CADIZ INC. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the following discussion contains trend analysis and other forward-looking statements. Forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. These include, among others, our ability to maximize value from our land and water resources and our ability to obtain new financings as needed to meet our ongoing working capital needs. See additional discussion under the heading "Risk Factors" above. Our forward-looking statements are made only as of the date hereof. 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 dedicated to delivering clean, reliable, and affordable water for people through a variety of innovative water supply, storage, conveyance and treatment projects. We are advancing human access to clean water with our unique combination of land, water, infrastructure and technology assets, cutting-edge innovation, and industry-leading standards of environmental stewardship.
We own approximately 46,000 acres of land with access to high-quality,
naturally-recharging groundwater resources in three areas of
Water Supply - We own vested water rights to withdraw 2.5 million acre-feet of
groundwater to support farming and off property uses. Because all water in the
aquifer system will eventually be lost to evaporation, surplus water that is
captured and withdrawn before it evaporates is a new water supply known as
"conserved" water. We have completed extensive environmental review in
accordance with local, state and federal laws authorizing the management of the
groundwater aquifer underlying the
Groundwater Storage - The alluvium aquifer that lies beneath the Cadiz Property is also large enough for conjunctive use as a water "banking" facility, capable of storing an additional 1 million acre-feet of imported surplus water for delivery during drought periods.
23
--------------------------------------------------------------------------------Cadiz Inc.
--------------------------------------------------------------------------------
Pipeline Conveyance - We also own a 30" steel natural gas pipeline ("Northern
Pipeline") that extends 220-miles from the
We are currently in discussions with multiple public water agencies to enter
into agreements whereby project participating agencies would finance and operate
the Northern Pipeline and lease 25,000 AFY of annual water supply from us. In
accordance with such potential agreements, we expect that we will contribute the
Northern Pipeline and an annual supply of 25,000 AFY of water from us into a
mutual water company to be owned jointly by the parties. In such event, we
expect that a JPA comprised of participating agencies will be able to purchase,
for a 40-year term (take or pay), 25,000 AFY of water at our wellhead at an
agreed upon market price estimated to start at approximately
Treatment - In the fourth quarter of 2022, we completed the acquisition of the
assets of
Our agricultural operations provide the Company's current principal source of
revenue, although our working capital needs are not fully supported by our
agricultural lease and farming returns at this time. We believe that our water
supply, storage, pipeline conveyance and treatment solutions will provide a
significant source of future cash flow for the business and our stockholders. We
presently rely upon debt and equity financing to support our working capital
needs and development of our water solutions. In
Our current and future operations also include activities that further our commitments to sustainable stewardship of our land and water resources, good governance and corporate social responsibility. We believe these commitments are important investments that will assist in maintenance of sustained stockholder value.
24
--------------------------------------------------------------------------------Results of Operations
Year Ended
We have not received significant revenues from our water supply, storage,
treatment or conveyance assets to date. Our revenues have been limited to rental
income from our agricultural leases and from sales from our alfalfa plantings
beginning in 2022. As a result, we have historically incurred a net loss from
operations. The net loss totaled
Our primary expenses are our ongoing overhead costs associated with the development of our water supply, storage or conveyance assets (i.e., general and administrative expense) and our interest expense. We will continue to incur non-cash expense in connection with our management and director equity incentive compensation plans.
Revenues. Revenue totaled
Cost of Sales. Cost of sales totaled
General and Administrative Expenses. General and administrative expenses during
the year ended
Compensation costs from stock and option awards for the year ended
Interest Expense. Interest expense totaled
25
--------------------------------------------------------------------------------Cadiz Inc.
--------------------------------------------------------------------------------
Year Ended
December 31,
2022 2021
Interest on outstanding debt
- (573 )
Amortization of debt discount 2,414 1,110
Amortization of deferred loan costs - 2,364
$ 8,263 $ 11,386
Gain (Loss) from Equity-Method Investments. Gain from equity-method investments
related to our 50% ownership in the
Liquidity and Capital Resources
(a) Current Financing Arrangements
As we have not received significant revenues from our development or treatment activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence. Historically, we have addressed these needs primarily through secured debt financing arrangements and private equity placements.
On
On
26
--------------------------------------------------------------------------------Cadiz Inc.
--------------------------------------------------------------------------------
On
On
On
On
The remaining proceeds from the
On
27
--------------------------------------------------------------------------------Cadiz Inc.
--------------------------------------------------------------------------------
Under the First Amended Credit Agreement, the maturity date of the Credit
Agreement has been extended from
Limitations on our liquidity and ability to raise capital may adversely affect us. 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. If additional capital is required, no assurances can be given as to the availability and terms of any new financing.
As we continue to actively pursue our business strategy, additional financing will continue to be required (see "Outlook", below). The covenants in the Credit Agreement do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any common equity financing. We do not expect the loan covenants to materially limit our ability to finance our water and agricultural development activities.
Cash Used for Operating Activities. Cash used for operating activities totaled
Cash Used for Investing Activities. Cash used for investing activities in the
year ended
Cash Provided by Financing Activities. Cash provided by financing activities
totaled
28
--------------------------------------------------------------------------------Cadiz Inc.
--------------------------------------------------------------------------------
(b) Outlook
Short-Term Outlook. The
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). Our future working capital needs will depend
upon the specific measures we pursue in the entitlement and development of our
water resources and other developments. Future capital expenditures will depend
on the progress of the
We are evaluating the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. We may meet any future cash requirements through a variety of means, including equity or debt placements, or through the sale or other disposition of assets. Equity placements would be undertaken only to the extent necessary, so as to minimize the dilution effect of any such placements upon our existing stockholders. No assurances can be given, however, as to the availability or terms of any new financing. Limitations on our liquidity and ability to raise capital may adversely affect us. Sufficient liquidity is critical to meet our resource development activities.
(c) Critical Accounting Estimates
As discussed in Note 2 to our Consolidated Financial Statements, "Summary of
Significant Accounting Policies", the preparation of financial statements in
conformity with accounting principles generally accepted in
(1) Liquidity. Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from the financial statement issuance date. Management evaluates the Company's liquidity to determine if there is a substantial doubt about the Company's ability to continue as a going concern. In the preparation of this liquidity assessment, management applies judgement to estimate the 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.
29
--------------------------------------------------------------------------------Cadiz Inc.
--------------------------------------------------------------------------------
Limitations on the Company's liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet the Company's activities. Although the Company currently expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that its liquidity requirements will continue to be satisfied. If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately impact its viability as a company.
(2) Business Combinations The results of acquired businesses are included in our Consolidated Financial Statements from their acquisition date. Assets and liabilities of an acquired business are recorded at their estimated fair values on the acquisition date. We engage third-party valuation specialists to assist us in determining these fair values as necessary. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.
The allocation of purchase price, including contingent consideration arrangements, requires management to make significant estimates and assumptions. While we believe our assumptions and estimates are reasonable, they are inherently uncertain and based in part on experience, market conditions, projections of future performance and information obtained from management of the acquired companies.
(3) Long-Lived Assets. Property, plant and equipment, and water program assets are depreciated or amortized over their useful lives. Useful lives are based on management's estimates of the period over which the assets will generate revenue. Assets are placed into service when they are in a condition or state of readiness for a specifically assigned function on a regular and ongoing basis.
(d) New Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements, "Summary of Significant Accounting Policies".
© Edgar Online, source
