What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-03-28 compared with 2024-03-28 · 84 added, 61 removed, 137 unchanged (51% of the section changed)

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

We are a water solutions provider with a unique combination of land, water, pipeline and water filtration technology assets located in Southern California between water systems serving population centers in the Southwestern United States.

Our portfolio of assets includes 2.5 million acre-feet of water supply (permits complete), 220 miles of existing, buried pipeline, 1 million acre-feet of groundwater storage capacity, versatile, scalable and cost-effective water filtration technology.

We manage our landholdings, pipeline and water filtration technology assets to offer a suite of integrated products and services to public water systems, government agencies and commercial customers that include reliable water supply, groundwater storage, water conveyance and custom-designed water filtration technology systems.

Water Supply – We own vested water rights to withdraw 2.5 million acre-feet of groundwater for beneficial uses, including agricultural development on our property and export to serve communities across Southern California.

Because all water in the aquifer system will eventually be lost to evaporation, surplus water that is captured and withdrawn before it evaporates is a new water supply (“conserved” water).

Because all water in the aquifer system will eventually be lost to evaporation, surplus water that is captured and withdrawn before it evaporates is a new water supply (i.e.

“conserved” water).

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

Water Storage – The alluvium aquifer that lies beneath the Cadiz Property is also large enough for use as a water “banking” facility, capable of storing water “in-lieu” for supply customers and up to 1 million acre-feet of imported surplus water for return during drought periods.

Water Storage – The alluvium aquifer that lies beneath the Cadiz Ranch is also large enough for use as a water “banking” facility, capable of storing water “in-lieu” for supply customers and up to 1 million acre-feet of imported surplus water for return during drought periods.

For comparison, MWD stores approximately 1.2 million acre-feet of water in the largest surface reservoir in the United States, Lake Mead.

Water Conveyance Infrastructure – We own the Northern Pipeline, an existing 220-mile 30-inch steel pipeline, that intersects several water storage and conveyance facilities in Southern California, including the California Aqueduct, the Los Angeles Aqueduct, and the Mojave River Pipeline.

We also own a 99-year lease with the ARZC that will allow us to construct the Southern Pipeline within the existing, active railroad ROW that extends from the Cadiz Ranch to the Colorado River Aqueduct.

The capacity of the Northern Pipeline for water conveyance is 25,000 AFY.

The capacity of the Southern Pipeline, ranges from 75,000 AFY to 150,000 AFY depending on the pipeline diameter (54-inch to 84-inch) selected to accommodate imported water storage.

We expect the capacity of the Southern Pipeline to be 150,000 AFY to accommodate imported water storage.

We hold an option to purchase up to 180 miles of existing unused 36” steel pipeline that can be used in construction of the Southern Pipeline system or to replace certain components of the Northern Pipeline.

Water Filtration Technology – In 2022, we completed the acquisition of ATEC, which provides innovative water filtration solutions for impaired or contaminated groundwater sources.

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

Our addition of pipeline infrastructure and ATEC water filtration technology to our portfolio of land and water assets enabled us in 2023 to adjust our business model to begin offering integrated services and solutions to public water systems that address the urgent challenges of climate change and make significant progress in advancing contract negotiations for water supply with public water systems.

In the first quarter of 2024, we entered into agreements with multiple public water systems to purchase 15,000 AFY of annual water supply from us to be delivered via the Northern Pipeline.

Our addition of pipeline infrastructure and ATEC water filtration technology to our portfolio of land and water assets has enabled us to adjust our business model to begin offering integrated services and solutions to public water systems that address the urgent challenges of climate change and make significant progress in advancing contract negotiations for water supply with public water systems.

The combination of the water supply, water storage and water conveyance infrastructure described above constitutes the Mojave Groundwater Bank as discussed in more detail in Item 1.

– Business, above.

In 2024, we entered into agreements with multiple public water systems for their purchase of 21,275 AFY of annual water supply from us to be delivered via the Northern Pipeline.

These agreements cumulatively represent 85% of the full capacity (25,000 AFY) of the Northern Pipeline.

Through membership in FGMWC, a mutual water company to be owned by the participating water agencies, these agreements provide for delivery of purchased annual water supply over a 40-year term (take or pay), at an agreed upon market price estimated to start at approximately $850/AFY and subject to annual adjustment.

Participating public agencies are expected to fund capital costs for conversion of the Northern Pipeline from gas to water, construction of pumping stations and appurtenant facilities, and would be able to seek infrastructure funding and grants.

These agreements and off take facility construction will be subject to standard environmental review and a project-level permitting process.

Participating public agencies are also expected to pay a portion of operating costs and the capital costs for construction of facilities.

In December 2024, we established a new business entity, Mojave Groundwater Storage Company LLC (“MGSC”) for public and private investors to take an ownership interest in the facility assets in exchange for equity capital to finance the estimated $800 million facility construction cost.

As of March 2025, we have entered into letters of intent and a letter of agreement with potential MGSC investors for up to $425 million.

The letters of intent and letter of agreement are non-binding and subject to on-going due diligence.

The parties will also coordinate with us to seek available infrastructure grants and/or other financing alternatives including potential bond issuances through a to-be-formed financing Joint Powers Authority.

ATEC and our agricultural operations provide our current principal source of revenue, although our working capital needs are not fully supported by these operations at this time.

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

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

Our revenues have been limited to rental income from our agricultural leases, sales from our alfalfa plantings beginning in 2022 and ATEC sales beginning in 2023.

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

We currently operate in two reportable segments.

Our largest segment is Land and Water Resources, which comprises all activities regarding our properties in the eastern Mojave Desert pre-revenue development of the Water Project (supply, storage and conveyance), and agricultural operations.

Our largest segment is Land and Water Resources, which comprises all activities regarding our properties in the eastern Mojave Desert, pre-revenue development of the Mojave Groundwater Bank (supply, storage and conveyance), and agricultural operations.

Our second operating segment is Water Filtration Technology comprised of ATEC which provides innovative water filtration technology solutions for impaired or contaminated groundwater sources.

Reporting of these two segments began in 2023 as the revenue and operating results for the water filtration technology segment were not material to our consolidated operations prior to the year ended December 31, 2023.

We evaluate our performance based on segment operating income (loss).

Interest expense, income tax expense and losses related to equity method investments are excluded from the computation of operating income (loss) for the segments.

Segment net revenue, segment operating expenses and segment operating (loss)/income information consisted of the following for the years ended December 31, 2024 and 2023:

Twelve Months Ended December 31, 2024

(in thousands)

Land and Water

Water Filtration

Costs and expenses:

Cost of sales

General and administrative

Total costs and expenses

Operating income (loss)

Twelve Months Ended December 31, 2023

(in thousands)

Land and Water

Water Filtration

Costs and expenses:

Cost of sales

General and administrative

Total costs and expenses

Operating income (loss)

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

Our revenues have been limited primarily to ATEC sales and sales from our alfalfa plantings and rental income from our agricultural leases.

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

We incurred a net loss of $31.1 million for the year ended December 31, 2024, compared with a net loss of $31.4 million for the year ended December 31, 2023.

The higher loss in 2023 was primarily due to a loss on extinguishment of debt in the amount of $5.3 million resulting from issuance of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in February 2023.

Our primary expenses are our ongoing overhead costs associated with the development of our water supply, storage and conveyance assets (i.e., general and administrative expense), farming expenses at the Cadiz Ranch, manufacturing operations of ATEC and our interest expense.

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

Revenue totaled $9.6 million during the year ended December 31, 2024, primarily related to ATEC sales totaling $7.9 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $1.3 million and rental income from agricultural leases totaling $0.4 million.

Revenue totaled $2.0 million during the year ended December 31, 2023, primarily related to ATEC sales totaling $0.8 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.8 million and rental income from our agricultural leases totaling $0.4 million.

Revenue totaled $1.5 million during the year ended December 31, 2022, primarily related to rental income from our agricultural leases and sales from the harvest from our then 610 acres of commercial alfalfa crop.

The increase in ATEC sales primarily relates to revenues under a contract to deliver 320 filters for the Central Utah Water Conservancy District’s Vineyard Wellfield Groundwater Polishing Project (“Utah Project”) announced in 2023 and now being delivered.

Cost of Sales .

Cost of sales totaled $7.3 million during the year ended December 31, 2024, comprised of $4.3 million related to ATEC (45.5% gross margin) and $3.0 million related to our alfalfa crop harvest.

The 2024 alfalfa crop harvest net operating loss of $1.7 million primarily related to continued suppressed market conditions for alfalfa on the West Coast.

Cost of sales totaled $2.9 million during the year ended December 31, 2023, comprised of $2.2 million related to our alfalfa crop harvest and $0.7 million related to ATEC.

The 2023 alfalfa crop harvest net operating loss of $1.4 million primarily relates to increased diesel costs for farming as well as suppressed market conditions for alfalfa on the West Coast.

Cost of sales totaled $2.1 million during the year ended December 31, 2022.

In June 2022, the Company converted 610 acres of agricultural development to alfalfa commercial production.

The 2022 loss was primarily due to non-recurring start-up costs for the initial short year of commercial production.

General and Administrative Expenses .

General and administrative expenses during the year ended December 31, 2024, exclusive of stock-based compensation costs, totaled $19.7 million compared with $17.3 million for the year ended December 31, 2023.

The increase in 2023 was primarily a result of community partnership and communications investments, including $2.2 million in water quality and infrastructure costs in coordination with community partners that will improve access to clean water in disadvantaged communities in the Coachella Valley and $1.3 million in corporate communications modernization expenses to the Company’s online, print, digital and social materials.

General and administrative expense for ATEC totaled $0.8 million for 2023.

The increase in 2024 was primarily a result of increased professional fees incurred in advancing the development of the Mojave Groundwater Bank and increased marketing outreach campaign activity in 2024.

General and administrative expense for ATEC totaled $1.8 million for 2024 compared to $0.8 million for 2023.

The increase was primarily driven by the growth in the ATEC operations.

Compensation costs from stock and option awards for the year ended December 31, 2024, totaled $4.6 million compared with $1.5 million for the year ended December 31, 2023.

The higher 2022 expense was primarily due to stock-based non-cash bonus awards to employees.

The higher 2024 expense was primarily due to an increase in stock-based non-cash awards to employees and consultants in 2024 compared to 2023.

Depreciation.

Depreciation expense totaled $1.2 million during the year ended December 31, 2023, compared to $0.7 million during the year ended December 31, 2022.

The higher 2023 depreciation expense is primarily due to construction in progress placed into service in 2023, which included land development and stand establishment related to the planting of 150 acres of alfalfa, as well as $0.2 million of depreciation for ATEC assets in 2023.

Depreciation expense totaled $1.2 million during each the years ended December 31, 2024 and 2023.

Interest Expense, Net .

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The following table summarizes the components of net interest expense for the two periods (in thousands):

Interest on outstanding debt

Year Ended December 31,

Cash interest on outstanding debt

PIK interest on outstanding debt

Interest added to lease obligation

Amortization of debt discount

Finance expense

Interest Income

Interest income primarily relates to interest on investments in short-term deposits.

Losses on Derivative Liabilities.

Losses on derivative liabilities totaled $220 thousand during the year ended December 31, 2023 compared to $0 in the year ended December 31, 2022.

The losses recorded in 2023 were a result of a remeasurement of a conversion option under our senior secured debt.

Increased interest expense is primarily due to increased borrowing under the Third Amended Credit Agreement.

Interest income primarily relates to interest on investments in short-term deposits which were lower in 2024.

Loss on Early Extinguishment of Debt.

Loss on early extinguishment of debt totaled $5.3 million during the year ended December 31, 2023 compared to $0 in the year ended December 31, 2022.

Loss on early extinguishment of debt totaled $0 during the year ended December 31, 2024 compared to $5.3 million in the year ended December 31, 2023.

The 2023 loss on early extinguishment of debt was a result of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in February 2023.

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Current Financing Arrangements

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

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

Equity Offerings

In July 2021, we completed the sale of 2,300,000 depositary shares each representing 1/1000 th of a share of Series A Preferred Stock (“Depositary Share Offering”) for net proceeds of approximately $54 million.

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

In January 2023, we completed the sale and issuance of 10,500,000 shares of 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.

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

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

The remaining proceeds from the January 2023 Direct Offering were used for capital expenditures to accelerate development of water supply, storage, conveyance and treatment assets, working capital, development of additional water resources to meet increase demand on an accelerated timetable, and general corporate purposes.

On November 5, 2024, we completed the sale and issuance of 7,000,000 shares of our common stock to certain institutional investors in a registered direct offering (“November 2024 Direct Offering”).

The shares of common stock were sold at a purchase price of $3.34 per share, for aggregate gross proceeds of $23.4 million and aggregate net proceeds of approximately $22.1 million.

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

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

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

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

On March 7, 2025, we completed the sale and issuance of 5,715,000 shares of our common stock to certain institutional investors in a registered direct offering (“March 2025 Direct Offering”) (see Note 14 of the Condensed Consolidated Financial Statements – “Subsequent Events”).

The shares of common stock were sold at a purchase price of $3.50 per share, for aggregate gross proceeds of approximately $20.0 million and aggregate net proceeds of approximately $18.3 million.

$5 million of the net proceeds from the November 2024 Direct Offering were paid in January 2025 to secure an exclusive option finalized in December 2024 to purchase up to 180 miles of steel pipe intended to be used for the development of the Mojave Groundwater Bank.

The remaining proceeds from the November 2024 Direct Offering and the proceeds from the March 2025 Direct Offering are intended to be used for capital and other expenses related to the development and construction of the Mojave Groundwater Bank, which may include acquisition of equipment and materials intended to be used in construction of facilities related to our Northern and/or Southern Pipelines, which we expect to begin in 2025.

Net proceeds from the offerings may also be used for the equipment and materials related to wellfield infrastructure on land owned by us and our subsidiaries, business development activities, other capital expenditures, working capital, the expansion of our business and general corporate purposes.

Debt Offerings

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Under the First Amended Credit Agreement, the maturity date of the Credit Agreement was extended from July 2, 2024 to June 30, 2026.

On March 6, 2024, we entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund 2012 (“Heerema”) (see Note 15 to the Condensed Consolidated Financial Statements – “Subsequent Events”).

On March 6, 2024, we entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund 2012 (“Heerema”) (see Note 7 to the Condensed Consolidated Financial Statements – “Long-Term Debt”).

Before entering into the Third Amended Credit Agreement, Heerema purchased the outstanding secured non-convertible term loans under the Credit Agreement (“Assignment”).

In connection with the Assignment, the existing holders of both the Convertible Loan and non-convertible term loans consented to effectuate the Third Amended Credit Agreement in consideration of a consent fee in the aggregate amount of $479,845 payable in the form of our common stock (valued at $2.89 per share, or 166,036 shares), which will be registered pursuant to an effective shelf registration statement on Form S-3 and a prospectus supplement thereunder.

In connection with the Assignment, the existing holders of both the Convertible Loan and non-convertible term loans consented to effectuate the Third Amended Credit Agreement in consideration of a consent fee in the aggregate amount of $479,845 payable in the form of our common stock (valued at $2.89 per share, or 166,036 shares), which was registered pursuant to an effective shelf registration statement on Form S-3 and a prospectus supplement thereunder.

The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from Heerema in an aggregate principal amount of $20 million, having a maturity date of June 30, 2027 (“New Secured Convertible Debt”);

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Interest on $21.2 million of the remaining principal amount will be paid in cash.

Interest on the aggregate $36 million principal amount of the New Secured Convertible Debt and existing Convertible Loan is paid in kind on a quarterly basis.

Interest on the New Secured Convertible Debt and existing Convertible Loan is paid in kind on a quarterly basis.

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

Sufficient liquidity is critical to meet our resource development, agricultural development and water filtration technology activities.

Sufficient liquidity is critical to meet our resource development activities.

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

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As we continue to actively pursue our business strategy, additional financing will continue to be required (see “Outlook”, below).

The covenants in the Credit Agreement do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any common equity financing.

We do not expect the loan covenants to materially limit our ability to finance our water, agricultural development, and water filtration technology activities.

The covenants in the Credit Agreement, as amended, do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any common equity financing.

We do not expect the loan covenants to materially limit our ability to finance our water and agricultural development activities.

Cash Used for Operating Activities .

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Cash used for investing activities in the year ended December 31, 2024, was $1.2 million, compared with $5.8 million for the year ended December 31, 2023.

The cash used in the 2023 period primarily related to development costs of three new wells at the Cadiz Ranch.

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

The cash used in the 2024 period primarily related to development costs for the planting of 125 additional acres of alfalfa and the payment of a deferred portion of the purchase price related to the ATEC acquisition.

The cash used in the 2023 period primarily related to the development of three new wells.

Cash Provided by Financing Activities .

Cash provided by financing activities totaled $35.5 million for the year ended December 31, 2024, compared with cash provided by financing activities of $17.6 million for the year ended December 31, 2023.

Proceeds from financing activities for both periods reported are primarily related to the issuance of shares under direct offerings, offset by the paydown of $15 million of senior secured debt in February 2023.

Proceeds from financing activities for the 2024 period primarily related to the issuance of long-term debt under the Third Amended Credit Agreement and to the issuance of shares under a direct offering.

Proceeds from financing activities for the 2023 period primarily related to the issuance of shares under direct offerings, offset by the paydown of $15 million of senior secured debt in February 2023.

Short-Term Outlook.

The net proceeds of approximately $19.0 million from the completion of the Third Amended Credit Agreement in March 2024, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs.

Our agricultural development and ATEC operations are expected to be funded using existing capital and cash profits generated from operations.

The net proceeds of approximately $18.3 million from the completion of the March 2025 Direct Offering, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs.

Our ATEC operations are expected to be funded using existing capital and cash profits generated from operations during 2025.

Long-Term Outlook .

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

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

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

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

Future capital expenditures will depend on the progress of the Mojave Groundwater Bank, including the funding of MGSC, ATEC operational needs and any further expansion of our agricultural assets.

Additionally, timing of reimbursement of development costs advanced related to the Mojave Groundwater Bank and the expected receipt of $51 million for the transfer of assets will impact the need to raise additional capital.

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

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Sufficient liquidity is critical to meet our resource development activities.

Critical Accounting Estimates

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

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

(d) New Accounting Pronouncements

New Accounting Pronouncements

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

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

Financial Statements and Supplementary Data

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

See the Index to Consolidated Financial Statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity