What changed in this filing

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Item 9A. Controls and Procedures

2026-03-31 compared with 2025-03-28 · 198 added, 139 removed, 818 unchanged (29% of the section changed)

24 unchanged sentences

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, 2025.

Exhibits, Financial Statement Schedules

Exhibits and Financial Statement Schedule

Financial Statements.

87 unchanged sentences

and Heerema International Group Services S.A.

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

10 unchanged sentences

Placement Agent Agreement, dated as of March 7, 2025, by and between the Company and Roth Capital Partners, LLC

Credit Agreement, dated as of October 27, 2025, by and between the Company and Lytton Rancheria of California

Memorandum of Understanding, effective as of September 25, 2025, among the Bureau of Reclamation, Fenner Valley Water Authority, and Fenner Gap Mutual Water Company

Insider Trading Policy

21 unchanged sentences

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_________________________

Management contract or compensatory plan or agreement.

33 unchanged sentences

Kenneth Lombard, Director

/s/ David O ’ Hara

David O’Hara, Director

March 31, 2026

/s/ Richard Polanco

1 unchanged sentence

Richard Polanco, Director

/s/ Carolyn Webb de Macias

Carolyn Webb de Macias, Director

March 28, 2025

Consolidated Financial Statements

28 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company incurred a net loss and comprehensive loss of $31.1 million for the year ended December 31, 2024.

The Company had working capital of $11.4 million as of December 31, 2024 and used cash in operating activities of $21.5 million for the year ended December 31, 2024.

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 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.

The principal considerations for our determination that performing procedures relating to the liquidity assessment is a critical audit matter are (i) the significant judgment by management when assessing whether the Company has sufficient liquidity and (ii) 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 projected cash outflows, projected cash inflows, categorization of expenditures as discretionary versus non-discretionary, and the ability to raise capital (collectively, “management’s significant assumptions”).

Accounting for the Lytton Credit Agreement

As described in Notes 2 and 7 to the consolidated financial statements, on October 27, 2025, the Company entered into a definitive agreement (the “Lytton Credit Agreement”) with Lytton Rancheria of California (Lytton), pursuant to which Lytton will provide the first tranche of capital (the “Tribal Investment”) for construction of the Mojave Groundwater Bank.

Under the Lytton Credit Agreement, the Company at its election may draw, as an unsecured term loan, up to $51 million in one or more installments ending April 30, 2027.

The Tribal Investment matures on April 30, 2031 (“Initial Maturity Date”), which may be extended to April 30, 2036.

In connection with the Lytton Credit Agreement, the Company agreed to issue shares of its common stock to Lytton upon execution of the Lytton Credit Agreement, on each funding date, and in the event the Tribal Investment is extended beyond the Initial Maturity Date.

Management has evaluated whether the contracts to issue the Company’s common stock to secure funding should be classified as equity or a derivative liability.

The Company’s obligation to deliver variable funding fee shares depending on the amount drawn on the facility by the Company was determined to be an equity contract and this obligation was recognized as a derivative liability of $7 million as of October 27, 2025.

The principal considerations for our determination that performing procedures relating to the accounting for the Lytton Credit Agreement is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to the Company’s accounting for the Lytton Credit Agreement.

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, among others, testing management’s process for estimating future liquidity requirements for the twelve months after the date the financial statements are issued and evaluating the sufficiency of the Company’s disclosures about whether the Company has sufficient liquidity to fund its costs for the next twelve months from the financial statement issuance date.

Testing management’s process involved (i) evaluating the appropriateness of the projected cash flow model;

(ii) testing the completeness and accuracy of the underlying data used in the projected cash flow model;

and (iii) evaluating the reasonableness of management’s significant assumptions.

Evaluating management’s significant assumptions 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.

These procedures included, among others (i) obtaining and evaluating the executed Lytton Credit Agreement;

(ii) evaluating management’s assessment relating to the determination of whether to account for the contracts to issue the Company’s common stock to secure funding as equity or a derivative liability based on the terms and conditions of the Lytton Credit Agreement;

and (iii) evaluating the sufficiency of the Company’s disclosures in the consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

17 unchanged sentences

( 8,580 ) (7,880 )

Loss on derivative liability

Loss on early extinguishment of debt

Gain on derivative liability

Loss before income taxes

1 unchanged sentence

Income tax expense

Gain (loss) from equity-method investments

Net loss and comprehensive loss

17 unchanged sentences

Total current assets

16,051 25,786

Property, plant, equipment and water programs, net

4 unchanged sentences

17,192 10,332

$ 140,914 $ 134,494

LIABILITIES AND STOCKHOLDERS' EQUITY

4 unchanged sentences

Current portion of long-term debt

Derivative liabilities 5,050 -

Dividend payable

3 unchanged sentences

Total current liabilities

13,188 14,406

Long-term debt, net

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7,500 shares authorized at December 31, 2025, and December 31, 2024;

shares issued and outstanding – 2,300 at December 31, 2024 and 2,300 at December 31, 2023

shares issued and outstanding – 2,300 at December 31, 2025 and December 31, 2024

Common stock - $ 0.01 par value;

100,000,000 shares authorized at December 31, 2024, and 85,000,000 authorized at December 31, 2023;

100,000,000 shares authorized at December 31, 2025 and December 31, 2024;

shares issued and outstanding:

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Cash flows from operating activities:

$ ( 31,140 ) $ ( 31,446 )

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

$ ( 34,151 ) $ ( 31,140 )

Amortization of debt discount and issuance costs

3 unchanged sentences

Finance expense

Loss on early extinguishment of debt

Compensation charge for stock and share option awards

Unrealized loss on derivative liabilities

Unrealized gain on derivative liabilities

Changes in operating assets and liabilities:

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Prepaid expenses and other current assets

( 380 ) ( 128 )

Accounts payable

3 unchanged sentences

Other accrued liabilities

( 575 ) 1,815

Net cash used in operating activities

4 unchanged sentences

Payments for contingent consideration liabilities

Additions to deposits for asset purchase options ( 5,000 ) -

Net cash used in investing activities

6 unchanged sentences

Proceeds from the issuance of long-term debt

15,000 20,000

Issuance costs of long-term debt

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( 127 ) ( 177 )

Costs for extinguishment of debt

Payment for contingent consideration liabilities ( 1,200 ) -

Taxes paid related to net share settlement of equity awards

9 unchanged sentences

Consolidated Statements of Stockholders ’ Equity

See accompanying notes to the consolidated financial statements.

($ in thousands, except per share data)

8.875% Series A Cumulative

8 unchanged sentences

- - - - - - - ( 5,106 ) ( 5,106 )

Reclassification of derivative liability

Issuance of warrants

- - - - - - 887 - 887

Stock-based compensation expense

Issuance of shares to lenders

166,036 1 - - - - 480 - 481

Issuance of shares to consultants

100,000 1 - - - - 256 - 257

Capitalization of gain on extinguishment of debt

- - - - - - 1,928 - 1,928

Stock-based compensation expense, net of taxes

1,377,058 15 - - - - 4,537 - 4,552

Net loss and comprehensive loss

6 unchanged sentences

- - - - - - ( 3,818 ) ( 1,265 ) ( 5,083 )

Issuance of warrants

Reclassification of dividends paid on 8.875 % series A cumulative perpetual preferred shares

- - - - - - ( 19,320 ) 19,320 -

1 unchanged sentence

975,000 9 - - - - 5,119 - 5,128

Issuance of shares to consultants

100,000 1 - - - - 256 - 257

Capitalization of gain on extinguishment of debt

- - - - - - 1,928 - 1,928

Stock-based compensation expense, net of taxes

4 unchanged sentences

83,213,589 $ 830 329 $ 1 2,300 $ 1 $ 714,616 $ ( 692,192 ) $ 23,256

See accompanying notes to the consolidated financial statements.

Notes To The Consolidated Financial Statements

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The Company’s 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, the Mojave Groundwater Bank is well 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.

As a result, the Company's groundwater storage project (the "Mojave Groundwater Bank") is well 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 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

The Company had working capital of $ 2.9 million at December 31, 2025 and used cash in operating activities of $ 18.9 million for the year ended December 31, 2025.

The lower loss in 2024 was primarily due to a 2023 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 2023, and improved operating results for the water filtration technology business segment offset by higher compensation costs related to stock based non-cash bonus awards and increased interest expense related to the Third Amended Credit Agreement in 2024.

The higher loss in 2025 was primarily due to increased professional fees incurred in advancing the development of the Mojave Groundwater Bank offset by improved profitability from ATEC Water Systems, LLC ("ATEC") driven by increased filter sales.

Notes To The Consolidated Financial Statements

Cash requirements during the year ended December 31,2024 primarily reflect certain operating and administrative costs related to development of the Company’s land, water, infrastructure and technology assets for water solutions including the Mojave Groundwater Bank, agricultural operations and water filtration business.

The Company’s present activities are focused on the development of its assets in ways that meet an urgent need for groundwater storage capacity in Southern California and growing demand for affordable, reliable, long-term water supplies before the next drought strikes the Southwestern United States.

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.

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 (“Lenders”) and B.

Riley Securities, Inc., (“BRS”) 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”)(see Note 7 – “Long-Term Debt”, below).

Cash requirements during the year ended December 31, 2025, primarily reflect certain operating and administrative costs related to the Company’s land, water, infrastructure and technology assets for water solutions including the Mojave Groundwater Bank, agricultural operations and water filtration business.

The Company’s present activities are focused on the development of its assets in ways that meet an urgent need for groundwater storage capacity in Southern California and growing demand for affordable, reliable, long-term water supplies that provide water security against inevitable drought periods in the Southwestern United States.

On March 6, 2024, the Company entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund 2012 (“Heerema”).

2 unchanged sentences

(c) the Convertible Loan existing prior to the Third Amended Credit Agreement, in an aggregate principal amount of approximately $ 16 million plus interest accruing thereon, has become unsecured;

and (d) extension of the maturity date for the existing Convertible Loan and non-convertible loans to June 30, 2027 ( see Note 7 – “Long-Term Debt”).

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

and (d) extension of the maturity date for the existing Convertible Loan and non-convertible loans to June 30, 2027 ( see Note 7 – “Long-Term Debt”, below).

On November 5, 2024, the Company completed the sale and issuance of 7,000,000 shares of its common stock to certain institutional investors in a registered 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.

Notes To The Consolidated Financial Statements

On March 7, 2025, the Company completed the sale and issuance of 5,715,000 shares of its common stock to certain institutional investors in a registered direct offering ( “March 2025 Direct Offering”) (see Note 14 - “Subsequent Events”).

On March 7, 2025, the Company completed the sale and issuance of 5,715,000 shares of its common stock to certain institutional investors in a registered direct offering.

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.

On October 27, 2025, the Company entered into a definitive agreement (the “Lytton Credit Agreement”) with Lytton Rancheria of California, a federally recognized Native American tribe (“Lytton”), pursuant to which Lytton will provide the first tranche of capital (the “Tribal Investment”) for construction of the Mojave Groundwater Bank.

Under the Lytton Credit Agreement, the Company at its election may draw, as an unsecured term loan, up to $ 51 million in one or more installments prior to April 30, 2027 ( see Note 7 - “Long-Term Debt”, below).

Under the Lytton Credit Agreement, the proceeds from the Tribal Investment will be used by the Company to fund the construction, development, ownership, operation, and other ongoing costs of the Mojave Groundwater Bank, and to reimburse the Company’s expenses related thereto.

On November 4, 2025, the company made an initial draw of $ 15 million for reimbursement of Mojave Groundwater Bank project expenses and to support development activities.

A second draw of $ 15 million was completed in March 2026.

Notes To The Consolidated Financial Statements

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 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.

The Company does not expect the loan covenants to materially limit its ability to finance its Mojave Groundwater Bank, agricultural operations and water filtration business activities.

Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from the financial statement issuance date.

19 unchanged sentences

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

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

The Company’s second operating segment is its Water Filtration Technology business, ATEC, which provides innovative water filtration solutions for impaired or contaminated groundwater sources.

The Chief Operating Decision-Maker for our Land and Water Resources segment is the Chief Executive Officer of Cadiz Inc.

and for the Water Filtration Technology segment is the Chief Executive Officer of ATEC.

There were no intersegment sales during the year ended December 31, 2024, and there were intersegment sales of $ 311 thousand during the year ended December 31, 2023, which resulted in an intercompany elimination of profits in the amount of $ 99 thousand.

There were no intersegment sales during the years ended December 31, 2025 and 2024.

Revenue Recognition

2 unchanged sentences

Sales of farm crops are recognized when product is shipped to customers at Cadiz Ranch, and sales at ATEC are recognized in accordance with the customer contract which generally occurs when filters are delivered to the customer.

$ 1.2 million of deferred revenue recorded as of December 31, 2024, was recognized as revenue during the year ended December 31, 2025.

Stock-Based Compensation

1 unchanged sentence

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, as amended.

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 stock awards, PSUs or RSUs granted, the Company determines the fair value of the stock award, PSUs or RSUs 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.

Notes To The Consolidated Financial Statements

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 and comprehensive loss applicable to common stock by the weighted-average common shares outstanding.

Restricted and performance 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 10,802,000 shares and 9,861,000 shares for the years ended December 31, 2025 and 2024, respectively.

Notes To The Consolidated Financial Statements

Property, Plant, Equipment and Water Programs

6 unchanged sentences

The Company has not commenced depreciation of these assets as they are not yet in service as the Mojave Groundwater Bank 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.

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

During the fourth quarter of 2025, the Company began capitalizing interest related to the Mojave Groundwater Bank which totaled $ 75 thousand.

Goodwill and Other Intangibles Resulting from Business Acquisitions

9 unchanged sentences

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

Notes To The Consolidated Financial Statements

Impairment of Goodwill and Long-Lived Assets

2 unchanged sentences

No impairment charge was recorded during the current fiscal year.

Notes To The Consolidated Financial Statements

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).

14 unchanged sentences

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.

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Notes To The Consolidated Financial Statements

Fair Value of Financial Instruments

4 unchanged sentences

Supplemental Cash Flow Information

During the year ended December 31, 2024, approximately $ 1.5 million in interest payments on the Company’s senior secured debt was paid in cash.

During the year ended December 31, 2025, approximately $ 1.7 million in interest payments on the Company’s debt was paid in cash.

There are no scheduled principal payments due on the Current Senior Secured Debt (see Note 7 – “Long-Term Debt”) prior to its maturity.

At December 31, 2024, accruals for cash dividends payable on the Series A Preferred Stock was $ 1.29 million (see Note 9 – “Common and Preferred Stock”).

At December 31, 2025, accruals for cash dividends payable on the Series A Preferred Stock were $ 1.27 million (see Note 9 – “Common and Preferred Stock”).

The cash dividends were paid on January 15, 2026.

At December 31, 2024, accruals for an exclusive three -year option to purchase up to 180 miles of steel pipe intended to be used for the development of the Mojave Groundwater Bank of $ 5 million was recorded in other assets and accrued liabilities.

The option payment was made in January 2025.

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

At December 31, 2025, accruals for capitalized costs related to the Mojave Groundwater Bank included in property, plant and equipment and water programs were approximately $ 2.5 million and are expected to be paid in 2026.

During the year ended December 31, 2025, the Company issued 975,000 shares of its common stock in conjunction with the execution and the initial draw of $ 15 million under the Lytton Credit Agreement.

The value of these shares issued totaling $ 5,128 was booked as a non-cash debt discount and will be amortized into interest expense over the remaining term of the loan (see Note 7 – “Long-term Debt”).

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

Cash, Cash Equivalents and Restricted Cash

7 unchanged sentences

$ 11,358 $ 17,426

Cash payments for income taxes were $ 11 thousand and $ 11 thousand for the years ended December 31, 2024 and 2023, respectively.

The restricted cash amounts primarily represented funds deposited into a segregated account as cash collateral supporting a letter of credit issued by the Company related to a performance and reclamation bond for the Northern Pipeline.

Cash payments for income taxes were $ 11 thousand for each of the years ended December 31, 2025 and 2024.

Notes To The Consolidated Financial Statements

1 unchanged sentence

Accounting Guidance Not Yet Adopted

In December 2023, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023 - 09, Income Taxes (Topic 740 )(“ASU 2023 - 09” ).

ASU 2023 - 09 expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash tax paid in the U.S.

and foreign jurisdictions.

ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024.

The Company is currently assessing this new guidance and expects this standard will not have a material impact on the consolidated financial statements.

In November 2024, the FASB issued ASU No.

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The adoption of this new standard as of December 31, 2024 had no material impact on the Company’s consolidated financial statements.

In December 2023, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023 - 09, Income Taxes (Topic 740 )(“ASU 2023 - 09” ).

ASU 2023 - 09 expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash tax paid in the U.S.

and foreign jurisdictions.

ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024.

The adoption of this new standard as of January 1, 2025, had no material impact on the Company’s consolidated financial statements.

NOTE 3 – REPORTABLE SEGMENTS

5 unchanged sentences

(in thousands)

Land and Water Resources

Water Filtration Technology

$ 1,835 $ 14,478 $ 16,313

11 unchanged sentences

(in thousands)

Land and Water Resources

Water Filtration Technology

$ 1,708 $ 7,900 $ 9,608

15 unchanged sentences

10,014 10,708

$ 140,914 $ 134,494

Goodwill by operating segment is as follows (dollars in thousands):

18 unchanged sentences

December 31, 2024

Water and Land

Water Filtration

Water and Land Resources

Water Filtration Technology

Land and land improvements

23 unchanged sentences

Notes To The Consolidated Financial Statements

During the year ended December 31, 2024, $ 646 thousand of construction in progress was placed into service, which included land development, irrigation systems and stand establishment related to the planting of 120 acres of alfalfa.

Depreciation expense on land improvements, buildings, leasehold improvements, machinery and equipment and furniture and fixtures was $ 1.2 million for each of the twelve months ended December 31, 2024 and 2023.

During the year ended December 31, 2025, $ 6.1 million of construction in progress was placed into service, which included the conversion of the Company's diesel operated agricultural wells to natural gas to reduce emissions.

Depreciation expense on land improvements, buildings, leasehold improvements, machinery and equipment and furniture and fixtures was $ 1.3 million and $ 1.2 million for the years ended December 31, 2025 and 2024, respectively.

NOTE 5 – OTHER ASSETS

2 unchanged sentences

Pipeline purchase option

Deferred finance costs 3,040 -

Loan commitment asset 4,949 -

Deposits and other

8 unchanged sentences

Pipeline purchase option

Commission expense

Other accrued expenses

3 unchanged sentences

At December 31, 2025 and 2024, the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):

Senior secured debt Interest rate of 7 % per annum

Senior secured debt

$ 21,200 $ 21,200

Convertible note instrument Interest rate of 7 % per annum

Interest rate of 7 % per annum

Unsecured debt

Interest rate of 8 % per annum

Convertible note instrument

42,055 39,259

Interest rate of 7 % per annum

Debt discount and debt issuance costs, net of accumulated accretion

6 unchanged sentences

The carrying value of the Company’s senior secured debt and the Company’s convertible note instrument approximates fair value.

The effective interest rate on the Company’s debt was 12.1 % for the year ended December 31, 2025.

Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2025, are as follows:

($ in thousands)

On July 2, 2021, the Company entered into a $ 50 million senior secured credit agreement (“Credit Agreement”) with Lenders and BRS, as administrative agent for the Lenders (“Current Senior Secured Debt”).

On July 2, 2021, the Company entered into a $ 50 million senior secured credit agreement (“Credit Agreement”) with Lenders and B.

Riley Securities ("BRS"), as administrative agent for the Lenders (“Current Senior Secured Debt”).

Interest is paid quarterly at a rate of seven percent per annum.

2 unchanged sentences

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 connection with entering into the Credit Agreement, 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 the Company’s common stock (collectively, the “Warrants”).

The A Warrants and B Warrants expired on July 2, 2024.

Notes To The Consolidated Financial Statements

As a result of the issuance of the A and B 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 was amortized over the term of the related debt.

On February 2, 2023, the Company entered into a First Amendment to Credit Agreement to amend certain provisions of the Credit Agreement (“First Amended Credit Agreement”).

4 unchanged sentences

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.

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

The amendment was recorded as a debt extinguishment.

As a result of the First Amended Credit Agreement, the Company bifurcated the new conversion option from the debt and recorded a derivative liability.

As of the effective date of the First Amended Credit Agreement, the derivative liability had a fair value of approximately $ 2.4 million which was recorded as loss on early extinguishment of debt.

In addition, the loss on early extinguishment of debt included $ 2.0 million of repayment fees for both repaid and amended principal and $ 980 thousand of unamortized debt issuance costs.

The fair value of the derivative liability was remeasured each reporting period using an option pricing model, and the change in fair value was recorded as an adjustment to the derivative liability with the change in fair value recorded as income or expense.

On August 14, 2023, the Credit Agreement was further amended to remove a conversion exchange cap provision (“Second Amended Credit Agreement”).

As a result of the Second Amended Credit Agreement, the Company reclassified the carrying value of the bifurcated conversion option at the time of the modification from a derivative liability in the amount of $ 2.57 million to additional paid-in capital.

Total unrealized losses of derivative liabilities accounted for as derivatives prior to the Second Amended Credit Agreement were $ 220 thousand for the year ended December 31, 2023.

Notes To The Consolidated Financial Statements

On March 6, 2024, the Company entered into the Third Amended Credit Agreement.

11 unchanged sentences

As a result of a registered direct offering that was completed in November 2024, the conversion price of the New Secured Convertible Debt was reduced to $ 5.14 per share.

Notes To The Consolidated Financial Statements

In connection with the debt issued to Heerema, the Company issued a warrant to purchase 1,000,000 shares of our common stock (the “Heerema Warrant”) to Heerema.

The Heerema Warrant has an exercise price of $ 5.00 per share, which will be subject to anti-dilution adjustments.

As a result of a registered direct offering that was completed in March 2025, the exercise price of the Heerema Warrant was reduced to $ 4.75 per share.

The Heerema Warrant expires on June 30, 2027.

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The Company was in compliance with all covenants under the Credit Agreement as of December 31, 2025.

On October 27, 2025 ( the “Effective Date”), the Company entered the Lytton Credit Agreement pursuant to which Lytton committed to provide an unsecured term loan facility with a maximum of $ 51 million in principal to be drawn in installments through April 30, 2027 to fund the construction, development, ownership, operation, and other ongoing costs of the Mojave Groundwater Bank, and to reimburse the Company’s expenses related thereto (the “Tribal Investment”).

The unsecured term loan bears interest at a fixed rate of 8 % per annum, payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year.

Interest may be paid in cash or, upon mutual agreement between the Company and Lytton, in shares of the Company’s common stock determined in accordance with the Lytton Credit Agreement.

The Tribal Investment matures on April 30, 2031 ( “Initial Maturity Date”) which may be extended to April 30, 2036.

In connection with the Lytton Credit Agreement, the Company agreed to issue shares of its common stock to Lytton as follows:

upon execution of the Lytton Credit Agreement, a commitment fee of 600,000 shares;

on each funding date, a funding fee of 25,000 shares per $1 million of principal amount funded;

in the event the Tribal Investment is extended beyond the Initial Maturity Date, an extension fee of 800,000 shares.

Notes To The Consolidated Financial Statements

The Company has evaluated whether the contracts to issue the Company’s common stock to secure funding should be classified as equity or a derivative liability pursuant to ASC 815 - 40.

The Company’s obligation to deliver variable funding fee shares depending on the amount drawn on the facility by the Company was determined to be an equity contract and this obligation is recognized as a derivative liability of $ 7 million at inception on October 27, 2025 and $ 5 million as of December 31, 2025, subject to reassessment at each reporting period.

The value of the commitment shares and the derivative liability at inception were capitalized in other noncurrent assets, $ 7,989 as of December 31, 2025.

A portion of the asset is recognized as a debt discount when the loan is drawn.

The extension fee is an equity contract that is not separately recognized as the probability of extending the maturity date was considered by the Company to be remote.

At any time following the funding of the full $ 51 million Tribal Investment amount under the Lytton Credit Agreement or on the maturity date, at Lytton’s election, any outstanding principal and accrued interest of the Tribal Investment may be converted into a contractual right to receive a share of future cash flows from the Company’s water-storage rights (the “Storage Cash Flows Right”), which will entitle Lytton to receive up to 51 % of the cash flows generated from the Company’s water-storage operations, provided that Lytton contributes the Storage Cash Flows Right to Mojave Water Infrastructure Company, LLC (“MWI”), the Company’s special purpose entity formed to construct, own and operate the Mojave Groundwater Bank, in exchange for an ownership interest in MWI alongside other expected equity investors in MWI on the same economic terms whereby such interest in MWI remains subject to definitive agreements to be mutually agreed upon by the parties including the Company.

On November 4, 2025 the Company made an initial draw of $ 15 million for reimbursement of Mojave Groundwater Bank project expenses and to support development activities.

A second draw of $ 15 million was made in March 2026.

NOTE 8 – INCOME TAXES

1 unchanged sentence

Temporary differences and carryforwards which gave rise to a significant portion of deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (dollars in thousands):

Notes To The Consolidated Financial Statements

Deferred tax assets:

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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.

Beginning in 2025 annual reporting, we adopted Accounting Standards Update (ASU) No.

2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures (ASU 2023 - 09 ) on a prospective basis.

A reconciliation of the U.S.

federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023 - 09 for the year ended December 31, 2025 is as follows (in thousands, except percentages):

Notes To The Consolidated Financial Statements

A reconciliation of the income tax benefit to the statutory federal income tax rate is as follows (dollars in thousands):

Expected federal income tax benefit at 21 %

Year Ended December 31, 2025

US federal statutory income tax rate

$ ( 7,169 ) 21.0 %

Increase (decrease) in valuation allowance

State income tax

State and local income taxes, net of federal income tax effect (1)

Valuation allowance

5,249 ( 15.4 )

Expiring carryforwards

Non-deductible expenses and other

Income tax expense

1,175 ( 3.4 )

Effective tax rate

( 1 ) California represents the full tax effect in this category.

A reconciliation of the U.S.

federal statutory income tax rates to our effective tax rate for the years ended December 31, 2024 is as follows (in thousands, except percentages):

Year Ended December 31, 2024

US federal statutory income tax rate

$ ( 6,537 ) 21.0 %

State and local income taxes, net of federal income tax effect (1)

Valuation allowance

4,942 ( 15.9 )

Expiring carryforwards

Non-deductible expenses and other

Effective tax rate

( 1 ) California represents the full tax effect in this category.

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023 - 09 for the year ended December 31, 2025 and 2024 are as follows (in thousands):

Year Ended December 31, 2024

Cash paid for income taxes, net of refunds received

Because it is more likely than not that the Company will not realize its net deferred tax assets, it has recorded a full valuation allowance against these assets.

Accordingly, no deferred tax asset has been recorded in the accompanying balance sheet.

Notes To The Consolidated Financial Statements

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA or the Act) was enacted.

Changes to bonus depreciation, interest expense limitations and domestic research and development expenses (among others) were implemented in the Act.

The Company does not believe that the enactment of the OBBBA will have a material impact on its income tax expense or deferred tax assets.

NOTE 9 – COMMON AND PREFERRED STOCK

1 unchanged sentence

As of December 31, 2025, and December 31, 2024, the Company had 83,213,589 and 75,353,889 shares issued and outstanding, respectively.

During 2023, the Company completed the sale and issuance of 10,500,000 shares of its common stock to certain institutional investors in a registered direct offering with net proceeds totaling $ 38.5 million.

During 2024, the Company completed the sale and issuance of 7,000,000 shares of our common stock to certain institutional investors in a registered direct offering with net proceeds totaling $ 22.1 million.

On November 5, 2024, the Company completed the sale and issuance of 7,000,000 shares of its common stock to certain institutional investors in a registered 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 March 7, 2025, the Company completed the sale and issuance of 5,715,000 shares of its common stock to certain institutional investors in a registered direct offering.

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.

Series 1 Preferred Stock

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Each share of Series 1 Preferred Stock is convertible at any time at the option of the Holder into 405.05 shares of Common Stock.

As of December 31, 2024, Holders of Series 1 Preferred Stock exercised their option to convert 9,671 shares of Series 1 Preferred Stock into 3,917,235 shares of Common Stock.

As of December 31, 2025, Holders of Series 1 Preferred Stock had exercised their option to convert 9,671 shares of Series 1 Preferred Stock into 3,917,235 shares of Common Stock.

The Company has 329 shares of Series 1 Preferred Stock issued and outstanding as of December 31, 2025.

Notes To The Consolidated Financial Statements

Series A Preferred Stock

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

Notes To The Consolidated Financial Statements

On July 1, 2021, the Company filed the Certificate of Designation (“Certificate of Designation”) for the Series A Preferred Stock with the Secretary of State of the State of Delaware, which became effective upon acceptance for record.

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As of December 31, 2025, the Company has paid cash dividends in the amount of $ 21,873,000 .

As of June 30, 2025, the Company reclassified $ 19,320,000 in aggregate cash dividends paid from the accumulated deficit balance to additional paid in capital.

The Company has assessed this misclassification, individually and in the aggregate, and concluded that this correction was not material to the current period or any prior period interim or annual financial statements.

On December 23, 2025, the Company’s Board of Directors declared that holders of Series A Preferred stock will receive a cash dividend equal to $ 550.00 per whole share;

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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.

Notes To The Consolidated Financial Statements

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

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.

Notes To The Consolidated Financial Statements

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.

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2019 Equity Incentive Plan

The 2019 Equity Incentive Plan (as amended, the “2019 EIP”) was originally approved by stockholders at the July 10, 2019 Annual Meeting, with amendments to the plan approved by stockholders at the July 12, 2022 Annual Meeting and the June 11, 2024 Annual Meeting.

The plan, as amended, provides for the grant and issuance of up to 7,200,000 shares and options to the Company’s employees, directors and consultants.

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Of the total 7,200,000 shares reserved under the 2019 EIP, 6,398,526 shares and restricted stock units (“RSUs”) have been awarded to the Company’s directors, employees and consultants as of December 31, 2025.

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 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 (“Supply Agreement Vesting Event”).

170,000 RSUs, including 85,000 related to the Supply Agreement Vesting Event, were accelerated and became fully vested as a result of an amended employee agreement entered into in February 2022 upon the change of the Executive Chair, 60,000 RSUs vested and were issued on January 3, 2023, and 170,000 RSUs vested and were issued on March 1, 2023.

85,000 of the RSUs related to the Supply Agreement Vesting Event were cancelled effective December 31, 2023 and the remaining 85,000 shares related to the Supply Agreement Vesting Event vested in March 2024.

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 vested on January 2, 2024.

In January 2024, 60,000 additional RSUs were granted to employees which vested on January 2, 2025.

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 and issued in July 2021 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 170,000 RSUs issued on March 1, 2023, the Company issued 102,871 shares net of taxes withheld and paid in cash by the Company.

Of the 85,000 RSUs earned and issued in March 2024 upon the Supply Agreement Vesting Event, the Company issued 62,624 shares net of taxes withheld and paid in cash by the Company.

Additionally, in April 2022 the Company issued 450,000 performance stock units (“PSUs”) upon achievement of certain performance events.

The PSUs were to vest upon the Company’s common stock achieving price hurdles (“Price Hurdles”) but not sooner than three years from date of grant date.

These PSUs were cancelled in April 2024 in conjunction with entering into an amended and rested employment agreement with the Company’s Chief Executive Officer which provided a grant of 1.6 million RSUs and PSUs with (a) 700,000 RSUs that vest over a three -year period from 2024 to 2026;

(b) 600,000 RSUs that will vest upon achievement of milestones related to completion of certain permits, entering into binding contracts for water delivery or storage, and delivery of water, and (c) 300,000 PSUs that will vest upon a Price Hurdle of $ 15 per share for 20 consecutive days.

Notes To The Consolidated Financial Statements

In January 2024, 60,000 RSUs were granted to employees which vested on January 2, 2025.

In April 2024, the Company granted 1.6 million RSUs and performance stock units (“PSUs”) in conjunction with entering into an amended and restated employment agreement with the Company’s Chief Executive Officer with (a) 700,000 RSUs that vest over a three -year period from 2024 to 2026;

(b) 600,000 RSUs that will vest upon achievement of milestones related to completion of certain permits, entering into binding contract for water delivery or storage, and delivery of water (“milestone RSUs”), and (c) 300,000 PSUs that will vest upon a Price Hurdle of $ 15 per share for 20 consecutive days.

In 2025, the Company’s Chief Executive Officer and the Company mutually agreed to cancel 300,000 PSUs and 10,000 RSUs so that the underlying shares can be utilized for grants to other key employees and consultants.

Of the 590,000 milestone RSUs, 50,000 vested and were issued in October 2025 upon achievement of certain milestones.

In September 2024, the Company granted 275,000 RSUs in conjunction with entering into an employment agreement with the Company’s Chief Operating Officer.

137,500 of these RSUs vest over a three -year period from September 2024 to September 2027 and the remaining 137,500 RSUs will vest upon achievement of milestones related to completion of certain permits, entering into binding contracts for water delivery or storage, and delivery of water.

400,000 RSUs were granted to a consultant on July 1, 2023 ( “July 2023 RSU Grant”).

Of the 400,000 RSUs granted under the July 2023 RSU Grant, 100,000 RSUs vested and were issued in October 2023, 200,000 RSUs vested and were issued in February 2024 and 100,000 RSUs vested and were issued in March 2024.

Additionally, 300,000 RSUs were granted to a consultant in January 2024 to vest upon achieving certain milestones.

As of September 30, 2024, all 300,000 of these RSUs vested and were issued upon entering into binding supply agreements for the Mojave Groundwater Bank.

150,000 RSUs were granted to consultants in January 2025 ( “January 2025 RSU Grant”).

Of the 150,000 RSUs granted under the January 2025 RSU Grant, 16,250 RSUs vested and were issued immediately, 50,000 RSUs vested in February 2025 upon achievement of certain milestones and 50,000 RSUs vested in July 2025 upon achievement of certain milestones.

The remaining 33,750 RSUs granted under the January 2025 RSU Grant vested in equal quarterly installments through December 2025.

In February 2025, 420,000 RSUs for bonus awards were granted to employees which vested and became issuable immediately.

Of these 420,000 RSUs, the Company issued 382,477 shares net of taxes withheld and paid in cash by the Company.

In March 2025, 145,000 RSUs were granted to consultants ( “March 2025 RSU Grant”).

Of the 145,000 RSUs granted under the March 2025 RSU Grant, 85,000 RSUs were subject to vesting upon achievement of certain milestones and 60,000 RSUs vest over a period of one year.

In June 2025, 55,000 of the shares underlying these RSUs vested upon achievement of certain milestones.

In September 2025, 150,000 RSUs and PSUs were granted to a consultant ( “September 2025 RSU Grant”).

Of the 150,000 units granted under the September 2025 RSU Grant, 25,000 RSUs vested on September 30, 2025.

The remaining 125,000 PSUs vest upon the company’s stock achieving certain price hurdles.

Notes To The Consolidated Financial Statements

In October 2025, 1,060,600 RSUs were granted to employees ( “October 2025 RSU Grant”).

Of the 1,060,600 RSUs granted under the October 2025 RSU Grant, 700,000 RUSs were subject to vesting upon achievement of milestones related to completion of certain permits, entering into binding contracts for water delivery and storage and delivery of water, and 360,600 RSUs vest in quarterly installments through December 31, 2027.

In October 2025, 50,000 of the shares underlying these RSUs vested upon achievement of certain milestones.

A summary of RSU activity under the plans during the years ended December 31, 2025 and 2024 is presented below:

4 unchanged sentences

( 1,627,216 ) $ 3.74

( 468,116 ) $ 7.19

Nonvested at December 31, 2024

3 unchanged sentences

( 78,335 ) $ 3.07

( 1,334,339 ) $ 4.00

Nonvested at December 31, 2025

4 unchanged sentences

Regulatory agencies periodically conduct inspections and, currently, there are no pending claims with respect to hazardous materials.

Notes To The Consolidated Financial Statements

Pursuant to cost-sharing agreements that have been entered into by participants in the Company’s Mojave Groundwater Bank, $ 625,000 in funds have been received in order to offset costs incurred in the environmental analysis of the Mojave Groundwater Bank.

These funds may either be reimbursed or credited to participants participation in the Mojave Groundwater Bank and, accordingly, are fully reflected as deferred revenue as of December 31, 2025 and December 31, 2024.

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.

$ 250 thousand of this liability was paid during 2024.

Notes To The Consolidated Financial Statements

In conjunction with the 26 -year right-of-way agreement with the United States Bureau of Land Management ("BLM") with respect to the Company’s Northern Pipeline asset, the Company deposited approximately $ 420,000 towards a performance and reclamation bond with the BLM which has been recorded in Other Long-Term Deposits/Prepaid Expenses.

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

3 unchanged sentences

The Company has operating leases for its right-of-way agreements, corporate offices and office equipment.

Effective February 1, 2024, the Company entered into a 26 -year right-of-way agreement with the United States Bureau of Land Management (“BLM”) with respect to the Company’s Northern Pipeline asset which resulted in recording right-of-use assets and lease liabilities in the amount of $ 1.9 million resulting from $ 4.8 million in future lease payments over the 26 years less imputed interest of $ 2.9 million based upon a 10 % weighted average discount rate.

Effective February 1, 2024, the Company entered into a 26 -year right-of-way agreement with the BLM with respect to the Company’s Northern Pipeline asset which resulted in recording right-of-use assets and lease liabilities in the amount of $ 1.9 million resulting from $ 4.8 million in future lease payments over the 26 years less imputed interest of $ 2.9 million based upon a 10 % weighted average discount rate.

The right-of-way agreement has an annual rent expense of approximately $ 185,000 , with annual defined inflation increases.

35 unchanged sentences

Long-term lease obligations

Notes To The Consolidated Financial Statements

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

1 unchanged sentence

The table below presents additional information related to the Company’s leases as of December 31, 2025:

Notes To The Consolidated Financial Statements

Weighted Average Remaining Lease Term Operating leases (in years)

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In 2022, 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.

$ 250 thousand of this liability was paid during 2024 and $ 1.2 million of this liability was paid during the second quarter of 2025 constituting payment in full of the remaining balance of this contingent consideration liability.

On October 27, 2025, the Company recorded a derivative liability in the amount of $ 7 million related to funding fee shares to be issued under the Lytton Credit Agreement (see Note 7 – Long-Term Debt, above).

$ 1.9 million of the derivative liability was reclassified to additional paid-in capital for the settlement of funding fee shares upon an initial borrowing of $ 15 million under the Lytton Credit Agreement.

The fair value of the derivative liability was estimated using the equity spot price approach, which involves remeasuring the liability at each reporting date based on the Company's closing common stock price.

The number of shares expected to be issued is determined in accordance with the funding fee formula specified in the debt agreement (i.e., 25,000 shares per $1 million of principal funded at each funding date).The change in fair value is recorded as an adjustment to the recorded derivative liability with the unrealized gains and losses reflected on the income statement.

Notes To The Consolidated Financial Statements

(in thousands)

2 unchanged sentences

Payment of contingent consideration liabilities

Derivative liabilities

Reclassification of derivative liabilities to additional paid-in capital 1,912

Unrealized gain on derivative liability 38

Balance at December 31, 2025

Notes To The Consolidated Financial Statements

Investments at Fair Value as of December 31, 2025

(in thousands)

Contingent consideration liabilities

Derivative Liabilities

$ - $ - $ 5,050 $ 5,050

1 unchanged sentence

$ - $ - $ 5,050 $ 5,050

NOTE 14 – SUBSEQUENT EVENTS

On March 7, 2025, the Company completed the sale and issuance of 5,715,000 shares of its common stock to certain institutional investors in a registered direct offering ( March 2025 Direct Offering).

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.

The Company intends to use the proceeds from the March 2024 Direct Offering 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 pipeline, which the Company expects to begin in 2025.

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

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