Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
  1. Homepage
  2. Equities
  3. United States
  4. Nasdaq
  5. Cadiz Inc.
  6. News
  7. Summary
    CDZI   US1275372076

CADIZ INC.

(CDZI)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

CADIZ : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/13/2021 | 09:01am EDT

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" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. 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 natural resources development company committed to providing sustainable water and agricultural opportunities in California.

We own approximately 45,000 acres of land with high-quality, naturally recharging groundwater resources in three areas of Southern California's Mojave Desert - the Cadiz Valley (35,000 acres), Danby Dry Lake (2,000 acres), and the Piute Valley (9,000 acres) ("Cadiz Property"). Our properties represent a unique private reserve of lands with vested water rights located in a remote area of eastern San Bernardino County that is at the crossroads of major highway, rail, energy, and water infrastructure supplying and delivering necessary resources to communities in California and across the Western United States. Our main objective is to realize the highest and best use of our land, water, and related infrastructure assets in an environmentally responsible way. Our present activities are focused on managing our assets to meet growing long-term demand for access to sustainable water supplies and agricultural products.

California faces systemic water challenges and is not able to safely, sustainably and reliably meet the water needs for all of its communities. We believe that the highest and best use of our assets will be realized by offering a combination of water supply, water storage and agricultural projects at our properties in ways that are sustainable and responsive to California's resource needs.

We are principally focused on developing a water project at our Cadiz Valley property that can help address California's persistent systemic water challenges and deliver new water to California communities in need of reliable water supplies and water infrastructure ("Water Project"). Through management of groundwater at the Cadiz Property, the Water Project would, in its first phase, or Phase 1, conserve and supply new water for approximately 400,000 people in communities in Southern California. A second phase of the Water Project, or Phase 2, would bank and store imported water for use in future dry years.

                                       18
--------------------------------------------------------------------------------


                                                                      Cadiz Inc.

--------------------------------------------------------------------------------

The Water Project has completed extensive permitting and environmental review in accordance with local, state and federal law and is approved to deliver a reliable supply of 50,000 acre-feet of water per year for 50 years to communities off of the Cadiz Property. Prior to construction and implementation, the Water Project must complete contracts with participating water agencies, conveyance arrangements to deliver water supplies to contracting water agencies, and arrange for facility construction, improvements, and financing.

We anticipate using two separate pipeline routes to convey water between the service areas of our participating agencies and the Cadiz Property. The first route, or the Southern Pipeline, requires the construction of a 43-mile, approximately 55-85" steel water conveyance pipeline within a portion of the Arizona & California Railroad Company's railroad right-of-way that crosses the Cadiz Property and intersects with the Colorado River Aqueduct ("CRA") in Rice, California. The CRA is owned by the Metropolitan Water District of Southern California ("MWD") and serves water providers in six southern California counties. The second route, or the Northern Pipeline, contemplates the use of an existing 220-mile, 30" steel pipeline that we acquired from El Paso Natural Gas ("EPNG") to convey water to the Cadiz Property for storage or between parties along the extensive 220-mile route. The Northern Pipeline extends from the Cadiz Property north-west to California's Central Valley, crossing the Mojave River Pipeline and the Los Angeles Aqueduct before terminating near the California State Water Project in Wheeler Ridge.

In December 2020, the U.S. Bureau of Land Management ("BLM") issued two right-of-way permits to our subsidiary Cadiz Real Estate LLC that assigned and granted rights to operate the Northern Pipeline and transport water consistently across the route over BLM-managed lands. The first right-of-way was issued pursuant to an assignment of a portion of an existing right-of-way held by EPNG and granted by BLM under the Mineral Leasing Act that enables the continued transportation of natural gas. The second right-of-way was issued under the Federal Land Policy and Management Act and authorizes the conveyance of water in the pipeline over BLM-managed lands.

With these BLM grants, conditions precedent in our Purchase & Sale Agreement with EPNG were principally satisfied allowing for completion of the Company's acquisition of the remaining 124-mile segment of the Northern Pipeline. We made final payment to EPNG of $19 million on June 30, 2021 and have completed payment for the asset. We are presently engaged in discussions with parties interested in using the Northern Pipeline for conveyance, storage and supply. Prior to conveyance of water through the Northern Pipeline, we must secure permits required by any definitive agreement to use the facility. All conveyance of water via the Northern Pipeline would be conducted in accordance with applicable local, state and federal laws.

We also remain engaged with parties interested in taking deliveries from the Water Project using the Southern Pipeline route and the CRA. Prior to construction of the Southern Pipeline, we must secure authorizations required to convey water in the CRA, including an agreement with MWD and authorization from the California State Lands Commission under Water Code Sections 1810 - 1815. We expect to pursue these approvals once definitive contracts with water providers are finalized.

Our agricultural operations provide the Company's principal source of revenue, although our working capital needs are not fully supported by our agricultural lease and farming returns at this time. We believe that the ultimate implementation of the Water Project will provide a significant source of future cash flow for the business and our stockholders. We presently rely upon debt and equity financing to support our working capital needs and development of the Water Project (see "Liquidity and Capital Resources", below).

                                       19
--------------------------------------------------------------------------------


                                                                      Cadiz Inc.

--------------------------------------------------------------------------------

Our current and future operations also include activities that further our commitments to sustainable stewardship of our land and water resources, good governance and corporate social responsibility. We believe these commitments are important investments that will assist in maintenance of sustained stockholder value.




Results of Operations



Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020

We have not received significant revenues from our water resource and real estate development activity to date. Our revenues have been limited to rental income from our agricultural leases. As a result, we have historically incurred a net loss from operations. We incurred a net loss of $11.6 million in the three months ended June 30, 2021, compared to a $4.8 million net loss during the three months ended June 30, 2020. The higher 2021 loss was primarily due to stock-based non-cash bonus awards to employees, together with an increase in interest expense related to our senior secured term loan.

Our primary expenses are our ongoing overhead costs associated with the development of the Water Project (i.e., general and administrative expense) and our interest expense. We will continue to incur non-cash expenses in connection with our management and director equity incentive compensation plans.

Revenues Revenue totaled $141 thousand during the three months ended June 30, 2021, compared to $148 thousand for the three months ended June 30, 2020. Revenues primarily related to rental income from our agricultural leases.

General and Administrative Expenses General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $3.1 million in the three months ended June 30, 2021, compared to $2.8 million in the three months ended June 30, 2020.

Compensation costs for stock and option awards for the three months ended June 30, 2021, were $3.3 million, compared to $0.3 million for the three months ended June 30, 2020. The higher 2021 expense was primarily due to stock-based non-cash bonus awards to employees.

Depreciation Depreciation expense totaled $103 thousand during the three months ended June 30, 2021, compared to $96 thousand during the three months ended June 30, 2020.

Interest Expense, net Net interest expense totaled $4.9 million during the three months ended June 30, 2021 compared to $1.7 million during the same period in 2020. The following table summarizes the components of net interest expense for the two periods (in thousands):



                                        Three Months Ended
                                             June 30,
                                         2021          2020

Interest on outstanding debt $ 2,939 $ 1,950 Unrealized gains on warrants, net

              -         (510 )
Amortization of debt discount                  6            6

Amortization of deferred loan costs 1,913 228


                                      $    4,858      $ 1,674


                                       20
--------------------------------------------------------------------------------


                                                                      Cadiz Inc.

--------------------------------------------------------------------------------

Income Taxes Income tax expense was $1 thousand for each of the three months ended June 30, 2021 and 2020, and were related to state income taxes. See Note 5 to the Condensed Consolidated Financial Statements - "Income Taxes".

Loss from Equity-Method Investments Loss from equity-method investments related to our 50% ownership in the SoCal Hemp JV LLC totaled $366 thousand for the three months ended June 30, 2021, compared to $73 thousand for the three months ended June 30, 2020.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

We incurred a net loss of $17.5 million in the six months ended June 30, 2021, compared to a $25.3 million net loss during the six months ended June 30, 2020. The higher 2020 loss was primarily due to a loss on early extinguishment of debt in the amount of $12.4 million, which was a non-cash charge, reflecting the excess of the fair value of new preferred stock issued over the historical book value of the related convertible debt retired pursuant to certain conversion and exchange agreements entered into in March 2020, offset primarily by higher stock-based non-cash bonus awards to employees in 2021.

Revenues Revenue totaled $280 thousand during the six months ended June 30, 2021, compared to $262 thousand for the six months ended June 30, 2020. Revenues primarily related to rental income from our agricultural leases.

General and Administrative Expenses General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $6.2 million in the six months ended June 30, 2021, compared to $5.5 million in the six months ended June 30, 2020.

Compensation costs for stock and option awards for the six months ended June 30, 2021, were $3.4 million, compared to $1.6 million for the six months ended June 30, 2020. The higher 2021 expense was primarily due to stock-based non-cash bonus awards to employees.

Depreciation Depreciation expense totaled $206 thousand during the six months ended June 30, 2021, compared to $175 thousand during the six months ended June 30, 2020.

Interest Expense, net Net interest expense totaled $7.4 million during the six months ended June 30, 2021 compared to $5.2 million during the same period in 2020. The following table summarizes the components of net interest expense for the two periods (in thousands):

                                       21
--------------------------------------------------------------------------------


                                                                      Cadiz Inc.

--------------------------------------------------------------------------------



                                               Six Months Ended
                                                   June 30,
                                               2021         2020

Interest on outstanding debt                 $   5,601     $ 4,608

Unrealized (gains) losses on warrants, net (573 ) 51 Amortization of debt discount

                       12         283
Amortization of deferred loan costs              2,360         304

                                             $   7,400     $ 5,246



Income Taxes Income tax expense was $3 thousand for each of the six months ended June 30, 2021 and 2020. See Note 5 to the Condensed Consolidated Financial Statements - "Income Taxes".

Loss from Equity-Method Investments Loss from equity-method investments related to our 50% ownership in the SoCal Hemp JV LLC totaled $569 thousand for the six months ended June 30, 2021, compared to $699 thousand for the six months ended June 30, 2020.

Liquidity and Capital Resources

Current Financing Arrangements

As we have not received significant revenues from our development activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence. Historically, we have addressed these needs primarily through secured debt financing arrangements and private equity placements.

In July 2020, we entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $30 million from time to time in an "at-the-market" offering (the "July 2020 ATM Offering") for further development of our land and agricultural assets, and for working capital purposes. As of June 30, 2021, we have sold the full $30 million in common stock authorized in the July 2020 ATM Offering through the sale of 2,748,339 shares resulting in aggregate net proceeds of approximately $29.2 million.

On June 7, 2021, we completed the sale and issuance of 1,219,512 shares of the Company's common stock to certain institutional investors under a placement agent agreement with B. Riley Securities, Inc. ("BRS"). The shares of common stock were sold at a purchase price of $12.30 per share, for aggregate gross proceeds of $15 million and aggregate net proceeds of approximately $14.1 million. We used the net proceeds from this offering, together with cash on hand, to fund the $19 million payment made on June 30, 2021 to complete the acquisition of a 124-mile extension of the Northern Pipeline.

                                       22
--------------------------------------------------------------------------------


                                                                      Cadiz Inc.

--------------------------------------------------------------------------------

On June 29, 2021, we entered into an Underwriting Agreement with BRS as representative of the several underwriters named there, to issue and sell an aggregate of 2,000,000 depositary shares (the "Depository Shares"), as well as up to 300,000 Depository Shares that may be sold pursuant to the exercise of an option to purchase additional Depositary Shares, each representing 1/1000th of a share of Series A Preferred Stock ("Depositary Share Offering"). The liquidation preference of each of each share of Series A Preferred Stock is $25,000 ($25.00 per Depositary Share). The Depositary Share Offering was completed on July 2, 2021 for net proceeds of approximately $54 million (see Note 10 to the Condensed Consolidated Financial Statements - "Subsequent Events").

In May 2017, we entered into a new $60 million credit agreement with funds affiliated with Apollo Global Management, LLC ("Apollo") that replaced and refinanced our then existing $45 million senior secured mortgage debt and provided $15 million of new senior debt to fund immediate construction related expenditures ("Senior Secured Debt"). We entered into two further agreements with Apollo which provided us with the right, at our option, to extend the maturity of the Senior Secured Debt from its then current maturity of May 25, 2021 to May 25, 2022, and to November 25, 2022, respectively. On May 18, 2021, we exercised our first extension option to extend the maturity date to May 25, 2022. At June 30, 2021, we were in compliance with our debt covenants.

On July 2, 2021, we entered into the $50 million New Loan (see Note 10 to the Condensed Consolidated Financial Statements - "Subsequent Events"). The proceeds of the New Loan, together with the proceeds from the Depositary Share Offering, were used to (a) to repay all our outstanding obligations under our existing Senior Secured Debt in the amount of approximately $77.5 million (b) to deposit approximately $10.2 million into a segregated account, representing an amount sufficient to pre-fund eight quarterly dividend payments on the Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering, and (c) to pay transaction related expenses. The remaining proceeds will be used for working capital needs and for general corporate purposes.

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 New Loan 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 in Operating Activities. Cash used in operating activities totaled $6.0 million and $7.0 million for the six months ended June 30, 2021 and 2020, respectively. The cash was primarily used to fund general and administration expenses related to our water development efforts and agricultural development efforts.

Cash Used in Investing Activities. Cash used in investing activities totaled $20.4 million for the six months ended June, 2021, and $7.0 million for the six months ended June 31, 2020. The cash used in the 2021 period primarily related to the Northern Pipeline acquisition. The 2020 period included additions to our interests in SoCal Hemp JV LLC, well development and professional water quality and structural testing of a five-mile segment of pipeline.

                                       23
--------------------------------------------------------------------------------


                                                                      Cadiz Inc.

--------------------------------------------------------------------------------

Cash Provided by Financing Activities. Cash provided by financing activities totaled $30.3 million for the six months ended June 30, 2021, compared with cash provided of $3.9 million for the six months ended June 30, 2020. Proceeds from financing activities for both periods reported are related to the issuance of shares under at-the-market and direct offerings.



Outlook


Short-Term Outlook. The completion of both the Depositary Share Offering and the New Loan (see Note 10 to the Condensed Consolidated Financial Statements - "Subsequent Events"), provided the Company with net cash proceeds of approximately $20 million. These net cash proceeds, together with cash on hand of approximately $11.2 million as of June 30, 2021, provide us with sufficient funds to meet our short-term working capital needs.

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 Water Project and further expansion of our agricultural assets.

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 will be undertaken only to the extent necessary, so as to minimize the dilutive 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.

Recent Accounting Pronouncements

See Note 1 to the Condensed Consolidated Financial Statements - "Basis of Presentation".

© Edgar Online, source Glimpses

All news about CADIZ INC.
10/08CADIZ : CEO Scott Slater on Sirius XM's Wharton Business Radio
PU
09/27CADIZ : Declares Quarterly Dividend on Series A Cumulative Perpetual Preferred Stock
PR
09/15CADIZ : Systemic Water Shortage in California Intensifies
PU
09/13CADIZ : Says No Material Developments Contributing to Trading Volatility
MT
09/13CADIZ INC. : Issues Statement on Recent Stock Volatility
PR
09/06RENEWABLES INFRASTRUCTURE : Acquires Four Solar Projects From Statkraft
MT
08/13CADIZ : Management's Discussion and Analysis of Financial Condition and Results of Operati..
AQ
08/13Cadiz Inc. Reports Earnings Results for the Second Quarter Ended June 30, 2021
CI
07/12CADIZ INC.(NASDAQGM : CDZI.P) dropped from NASDAQ Composite Index
CI
07/09CADIZ INC.(NASDAQGM : CDZI.P) added to NASDAQ Composite Index
CI
More news