc., David Ketchum and Donna Ketchum and Cadiz Inc.

Amended and Restated Limited Liability Company Agreement of ATEC Water Systems, LLC dated as of November 6, 2022

Placement Agent Agreement, dated as of January 30, 2023, by and among Cadiz Inc., B.

Riley Securities, Inc.

and Northland Securities Inc.

Subsidiaries of the Registrant

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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

* 101.DEF

Inline XBRL Extension Definition

* 101.LAB

Inline XBRL Taxonomy Extension Label

* 101.PRE

Inline XBRL Taxonomy Extension Presentation

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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.

 /s/ Scott S.

Slater          

Chief Executive Officer

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Hickox, Director

 /s/ Kenneth Lombard

March 30, 2023

Kenneth Lombard, Director

 /s/ Richard Polanco

March 30, 2023

Richard Polanco, Director

/s/ Carolyn Webb de Macias

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Report of Independent Registered Public Accounting Firm (PCAOB ID Number 238 )

Consolidated Statements of Operations and Comprehensive Loss for each of the two years in the period ended December 31, 2021

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2021

Consolidated Statements of Stockholders’

Equity (Deficit) for each of the two years in the period ended December 31, 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021

Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021

Notes to the Consolidated Financial Statements

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equity (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, 2021 and 2020, 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. 

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, 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

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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.

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, the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company incurred losses of $24.8 million for the year ended December 31, 2022.

The Company had working capital of $6.8 million as of December 31, 2022 and used cash in operations of $18.6 million for the year ended December 31, 2022.

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 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. 

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. 

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

(i) projected cash outflows;

(ii) projected cash inflows;

(iii) categorization of expenditures as discretionary versus non-discretionary;

and (iv) 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.

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 and a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s liquidity assessment and the significant assumptions related to (i) projected cash outflows;

(ii) projected cash inflows;

(iii) categorization of expenditures as discretionary versus non-discretionary;

and (iv) ability to raise capital.

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;

These procedures included, among others (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;

and (iv) evaluating the reasonableness of management’s significant assumptions related to projected cash outflows, projected cash inflows, categorization of expenditures as discretionary versus non-discretionary, and ability to raise capital.

Evaluating management’s assumptions related to projected cash outflows, projected cash inflows, categorization of expenditures as discretionary versus non-discretionary, and ability to raise capital 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

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Consolidated Statements of Operations and Comprehensive Loss

(I n thousands, except per share data)

Total revenues (rental income)

(In thousands, except per share data)

Total revenues

Costs and expenses:

Cost of Sales

General and administrative

17,653  

11,914  

Total costs and expenses

18,076  

12,295  

Operating loss

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Income tax expense

Loss from equity-method investments

Gain (loss) from equity-method investments

Net loss and comprehensive loss

Preferred stock dividend requirements

$ 2,737  

Net loss and comprehensive loss applicable to common stock

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Basic and diluted weighted-average shares outstanding

40,561  

34,188  

See accompanying notes to the consolidated financial statements.

Consolidated Balance Sheets

($ in thousands, except per share data)  

Current assets:

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12,435  

13,214  

Property, plant, equipment and water programs, net

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$ 112,493  

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 1,107  

Accrued liabilities

Current portion of long-term debt

Warrant derivative liabilities

Dividend payable

Contingent consideration liabilities

Operating lease liabilities

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shares issued and outstanding –

329 at December 31, 2021 and 7,531 at December 31, 2020

329 at December 31, 2022 and December 31, 2021

8.875 % Series A cumulative, perpetual preferred stock - $ .01 par value;

7,500 shares authorized at December 31, 2021 and 0 shares at December 31, 2020;

7,500 shares authorized at December 31, 2022 and December 31, 2021;

shares issued and outstanding –

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Accumulated deficit

Total stockholders' equity (deficit)

Total stockholders' equity

34,223  

Total liabilities and stockholders' equitu (deficit)

40,609  

Total liabilities and stockholders' equity

$ 110,787  

$ 112,493  

See accompanying notes to the consolidated financial statements.

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Cash flows from operating activities:

Adjustments to reconcile net loss tonet cash used in operating activities:

Net loss  

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of debt discount and issuance costs

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Loss on equity method investments

( 40 )  

Loss on debt conversion and extinguishment of debt

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Prepaid expenses and other current assets

( 684 )  

Accounts payable

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Contributions to equity-method investments

Additions to long-term investments

Distributions from equity-method investments  

Payments for acquisitions, net of cash acquired

( 750 )  

Net cash used in investing activities

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Net proceeds from issuance of common stock

21,636  

32,459  

Net proceeds from the issuance of 8.875 % series A cumulative, perpetual preferred stock

54,209  

Dividend payment

Proceeds from the issuance of long-term debt

50,137  

Issuance costs of long-term debt

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Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

16,647  

51,178  

Net (decrease) increase in cash, cash equivalents and restricted cash

( 6,074 )  

12,432  

Cash, cash equivalents and restricted cash, beginning of period

19,856  

Cash, cash equivalents and restricted cash, end of period

$ 13,782  

$ 19,856  

See accompanying notes to the consolidated financial statements.

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Equity (Deficit)

Preferred Stock

8.875% Series A Cumulative

Preferred Stock

Perpetual Preferred Stock

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$ ( 539,414 )  

Issuance of shares pursuant to ATM offerings

1,508,013  

14,752  

14,767  

Issuance of shares pursuant to bond conversion

5,766,337  

38,843  

38,900  

Reclassification of warrant liability

( 865 )  

Issuance of preferred shares

10,000  

39,735  

39,736  

Conversion of preferred shares to common shares

1,000,068  

( 2,469 )  

( 10 )  

Stock-based compensation expense

147,376  

Net loss and comprehensive loss

( 37,817 )  

Balance as of December 31, 2020

36,902,361  

$ 513,744  

$ ( 539,414 )  

Issuance of restricted stock units

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$ 40,609  

Issuance of shares pursuant to direct offerings

11,857,140  

21,518  

21,636  

Dividends paid and declared on 8.857 % series A cumulative perpetual preferred shares ($ 2,220 per share)

( 5,106 )  

Stock-based compensation expense

310,501  

Net loss and comprehensive loss

( 24,792 )  

Balance as of December 31, 2022  

55,823,810  

$ 636,963  

$ ( 603,298 )  

$ 34,223  

See accompanying notes to the consolidated financial statements.

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DESCRIPTION OF BUSINESS

(“Cadiz”

or the “Company”) is a water resources development company and agribusiness committed to sustainable water and farming projects in California.

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

(“Cadiz or the “Company”) is 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.

The Company is advancing human access to clean water with its unique combination of land, water, infrastructure and technology assets, cutting-edge innovation, and industry-leading standards of environmental stewardship.

The Company owns 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.

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-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 Company’s land holdings with vested water rights were primarily assembled by its 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.

Since its founding in 1983, the Company has developed its unique land assets in California for sustainable farming and groundwater management, and in recent years,  has invested in wellfield and pipeline infrastructure as well as groundwater treatment technology that will enable us to play a critical role in serving the needs of people and communities that lack access to clean, reliable and affordable water. 

The Company’s unique supply, storage and pipeline assets are located in a remote area of eastern San Bernardino County that sits at the crossroads of major highway, rail, energy, and water infrastructure between California’s primary water supply systems, the Colorado River Basin and the State Water Project.

As a result, our Cadiz Water Conservation and Storage Project is uniquely positioned to assist public water agencies in storing and managing unpredictable water supplies and provide reliable, affordable water supplies to chronically underserved areas of California.

NOTE 2 –

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The Company had working capital of $ 6.8 million at December 31, 2022 and used cash in operations of $ 18.6 million for the year ended December 31, 2022.

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 new preferred stock issued over the historical book value of the related convertible debt retired 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 and an increase in general and administrative expenses primarily related to legal fees and technical studies related to putting the Northern Pipeline into use in 2021.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Cash requirements during the year ended December 31, 2021 primarily reflect certain administrative costs related to the Company’s water project development efforts, the further development of its land and agricultural assets, including its 50 % equity investment in SoCal Hemp JV LLC, and fees associated with the Company’s refinancing and issuance of preferred stock.

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 higher cost of sales recorded in the 2022 period.

Cash requirements during the year ended December 31, 2022 primarily reflect certain administrative costs related to the Company’s water project development efforts, the further development of its land and agricultural assets.

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.

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 July 2, 2021, the Company had sold the $ 30 million in common stock authorized in the July 2020 ATM Offering through the sale of 2,748,339 shares resulting in aggregate net proceeds of approximately $ 29.2 million.

Notes To The Consolidated Financial Statements

On June 7, 2021, the Company 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.

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(“BRS”).

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

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

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.

The Company 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 its Northern Pipeline.

On June 29, 2021, the Company 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”).

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

In May 2017, the Company entered into a $ 60 million credit agreement with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced its then existing $ 45 million senior secured mortgage debt and provided $ 15 million of new senior debt to fund immediate construction related expenditures (“Prior Senior Secured Debt”). 

The Company entered into two further agreements with Apollo which provided it with the right, at its option, to extend the maturity of the Prior Senior Secured Debt from its then current maturity of May 25, 2021 to May 25, 2022, and to November 25, 2022, respectively. On May 18, 2021, the Company exercised its first extension option to extend the maturity date to May 25, 2022.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On July 2, 2021, 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 6 –

“Long-Term Debt”).

The proceeds of the Current Senior Secured Debt, together with the proceeds from the Depositary Share Offering, were used (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.

The proceeds of the Current Senior Secured Debt, together with the proceeds from the Depositary Share Offering, were used (a) to repay all the Company’s 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 were used for working capital needs and for general corporate purposes.

At December 31, 2022, the Company was in compliance with its debt covenants.

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.

The covenants in the Current Senior Secured Debt do not prohibit the Company’s use of additional equity financing and allow the Company to retain 100% of the proceeds of any common equity financing.  The Company does not expect the loan covenants to materially limit its ability to finance its water and agricultural development activities.

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 $ 11.7 million.

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

See Note 14 –

"Subsequent Events".

On November 14, 2022, the Company completed the sale and issuance of 5,000,000 shares of the Company’s 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.

Notes To The Consolidated Financial Statements

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

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

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

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 the Company’s water supply, storage, conveyance and treatment assets, working capital and development of additional water resources to meet increase demand on an accelerated timetable.

The covenants in the Current Senior Secured Debt do not prohibit the Company’s use of additional equity financing and allow the Company to retain 100% of the proceeds of any common equity financing. The Company does not expect the loan covenants to materially limit its ability to finance its water and agricultural development activities.

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.

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

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

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

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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.

The Company applies the equity method of accounting for investments in which the Company has significant influence but not a controlling interest.

Notes To The Consolidated Financial Statements

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Actual results could differ from those estimates.

Segment Reporting

The Company currently operates in two segments based upon its organizational structure and the way in which its operations are managed and evaluated.

The Company’s largest segment is Land and Water Resources which includes all activities regarding its properties in the eastern Mojave desert including the Water Project development and its agricultural operations.

The Company’s second operating segment is its recently acquired water treatment business, ATEC Water Systems LLC (“ATEC”) which provides innovative water filtration solutions for impaired or contaminated groundwater sources.

The reporting segments have been combined for 2022 as the ATEC business was not acquired until November 2022 and its revenue, operating results and assets in 2022 were not material to the Company’s consolidated operations.

Revenue Recognition

The Company recognizes rental income through its agricultural leases with Fenner Valley Farms LLC and SoCal Hemp JV LLC.

The Company recognizes rental income through its agricultural leases with Fenner Valley Farms LLC and SoCal Hemp JV LLC, and crop sale revenue from its alfalfa farming operations upon shipment and transfer of title to customers.

Stock-Based Compensation

General and administrative expenses include $ 1.9 million and $ 4.7 million of stock-based compensation expenses in the years ended December 31, 2022 and 2021, respectively.

Stock-based compensation is generally based upon grants of stock awards and 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. For RSUs which vest upon completion of certain milestones, the fair value of the RSU is recognized when it is probable that the milestone will be achieved. 

Stock-based compensation is generally based upon grants of stock awards, performance stock units (“PSU”) and restricted stock units (“RSU”) to its employees and consultants under the 2019 Equity Incentive Plan.

For stock awards, PSUs or RSUs granted, the Company determines the fair value of the stock award, PSUs or RSU at the date of the grant and recognizes the compensation expense over the vesting period.

For PSUs or RSUs which vest upon completion of certain milestones, the fair value of the PSU or RSU is recognized when it is probable that the milestone will be achieved.

Net Loss Per Common Share

Basic net loss per share is computed by dividing the net loss applicable to common stock by the weighted-average common shares outstanding.

Basic net loss per share is computed by dividing the net loss applicable to common stock by the weighted-average common shares outstanding.

Options, restricted stock units, convertible debt, convertible preferred shares and warrants 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 1,814,000 shares and 3,000,000 shares for the years ended December 31, 2022 and 2021, respectively.

Notes To The Consolidated Financial Statements

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.

Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally five 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Water rights, storage and supply programs are stated at cost.

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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.

The Company has not commenced depreciation of these assets as they are not yet in service as the Water Project is not operating.

While interest on borrowed funds is currently expensed, interest costs related to the construction of water project facilities will be capitalized at the time construction of these facilities commences.

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. 

Goodwill and Other Intangibles Resulting from Business Acquisitions

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 –

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(“ASC 350”

) on January 1, 2002. 

In addition, as a result of the ATEC Acquisition (see Note 3 –

“Acquisitions”), tax deductible goodwill in the amount of $ 1.9 million was recorded in November 2022. 

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 positive carrying amount on December 31, 2021, and a negative carrying amount in 2020.

As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation.

If the Company’s stock price continues to experience significant price declines, this will impact the fair value of the reporting unit and could lead to potential impairment charges in future periods. Accordingly, no assurances can be given that the Company will not record an impairment loss on goodwill in the future.

Deferred Financing Costs

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, and are presented as a reduction of long-term debt. 

Deferred loan costs were $ 2.3 million and $ 0.8 million as of December 31, 2021 and 2020, respectively. 

The reporting units to which $ 5.7 million of goodwill is allocated had a positive carrying amount on December 31, 2022 and 2021.

The Company accounts for business combinations using the acquisition method, with the excess of the acquisition cost over the fair value of net tangible assets and identified intangible assets acquired considered goodwill.

As a result, the Company discloses goodwill separately from other intangible assets.

Other identifiable intangibles related to the ATEC acquisition included non-compete agreements.

Contingent consideration arrangements are initially recorded based on management’s best estimate of the amount of contingent consideration that will be realized.

Changes in fair value of contingent consideration that are not measurement period adjustments are recognized in earnings.

Impairment of Goodwill and Long-Lived Assets

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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.

Notes To The Consolidated Financial Statements

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

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

In performing the impairment test, the Company has the option 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, the Company performs 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;

 The Company uses the market approach to assess impairment for the Land and Water Resources reporting unit, as its common stock price is an important component of the fair value calculation. 

If the Company’s stock price experiences price declines, this will impact the fair value of the reporting unit and could lead to potential impairment charges in future periods. Accordingly, no assurances can be given that the Company will not record an impairment loss on goodwill in the future.

In the Company’s annual impairment analysis for the fourth quarter 2022, the goodwill was evaluated utilizing a qualitative assessment.

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

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

Deferred Financing Costs

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, and are presented as a reduction of long-term debt.

The Company had no deferred loan costs as of December 31, 2022, and $ 2.3 million as of December 31, 2021.

Debt Discount

Debt discount created upon the issuance of debt is deferred and amortized over the life of the related loan using the effective interest method, and is presented as a reduction of long-term debt. 

The Company recorded debt discount of $ 2.4 million for the year ended December 31, 2022, and $ 1.1 million for the year ended December 31, 2021. 

Amortization of debt discounts is included in interest expense on the Consolidated Statement of Operations.

Notes To The Consolidated Financial Statements

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.

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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 –

See Note 7  –

“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 Brands, 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 ("SCHCO").

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.

The carrying value of the investment was $ 1.0 million at December 31, 2021, and $ 1.4 million at December 31, 2020.

During 2021, the Company made contributions to the JV of $ 0.8 million, offset by $ 0.2 million in repayments by SCHCO to the Company for their share of initial costs which was funded by the Company under the LLC Agreement, and recorded $ 1.0 million of losses.

The losses resulted from a determination to write-off the cost of the 2021 plantings due to the continued significant reduced market price for hemp biomass experienced in 2021 due to an oversupply of product in the marketplace.

In July 2019, SoCal Hemp JV LLC (the “JV”) was created by Cadiz Real Estate LLC (a fully owned subsidiary of Cadiz Inc.) and SoCal Hemp Co, LLC (a fully owned subsidiary of Glass House Brands, Inc., which is an unrelated company to Cadiz Inc.) when the two parties entered into a Limited Liability Company Agreement (“LLC Agreement”).

The JV was 50% owned by Cadiz Real Estate LLC and 50 % owned by SoCal Hemp Co., LLC (“SCHCO”, together the “Parties”).

Pursuant to the LLC Agreement, the JV profits and losses were allocated to the members based on their ownership share.

The Company accounted for its investment in the JV using the equity method of accounting. 

No planting of hemp was made by the JV during 2022 due to poor market conditions for hemp pricing. 

On December 30, 2022, the Parties entered into an Agreement and Plan of Dissolution of the JV whereby the Company purchased fixed assets with a net book value to the JV of approximately $ 343 thousand for $ 171 thousand and reclaimed the buildings, tenant improvements and machinery and equipment with fair value of approximately $ 1 million which is included in Property, Plant, Equipment and Water Programs at December 31, 2022. 

Prior to the dissolution of the JV, the carrying value of the investment was approximately $ 1 million. 

Loss from equity-method investments related to the JV immediately prior to the dissolution totaled $ 171 thousand. 

At the time of the dissolution, the Company recorded a gain on the dissolution of the JV of approximately $ 211 thousand.

Total gain from equity-method investments for the year ended December 31, 2022, was $ 40 thousand.

The Company recorded rental income related to the JV of approximately $ 129 thousand for the year ended December 31, 2022. 

The results of the JV have not been separately recorded in discontinued operations as the results were not material.

Supplemental Cash Flow Information

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Notes To The Consolidated Financial Statements

On May 18, 2021, the Company exercised its first extension option to extend the maturity date of the Prior Senior Secured Debt from May 25, 2021 to May 25, 2022 ( “First Option Election Notice”).

At the time of the First Option Election Notice, the Company paid an extension option fee equal to 1 % of the aggregate amount of the accreted loan value as of the date of such notice (“Extension Option Fee”).

The Extension Option Fee was payable in cash or in shares of the Company’s common stock, at the option of the Company in its sole discretion.

The Company opted to pay the Extension Option Fee in common stock, and as a result issued 64,356 shares of common stock to its lenders.

In conjunction with the closing of an assignment and assumption agreement (see Note 6  –

“Long-Term Debt”), on July 2, 2021, the Company issued 299,210 shares of the Company’s common stock to Apollo related to the repayment of the Prior Senior Secured Debt.

At December 31, 2022, accruals for cash dividends payable on the Series A Preferred Stock was $ 1.29 million (see Note 9 –

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The cash dividends were paid on January 17, 2023.

At December 31, 2021, accruals for purchases of PP&E received was approximately $ 196 thousand, and are expected to be paid in the first fiscal quarter of 2022.

At December 31, 2022, accruals for purchases of PP&E received was approximately $ 1.5 million, and are expected to be paid in the first fiscal quarter of 2023.

The balance of cash, cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows is comprised of the following:

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Restricted Cash

Long-Term Restricted Cash  

Cash, Cash Equivalents and Restricted Cash in the Consolidated Statement of Cash Flows

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$ 19,856  

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

Cash payments for income taxes were $ 7 thousand and $ 10 thousand for the years ended December 31, 2022 and 2021, respectively.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

Accounting Guidance Not Yet Adopted

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 December 2019, FASB issued an accounting standards update which reduces complexity in accounting standards by removing certain exceptions to the general principles in Topic 740.

In June 2016, the Financial Account Standards Board (“FASB”) issued an accounting standards update which introduces new guidance for the accounting for credit losses on certain financial instruments.

This update is effective for fiscal years beginning after December 15, 2022, and for interim periods within those fiscal years, with early adoption permitted.

The adoption of this new standard on January 1, 2023 had no impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued an accounting standards update which simplifies accounting for convertible instruments by removing major separation models required under current U.S.

GAAP (“ASU 2020 - 6”

Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.

ASU 2020 - 06 also removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to be eligible for it.

The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.

 ASU 2020 - 06 is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted for annual reporting periods beginning after December 15, 2020. 

The Company early adopted the provisions of ASU 2020 - 06 effective January 1, 2021, on the modified retrospective transition method, to take advantage of the removal of certain conditions required for equity contracts to qualify for the derivative scope exception. 

Adopting ASU 2020 - 06 did not result in a cumulative impact of adoption during the year ended December 31, 2021.

Reclassifications

Certain reclassifications have been made to the prior year's financial statement notes to conform to classifications used in the current year.

NOTE 3 –

On November 9, 2022, the Company completed the acquisition of the assets of ATEC Systems, Inc.

into ATEC Water Systems, LLC ("ATEC"), a water filtration technology company, at a purchase price of up to $ 2.2 million (“ATEC Acquisition”). 

The ATEC Acquisition is intended to enable the Company to assist water agencies in increasing supplies of potable water from contaminated groundwater sources. 

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

Notes To The Consolidated Financial Statements

($ in thousands)

Property, plant and equipment

Identifiable intangibles

Total estimated purchase price

$ 2,200  

The final allocation of purchase consideration to assets and liabilities is ongoing as the Company continues to evaluate certain balances, estimates and assumptions during the measurement period. 

Consistent with the allowable time to complete the Company’s assessment, the valuation of certain acquired assets and liabilities, including environmental liabilities and income taxes, is currently pending finalization.

The impact of the ATEC Acquisition, which is a new water treatment segment for the Company, was not material to the proforma net revenue or net income of the Company’s combined operations for the periods presented. 

Net revenue and net loss related to ATEC post-acquisition were not material to the Consolidated Statements of Income for the periods presented. 

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

Following the acquisition, we entered into an agreement to grant 

200,000 Class P Units of ATEC to the new Chief Operating Officer of ATEC which vest ratably an annual basis over three years. 

These units provide for a 20 % profit participation in ATEC following a return to the Company of its initial $ 2.2 million investment.

NOTE 4 –

PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Land and land improvements

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22,091  

Leasehold improvements

Furniture and fixtures

22,087  

Leasehold improvements, furniture and fixtures

Machinery and equipment

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$ 78,890  

On June 30, 2021, the Company recorded the acquisition of a 124 -mile pipeline (“Northern Pipeline”). 

Notes To The Consolidated Financial Statements

On June 30, 2021, the Company recorded the acquisition of a 124 -mile pipeline (“Northern Pipeline”).

Depreciation on the Northern Pipeline will commence when construction is completed and required permits are secured in order to use the facility for the conveyance of water.

Land and land improvements primarily include land acquisitions, well development, irrigation systems and other related land infrastructure. 

Water programs primarily include costs directly attributable to the Company’s water project development efforts, including consulting fees for various engineering, hydrological, environmental and additional feasibility studies, and other professional and legal fees. 

Land and land improvements primarily include land acquisitions, well development, irrigation systems and other related land infrastructure.

Depreciation expense on land improvements, buildings, leasehold improvements, machinery and equipment and furniture and fixtures was $ 654 thousand and $ 423 thousand for the twelve months ended December 31, 2022 and 2021, respectively.

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$ 4,296  

Prepaid rent primarily consists of fees incurred to obtain the rights-of-way for the Water Project.

Deposits and other

$ 5,030  

$ 4,296  

Prepaid rent primarily consists of fees incurred to obtain the rights-of-way for the Water Project.

Amortization of prepaid rent was approximately $ 115,000 for each of the years ended December 31, 2022 and 2021.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 –

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Well development

Water project

Other accrued expenses

$ 1,545  

Notes To The Consolidated Financial Statements

NOTE 7 –

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At December 31, 2022 and 2021, the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):

New senior secured debt due July 2, 2024  

Senior secured debt due July 2, 2024  

Interest rate of 7 % per annum

$ 50,000  

Prior senior secured debt due May 25, 2021  

Interest accrues at 8% per annum

$ 50,000  

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Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2022, are as follows:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands)

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$ 50,287  

In March 2020, the Company entered into an agreement that provided it the right, at its option, to extend the contractual May 25, 2021 maturity of the Prior Senior Secured Debt to May 25, 2022. 

On March 24, 2021, the Company entered into an additional agreement which provided it the right, at its option, to further extend the maturity date of its the Prior Senior Secured Debt to November 25, 2022.

The fee to acquire this second extension option was the adjustment of the exercise price of 362,500 warrants held by Apollo from $ 6.75 to $ 0.01 (“Warrant Modification”).

As a result of the Warrant Modification, the Company reclassified the carrying value of the warrant prior to the modification from a warrant liability in the amount of $ 1.3 million to additional paid-in capital.

In addition, the Company recorded debt issuance costs in the amount of $ 1.9 million, which was the increase in fair value of the warrant at the time of the modification, with a corresponding adjustment to additional paid-in capital.

On May 10, 2021, Apollo exercised all of its 362,500 warrants, which allowed them to purchase 362,500 shares of common stock at $ 0.01 per share.

For the year ended December 31, 2021, the Company recognized a gain of $ 573 thousand related to the remeasurement of the warrant liability prior to the Warrant Modification.

On May 18, 2021, the Company exercised its first extension option to extend the maturity date of the Prior Senior Secured Debt to May 25, 2022 ( “First Option Election Notice”).

At the time of the First Option Election Notice, the Company was required to pay an extension option fee equal to 1 % of the aggregate amount of the accreted loan value as of the date of such notice (“Extension Option Fee”).

The Extension Option Fee was payable in cash or in shares of the Company’s common stock, at the option of the Company in its sole discretion.

The Company opted to pay the Extension Option Fee in common stock, and as a result issued 64,356 shares of common stock to Apollo.

On June 28, 2021, an affiliate of BRS entered into an assignment and assumption agreement (“Assignment”) whereby it agreed to purchase all outstanding obligations under the Company’s Prior Senior Secured Debt for $ 77.5 million.

This Assignment closed on July 2, 2021.

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The Current Senior Secured Debt will mature on July 2, 2024, unless the maturity is accelerated subject to the terms of the Credit Agreement.

Interest is paid quarterly beginning on September 30, 2021 at a rate of seven percent per annum. 

The obligations under the Current Senior Secured Debt are secured by substantially all of the Company’s assets on a first -priority basis.

In connection with any repayment or prepayment of the debt, the Company is required to pay a repayment fee equal to the principal amount being repaid or prepaid, multiplied by (i) 0.0 %, if such repayment or prepayment is made prior to the six -month anniversary of the closing of the debt, (ii) 2.0 %, if such repayment or prepayment is made on or after the six -month anniversary of the closing of the debt and prior to the eighteen -month anniversary of the closing of the debt, (iii) 4.0 %, if such repayment or prepayment is made on or after the eighteen -month anniversary of the closing of the debt and prior to the thirty -month anniversary of the closing of the debt, and (iii) 6.0 %, if such repayment or prepayment is made at any time after the thirty -month anniversary of the closing of the debt.

Interest is paid quarterly beginning on September 30, 2021 at a rate of seven percent per annum. The obligations under the Current Senior Secured Debt are secured by substantially all of the Company’s assets on a first -priority basis.

In connection with any repayment or prepayment of the debt, the Company is required to pay a repayment fee equal to the principal amount being repaid or prepaid, multiplied by (i) 4.0 %, if such repayment or prepayment is made on or after the eighteen -month anniversary of the closing of the debt and prior to the thirty -month anniversary of the closing of the debt, and (iii) 6.0 %, if such repayment or prepayment is made at any time after the thirty -month anniversary of the closing of the debt.

At any time, the Company will be permitted to prepay the principal of the debt, in whole or in part, provided that such prepayment is accompanied by any accrued interest on such principal amount being prepaid plus the applicable repayment fee described above.

In the event of certain asset sales, the incurrence of indebtedness or a casualty or condemnation event, in each case, under certain circumstances as described in the Credit Agreement, the Company will be required to use a portion of the proceeds to prepay amounts under the debt.

In the event of any additional issuance of depositary receipts (“Depositary Receipts”) representing interests in shares of 8.875 % Series A Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) by the Company, the Company will be required to, within five business days after the receipt of the net cash proceeds, apply (i) 25 %, in the case of an issuance within six months of the closing of the debt, (ii) 50 %, in the case of any issuance immediately following the six months anniversary of the closing of the debt and up to and including the one year anniversary of the closing of the debt and (iii) 75 %, in the case of any issuance anytime thereafter, of the net cash proceeds to prepay amounts due under the debt (including the applicable repayment fee described above). 

The Credit Agreement includes customary affirmative and negative covenants, including delivery of financial statements and other reports.

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While any amount remains outstanding under the debt, the Lenders will have the right to convert the outstanding principal, plus unpaid interest, on the debt into Depositary Receipts at the per share exchange price of $ 25.00 , as follows:

on or before the 12 -month anniversary of the closing of the debt, up to 25 % of the outstanding principal and unpaid interest on the debt may be exchanged into Depositary Receipts;

at any time after the 18 -month anniversary of the closing of the debt, and on or before the 24 -month anniversary of the closing of the debt, up to 75 % of the principal and unpaid interest on the debt may be exchanged into Depositary Receipts;

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

at any time after the 24 -month anniversary of the closing of the debt, up to 100 % of the principal and unpaid interest on the debt may be exchanged for Depositary Receipts.

The proceeds of the Current Senior Secured Debt were used, together with the proceeds received from the Depositary Share Offering, (a) to repay all of the Company’s outstanding obligations under the Prior Senior Secured Debt, (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.

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

In addition, the Company incurred approximately $ 2.9 million in legal and advisory fees which was recorded as additional debt discount and is being amortized over the term of the Current Senior Secured Debt.

Notes To The Consolidated Financial Statements

In connection with the issuance of the Current Senior Secured Debt, on July 2, 2021 ( 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”).

The A Warrants may be exercised any time prior to July 2, 2024 ( the “Expiration Date”) and have an exercise price of $ 17.38 equal to 120 % of the closing price per share of our common stock on the Original Issue Date.

The B Warrants may be exercised in the period from 180 days after the Original Issue Date to the Expiration Date and have an exercise price of $ 21.72 equal to 150 % of the closing price of our common stock on the Original Issue Date.

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

The A Warrants may be exercised any time prior to July 2, 2024 ( the “Expiration Date”) and have an exercise price of $ 17.38 equal to 120 % of the closing price per share of the Company’s common stock on the Original Issue Date.

As a result of the issuance of the Warrants, which met the criteria for equity classification under applicable GAAP, the Company recorded additional paid-in capital in the amount of $ 1.9 million which was the fair value of the Warrants on the issuance date.

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

On February 2, 2023, the Company used a portion of the net cash proceeds from a January 2023 direct offering to repay the Current Senior Secured Debt in the principal amount of $ 15 million, together with fees and interest required to be paid in connection with such repayment, under the Credit Agreement (see Note 15 - “Subsequent Events).

NOTE 8 –

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Temporary differences and carryforwards which gave rise to a significant portion of deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows (dollars in thousands):

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets:

5 unchanged sentences

Deferred compensation

Accrued liabilities and others

Accrued liabilities and other

Total deferred tax assets

3 unchanged sentences

Net deferred tax asset

The valuation allowance decreased $ 10,625,000 in 2021 and increased $ 5,334,000 in 2020.

The change in deferred tax assets resulted from current year net operating losses and changes to future tax deductions resulting from expiring net operating losses, terms of stock compensation plans, fixed assets, and accrued liabilities.

A full valuation allowance continues to be recorded given the Company continues to be incurring losses.

Notes To The Consolidated Financial Statements

As of December 31, 2022, the Company had net operating loss (NOL) carryforwards of approximately $ 330 million for federal income tax purposes and $ 283 million for California income tax purposes.

Such carryforwards expire in varying amounts through the year 2038 and 2041 for federal and California purposes, respectively. For federal losses arising in tax years ending after December 31, 2017, the NOL carryforwards are allowed indefinitely.

Use of the carryforward amounts is subject to an annual limitation as a result of a previous ownership change and an ownership change that occurred in June of 2021.

As of December 31, 2021, the Company possessed unrecognized tax benefits totaling approximately $ 0.9 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.

The Company's tax years 2018  through 2021 remain subject to examination by the Internal Revenue Service, and tax years 2017 through 2021 remain subject to examination by California tax jurisdictions.

Such carryforwards expire in varying amounts through the year 2037 and 2042 for federal and California purposes, respectively.

For federal losses arising in tax years ending after December 31, 2017, the NOL carryforwards are allowed indefinitely.

Use of the carryforward amounts is subject to an annual limitation as a result of a previous ownership change and a tax ownership change that occurred in June of 2021.

As of December 31, 2022 and 2021, the Company's unrecognized tax benefits were immaterial.

The Company's tax years 2019 through 2022 remain subject to examination by the Internal Revenue Service, and tax years 2018 through 2022 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):

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Expected federal income tax benefit at 21%

Increase (decrease) in valuation allowance

( 8,530 )  

State income tax

9 unchanged sentences

As of December 31, 2022, and December 31, 2021, the Company had 55,823,810 and 43,656,169 shares issued and outstanding, respectively.

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:

Notes To The Consolidated Financial Statements

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:

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;

1 unchanged sentence

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 $ 2.2  million and $ 1.5 million in 2021 and 2020, respectively.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Additionally, the Company incurred direct expenses to Brownstein of approximately $ 1.5 million and $ 2.2 million in 2022 and 2021, respectively.

Series 1 Preferred Stock

8 unchanged sentences

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

Notes To The Consolidated Financial Statements

As set forth in the Certificate of Designation, the Series A Preferred Stock will rank, as to dividend rights and rights upon the Company’s liquidation, dissolution or winding up:

8 unchanged sentences

The dividend was paid on January 17, 2023 to respective holders of record at of the close of business on January 4, 2023.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At the issuance of the Series A Preferred Stock, the Company pre-funded eight quarterly payments through July 2023 in a segregated account which appears as Restricted Cash on the Balance Sheet.

Dividends on the Series A Preferred Stock underlying the depositary shares will continue to accumulate whether or not (i) any of our agreements prohibit the current payment of dividends, (ii) we have earnings or funds legally available to pay the dividends, or (iii) our Board of Directors does not declare the payment of the dividends.

Dividends on the Series A Preferred Stock underlying the depositary shares will continue to accumulate whether or not (i) any of the Company’s agreements prohibit the current payment of dividends, (ii) the Company has earnings or funds legally available to pay the dividends, or (iii) the Company’s Board of Directors does not declare the payment of the dividends.

Holders of depositary shares representing interests in the Series A Preferred Stock generally will have no voting rights.

However, if we do not pay dividends on any outstanding shares of Series A Preferred Stock for six or more quarterly dividend periods (whether or not declared or consecutive), holders of the Series A Preferred Stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to elect two additional directors to the Board of Directors to serve until all unpaid dividends have been fully paid or declared and set apart for payment.

However, if the Company does not pay dividends on any outstanding shares of Series A Preferred Stock for six or more quarterly dividend periods (whether or not declared or consecutive), holders of the Series A Preferred Stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to elect two additional directors to the Board of Directors to serve until all unpaid dividends have been fully paid or declared and set apart for payment.

On and after July 2, 2026, the shares of Series A Preferred Stock will be redeemable at the Company’s option, in whole or in part, at a redemption price equal to $ 25,000.00 per share ($ 25.00 per Depositary Share), plus any accrued and unpaid dividends.

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

Shares of Series A Preferred Stock are convertible into shares of Common Stock if, and only if, a change of control or delisting event (each as defined in the Certificate of Designation) has occurred, and the Company has not elected to redeem the Series A Preferred Stock prior to the applicable conversion date. 

Notes To The Consolidated Financial Statements

Upon any conversion, each share of Series A Preferred Stock will be converted into that number of shares of Common Stock equal to the lesser of (i) the quotient obtained by dividing (A) the sum of ( x ) the $ 25,000 liquidation preference per share plus (y) the amount of an accrued and unpaid dividends to, but not including, the conversion date by (B) the Common Stock Purchase Price (as defined in the Certificate of Designation), and (ii) 3,748.13 (the “Share Cap”), subject to certain adjustments.

1 unchanged sentence

NOTE 10 –

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 had a ten -year term with vesting periods ranging from issuance date to 24 months.

STOCK-BASED COMPENSATION PLANS

The Company has issued options and has granted stock awards pursuant to its 2019 Equity Incentive Plan, as described below.

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.

Effective July 1, 2021, under the 2019 Equity Incentive Plan, each outside director receives $ 75,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $ 25,000 on June 30 of each year.

The award accrues on a quarterly basis, with $ 18,750 of cash compensation and $ 6,250 of stock earned for each fiscal quarter in which a director serves. 

The deferred stock award vests automatically on the January 31 that first follows the award date. 

Stock Options to Directors, Officers and Consultants

The Company had no options outstanding under either of the above plans as of December 31, 2021.

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 an option-pricing model.         

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, 2021 and 2020 relating to these options.

No stock options were exercised during 2021.

No options were granted in 2021 and 2020.

A summary of option activity under the plans as of December 31, 2021, and changes during the year ended December 31, 2020 are presented below:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Exercise Price

($000 ’

Outstanding at January 1, 2020

492,500  

$ 11.66  

$ 3,834  

Forfeited, Expired or canceled

377,500  

$ 11.50  

$ 2,915  

Outstanding at December 31, 2020

115,000  

$ 12.17  

Forfeited, Expired or canceled

115,000  

$ 12.17  

Outstanding at December 31, 2021

Options exercisable at December 31, 2021

Weighted-average years of remaining contractual life of options outstanding at December 31, 2021

The 2019 Equity Incentive Plan (as amended, the “2019 EIP”) was originally approved by stockholders at the July 10, 2019 Annual Meeting, with an amendment to the plan approved by stockholders at the July 12, 2022 Annual Meeting.

The plan, as amended, provides for the grant and issuance of up to 2,700,000 shares and options to the Company’s employees, directors and consultants.

Effective July 1, 2021, under the 2019 EIP, each outside director receives $ 75,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $ 25,000 on June 30 of each year.

The award accrues on a quarterly basis, with $ 18,750 of cash compensation and $ 6,250 of stock earned for each fiscal quarter in which a director serves.

The deferred stock award vests automatically on the January 31 that first follows the award date.

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, 1,120,292 shares and restricted stock units (“RSUs”) have been awarded to the Company directors, employees and consultants as of December 31, 2021.

Of the 1,120,292 shares and RSUs awarded, 14,243 shares were awarded to the Company’s directors for services performed during the plan year ended June 30, 2021.

These shares vested and were issued on January 31, 2022.

The Company has granted stock awards pursuant to its 2019 EIP.

Of the total 2,700,000 shares reserved under the 2019 EIP, 1,803,666 shares and restricted stock units (“RSUs”) have been awarded to the Company’s directors, employees and consultants as of December 31, 2022.

Notes To The Consolidated Financial Statements

825,000 RSUs were granted to employees in April 2021 as long-term equity incentive awards ( “April 2021 RSU Grant”).

Of the 825,000 RSUs granted under the April 2021 RSU Grant, 510,000 RSUs vest upon completion of certain milestones, including (a) 255,000 RSUs which vested in July 2021 upon completion of refinancing of the Company’s Prior Senior Secured Debt and funding to complete the purchase of the Northern Pipeline (“Vesting Event”), and (b) 255,000 RSUs scheduled to vest upon completion of final binding water supply agreement(s) for the delivery of at least 9,500 acre-feet of water per annum to customers.

Of the remaining 315,000 RSUs granted under the April 2021 RSU Grant, 60,000 RSUs are scheduled to vest on January 3, 2023, and 255,000 RSUs are scheduled to vest on March 1, 2023.

Of the 825,000 RSUs granted under the April 2021 RSU Grant, 510,000 RSUs were scheduled to vest upon completion of certain milestones, including (a) 255,000 RSUs which vested in July 2021 upon completion of refinancing of the Company’s then existing senior secured debt and funding to complete the purchase of the northern Pipeline (“

Northern Pipeline Vesting Event”), and (b) 255,000 RSUs scheduled to vest upon completion of final binding water supply agreement(s) for the delivery of at least 9,500 acre-feet of water per annum to customers.

Of the remaining 315,000 RSUs granted under the April 2021 RSU Grant, 60,000 RSUs vested and were issued on January 3, 2023, and 255,000 RSUs vested and were issued on March 1, 2023.

Additionally, in July 2022, 60,000 RSUs were granted to employees as long-term equity incentive awards ( “July 2022 RSU Grant”).

The RSUs granted under the July 2022 RSU Grant are scheduled to vest on January 2, 2024.

The RSU incentive awards are subject in each case to continued employment with the Company through the vesting date.

Of the 255,000 RSUs earned upon the Vesting Event, the Company issued 158,673 shares net of taxes withheld and paid in cash by the Company.

The accompanying consolidated statements of operations and comprehensive loss include approximately $ 4,747,000 and $ 2,096,000 of stock-based compensation expense related to stock awards in the years ended December 31, 2021 and 2020, respectively.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Of the 255,000 RSUs earned upon the Northern Pipeline Vesting Event, the Company issued 158,673 shares net of taxes withheld and paid in cash by the Company.

Of the 255,000 RSUs issued on March 1, 2023, the Company issued 158,673 shares net of taxes withheld and paid in cash by the Company.

Upon the change of the Executive Chair on February 4, 2022, a total of 170,000 unvested RSUs were accelerated and became fully vested as a result of an amended employee agreement, which included 85,000 RSUs scheduled to vest upon completion of final binding water supply agreement(s) and 85,000 RSUs scheduled to vest on March 1, 2023.

Additionally, the Company issued 450,000 performance stock units (“PSUs”) upon achievement of certain performance events.

The PSUs vest upon the Company’s common stock achieving price hurdles (“Price Hurdles”) but not sooner than three years from date of grant, including (a) 200,000 PSUs to vest upon a Price Hurdle of $ 7 per share, (b) 150,000 PSUs to vest upon a Price Hurdle of $ 9 per share, (c) 50,000 PSUs to vest upon a Price Hurdle of $ 11 per share, and (d) 50,000 PSUs to vest upon a Price Hurdle of $ 13 per share and are payable, at the option of the Compensation Committee, in either common stock or cash.

The PSU incentive award is subject to continued employment with the Company through the vesting date.

A summary of RSU activity under the plans during the years ended December 31, 2022 and 2021 is presented below:

16 unchanged sentences

$ 8.90  

Notes To The Consolidated Financial Statements

As of December 31, 2022, the Company had approximately $ 2.5 million of unrecognized stock compensation expense related to nonvested PSUs and RSUs.

NOTE 11 –

1 unchanged sentence

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.

As a result, the Company’s financial results are reported in a single segment for the year ended December 31, 2022.

During November 2022, the Company entered into a new segment, water treatment, through its acquisition of ATEC (see Note 3 –

“Acquisitions”). 

No segment information for ATEC is separately presented as the impact of ATEC was not material to the Consolidated Statements of Operations for the periods presented.

NOTE 12 –

4 unchanged sentences

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, 2022 and December 31, 2021.

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 was effective on January 1, 2021, has an annual rent expense of approximately $ 321,000 , with annual defined inflation increases.

The Company prepaid the 2022 rent in 2021 and has recorded the payment in Other Assets.

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 Long-Term Deposits.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business.

2 unchanged sentences

NOTE 13 –

Effective January 1, 2021, the Company entered into two 29 -year right-of-way agreements with the United States Bureau of Land Management (“BLM”) with respect to the Company’s Northern Pipeline asset which resulted in recording right-of-way assets and lease liabilities in the amount of $ 3.3 million.

The right-of-way agreements have a combined annual rent expense of approximately $ 321,000 , with annual defined inflation increases.  

The Company also has operating leases for corporate offices, vehicles and office equipment.

The Company’s right-of-way agreements and leases have remaining lease terms of 1 month to 28 years as of December 31, 2021.

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 2049.

The Company has operating leases for its corporate offices and office equipment.

The Company’s leases have remaining lease terms of 1 month to 46 months as of December 31, 2022, 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 included in the lease term.

The Company’s current lease arrangements expire in the fourth quarter of 2024.

The Company has removed $3.3 million of right-of-use assets and liabilities related to the Bureau of Land Management (“BLM”) rights-of-way leases due to a court ruling in September 2022 which vacated the rights-of-way and returned them to the BLM.

The Company will reapply for the rights-of-way and work with the BLM on any additional environmental review required to authorize the conveyance of water in the Northern Pipeline over BLM lands.

The Company does not have any finance leases.

Notes To The Consolidated Financial Statements

The Company’s lease population does not include any residual value guarantees, and therefore none were considered in the calculation of the lease balances.

1 unchanged sentence

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.

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 elected to utilize the practical expedients permitted within the leasing 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.

2 unchanged sentences

the Company recognizes lease expense for these leases on a straight-line basis over the term of the lease.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Lease balances . 

Amounts recognized in the accompanying consolidated balance sheet as of December 31, 2021 and 2020  are as follows (in thousands):

As of December 31, 2021  

Lease balances .

Amounts recognized in the accompanying consolidated balance sheet as of December 31, 2022 and 2021 are as follows (in thousands):

As of December 31, 2022

Balance Sheet Location

$ 3,281  

Short-term lease liability

2 unchanged sentences

Other long-term liabilities

$ 3,257  

As of December 31, 2020  

As of December 31, 2021

Balance Sheet Location

$ 3,281  

Short-term lease liability

2 unchanged sentences

Other long-term liabilities

Lease cost.  

$ 3,257  

The Company’s operating lease cost for the year ended December 31, 2022 was $ 29 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, 2022 ( in thousands):

Notes To The Consolidated Financial Statements

Total lease payments

3 unchanged sentences

Long-term lease obligations

$ 3,257  

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, 2021:

Most of the Company’s lease agreements do not provide a readily determinable implicit rate nor is it available to us from its lessors.

Instead, the Company estimates its incremental borrowing rate based on information available at either the implementation date of 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 the Company’s leases as of December 31, 2022:

Weighted Average Remaining Lease Term

2 unchanged sentences

Operating leases

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 a lessor, in February 2016, the Company entered into a lease agreement with Fenner Valley Farms LLC (“FVF”) (the “lessee”), pursuant to which FVF is leasing, for a 99 -year term, 2,100 acres owned by Cadiz in San Bernardino County, California, to be used to plant, grow and harvest agricultural crops (“FVF Lease Agreement”).

As consideration for the lease, FVF paid the Company a one -time payment of $ 12.0 million upon closing.

The Company expects to receive rental income of $ 420 thousand annually over the next five years related to the FVF Lease Agreement. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company expects to record rental income of $ 420 thousand annually over the next five years related to the FVF Lease Agreement.

NOTE 14 –

9 unchanged sentences

The fee to acquire this second extension option was the adjustment of the exercise price of 362,500 warrants to purchase the Company’s common stock held by Apollo from $ 6.75 to $ 0.01 (“Warrant Modification”).

Notes To The Consolidated Financial Statements

3 unchanged sentences

The following table presents a reconciliation of Level 3 activity for the years ended December 31, 2021 and 2022:

(in thousands)  

Level 3 Liabilities

(in thousands)

Warrant Liabilities

Balance at January 1, 2021

Reclassification of warrant liability

Unrealized gains on warrants, net

Balance at December 31, 2020

$ 1,847  

Unrealized gains on warrants, net

Reclassification of warrant liability to additional paid in capital upon Warrant Modification

( 1,274  

Balance at December 31, 2021

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Contingent consideration liabilities

Balance at December 31, 2022

$ 1,450  

NOTE 15 –

SUBSEQUENT EVENTS

On March 23, 2022, we 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 $ 3.84 per share, for aggregate gross proceeds of $ 40.32 million and aggregate net proceeds of approximately $ 38.5 million.

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

The purchasers in this offering include (i) the Company’s founder, current director and former Chairman, Keith Brackpool, who purchased 1,142,857 Shares, (ii) the Company’s director, Geoffrey Grant, who purchased 285,714 Shares, and (iii) the Company’s largest stockholder, a fund represented by Heerema International Group Services S.A., purchased 2,857,142 Shares in this offering and following the offering beneficially owns approximately 35.4 % of the issued and outstanding shares of the Company’s common stock.

A portion of the proceeds were used to repay the Company’s debt in the principal amount of $ 15 million, together with fees and interest required to be paid in connection with such repayment under the Credit Agreement.

The remaining proceeds will be used for capital expenditures to accelerate development of the Company’s water supply project, working capital and development of additional water resources to meet increased demand on an accelerated timetable.

Notes To The Consolidated Financial Statements

On February 2, 2023, the Company and its wholly-owned subsidiary, Cadiz Real Estate LLC, as borrowers (collectively, the “Borrowers”) entered into a First Amendment to Credit Agreement with BRF Finance Co., LLC 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 the Company’s common stock at a conversion price of $ 4.80 per share (the “Conversion Price”).

The lenders’

right to convert is conditioned upon the Company 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, the Company 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 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.

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 9A. Controls and Procedures