Cadiz Inc 10-Q for FY2024 Q3
Cadiz Inc (CDZIP)
About this 10-Q
Cadiz Inc filed this 10-Q on November 13, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.22M
- up 776.1% from $368K a year earlier
- Net loss
- $6.79M
- compared with a net loss of $6.94M a year earlier
united states
Securities and Exchange Commission
Washington, D. C. 20549
FORM
(Mark One)
| | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended
OR
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from …… to …….
Commission File Number
Cadiz Inc.
(Exact name of registrant specified in its charter)
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| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
| |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
☐ Large accelerated filer ☐ Accelerated filer ☑
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes
As of November 8, 2024, the Registrant had
| Page |
| PART I – FINANCIAL INFORMATION |
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| ITEM 1. Financial Statements |
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| Cadiz Inc. Condensed Consolidated Financial Statements |
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| Unaudited Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
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| Unaudited Notes to the Condensed Consolidated Financial Statements |
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| ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| ITEM 3. Quantitative and Qualitative Disclosures about Market Risk |
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| PART II – OTHER INFORMATION |
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| ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| ($ in thousands, except per share data) | 2024 | 2023 | ||||||
| Total revenues | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of sales | ||||||||
| General and administrative | ||||||||
| Depreciation | ||||||||
| Total costs and expenses | ||||||||
| Operating loss | ( | ) | ) | |||||
| Interest expense, net | ( | ) | ) | |||||
| Loss before income taxes | ( | ) | ) | |||||
| Income tax expense | ( | ) | ) | |||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ) | |||
| Less: Preferred stock dividend | ( | ) | ) | |||||
| Net loss and comprehensive loss applicable to common stock | $ | ( | ) | $ | ) | |||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ) | |||
| Basic and diluted weighted average shares outstanding | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
| For the Nine Months |
||||||||
| Ended September 30, |
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| ($ in thousands, except per share data) |
2024 |
2023 |
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| Total revenues |
$ | $ | ||||||
| Costs and expenses: |
||||||||
| Cost of sales |
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| General and administrative |
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| Depreciation |
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| Total costs and expenses |
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| Operating loss |
( |
) | ) | |||||
| Interest expense, net |
( |
) | ) | |||||
| Loss on derivative liability |
( |
) | ||||||
| Loss on early extinguishment of debt |
( |
) | ||||||
| Loss before income taxes |
( |
) | ) | |||||
| Income tax expense |
( |
) | ) | |||||
| Net loss and comprehensive loss |
$ | ( |
) | $ | ) | |||
| Less: Preferred stock dividend |
( |
) | ) | |||||
| Net loss and comprehensive loss applicable to common stock |
$ | ( |
) | $ | ) | |||
| Basic and diluted net loss per common share |
$ | ( |
) | $ | ) | |||
| Basic and diluted weighted average shares outstanding |
||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Balance Sheets (Unaudited)
| September 30, | December 31, | |||||||
| ($ in thousands, except per share data) | 2024 | 2023 | ||||||
| ASSET | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant, equipment and water programs, net | ||||||||
| Long-term deposit/prepaid expenses | ||||||||
| Goodwill | ||||||||
| Right-of-use asset | ||||||||
| Long-term restricted cash | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Current portion of long-term debt | ||||||||
| Dividend payable | ||||||||
| Contingent consideration liabilities | ||||||||
| Deferred revenue | ||||||||
| Operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Long-term lease obligations with related party, net | ||||||||
| Long-term operating lease liabilities | ||||||||
| Deferred revenue | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - $ par value; shares authorized at September 30, 2024 and December 31, 2023; shares issued and outstanding – at September 30, 2024 and December 31, 2023 | ||||||||
| % Series A cumulative, perpetual preferred stock - $ par value; shares authorized at September 30, 2024 and December 31, 2023; shares issued and outstanding – at September 30, 2024 and December 31, 2023 | ||||||||
| Common stock - $ par value; shares authorized at September 30, 2024 and authorized at December 31, 2023; shares issued and outstanding – at September 30, 2024 and at December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (Unaudited)
| For the Nine Months |
||||||||
| Ended September 30, |
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| ($ in thousands) |
2024 |
2023 |
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| Cash flows from operating activities: |
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| Net loss |
$ | ( |
) | ( |
) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation |
||||||||
| Amortization of debt discount and issuance costs |
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| Amortization of right-of-use asset |
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| Interest expense added to loan principal |
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| Interest expense added to lease liability |
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| Finance expense |
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| Unrealized loss on derivative liability |
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| Loss on early extinguishment of debt |
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| Compensation charge for stock and share option awards |
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| Changes in operating assets and liabilities: |
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| Accounts receivable |
( |
) | ||||||
| Inventories |
( |
) | ( |
) | ||||
| Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
| Other assets |
( |
) | ||||||
| Accounts payable |
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| Lease liabilities |
( |
) | ( |
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| Deferred revenue |
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| Other accrued liabilities |
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| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: |
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| Additions to property, plant and equipment and water programs |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
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| Net proceeds from issuance of stock |
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| Dividend payments |
( |
) | ( |
) | ||||
| Proceeds from the issuance of long-term debt |
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| Principal payments on long-term debt |
( |
) | ( |
) | ||||
| Issuance costs long-term debt |
( |
) | ( |
) | ||||
| Costs for early extinguishment of debt |
( |
) | ||||||
| Taxes paid related to net share settlement of equity awards |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
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| Net decrease in cash, cash equivalents and restricted cash |
( |
) | ( |
) | ||||
| Cash, cash equivalents and restricted cash, beginning of period |
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| Cash, cash equivalents and restricted cash, end of period |
$ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
For the three and nine months ended September 30, 2024 ($ in thousands, except share data)
| 8.875% Series A Cumulative | Additional | Total | ||||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Perpetual Preferred Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Stock-based compensation expense, net of taxes | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Issuance of warrants | - | - | - | |||||||||||||||||||||||||||||||||
| Shares to be issued to lenders | ||||||||||||||||||||||||||||||||||||
| Issuance of shares to consultants | ||||||||||||||||||||||||||||||||||||
| Capitalization of gain on extinguishment of debt | - | - | - | |||||||||||||||||||||||||||||||||
| Dividends declared on % series A cumulative perpetual preferred shares ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense, net of taxes | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Dividends declared on % series A cumulative perpetual preferred shares ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||||||
| Dividend declared on % series A cumulative perpetual preferred shares ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of September 30, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
For the three and nine months ended September 30, 2023 ($ in thousands, except share data)
| 8.875% Series A Cumulative | Additional | Total | ||||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Perpetual Preferred Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Issuance of shares pursuant to direct offerings | ||||||||||||||||||||||||||||||||||||
| Dividends declared on % series A cumulative perpetual preferred shares ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Dividends declared on % series A cumulative perpetual preferred shares ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Reclassification of derivative liability | - | - | - | |||||||||||||||||||||||||||||||||
| Dividends declared on % series A cumulative perpetual preferred shares ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | ( | ) | |||||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Notes to the Consolidated Financial Statements
NOTE 1 – BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements and notes have been prepared by Cadiz Inc., also referred to as “Cadiz” or “the Company”, without audit and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The foregoing Condensed Consolidated Financial Statements include the accounts of the Company and contain all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair statement of the Company’s financial position, the results of its operations and its cash flows for the periods presented and have been prepared in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements. The results of operations for the nine months ended September 30, 2024, are not necessarily indicative of results for the entire fiscal year ending December 31, 2024.
Liquidity
The Condensed Consolidated Financial Statements of the Company have been prepared using accounting principles applicable to a going concern, which assumes realization of assets and settlement of liabilities in the normal course of business.
The Company incurred losses of $
Cash requirements during the nine months ended September 30, 2024, 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 Banking Project (formerly called the Cadiz Water Conservation & Storage Project), ("Mojave Groundwater Banking Project" or “Water Project”), agricultural operations and water filtration business. The Company’s present activities are focused on the development of its assets in ways that meet a need for groundwater storage capacity in Southern California and growing demands for affordable, reliable, long-term water supplies in the Southwestern United States.
Cadiz Inc.
On January 30, 2023, the Company completed the sale and issuance of
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 $
On March 6, 2024, the Company entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”). The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from HHC $ Fund 2012 (“Heerema”) in an aggregate principal amount of $
On November 5, 2024, the Company completed the sale and issuance of
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, deferring the timing of preferred stock dividend payments (see Note 9 – Common and Preferred Stock) 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 solutions and agricultural development activities.
Cadiz Inc.
Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from each financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is a substantial doubt about the Company’s ability to continue as a going concern. In the preparation of this liquidity assessment, management applies judgement to estimate the projected cash flows of the Company including the following: (i) projected cash inflows and outflows and their timing, (ii) categorization of expenditures as discretionary versus non-discretionary and (iii) 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.
Limitations on the Company’s liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet the Company’s resource development 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 its viability as a company.
Supplemental Cash Flow Information
During the nine months ended September 30, 2024, approximately $
At September 30, 2024, accruals for cash dividends payable on the Series A Preferred Stock was $
The balance of cash, cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows is comprised of the following:
| Cash, Cash Equivalents and Restricted Cash | September 30, 2024 | December 31, 2023 | September 30, 2023 | |||||||||
| (in thousands) | ||||||||||||
| Cash and Cash Equivalents | $ | $ | $ | |||||||||
| Restricted Cash | ||||||||||||
| Long Term Restricted Cash | ||||||||||||
| Cash, Cash Equivalents and Restricted Cash in the Consolidated Statement of Cash Flows | $ | $ | $ | |||||||||
In conjunction with the Third Amended Credit Agreement, the Company issued warrants to Heerema and paid a consent fee with common stock which are non-cash financing activities. See Note 3 – “Long Term Debt” for additional discussion of these non-cash financing activities.
Cadiz Inc.
Recent Accounting Pronouncements
Accounting Guidance Not Yet Adopted
In November 2023, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ASU 2023-07, Segment Reporting (Topic 280)(“ASU 2023-07”). ASU 2023-07 modifies the disclosure and presentation requirements of reportable segments. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within those financial years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing this new guidance and expects this new standard will not have a material impact on the consolidated financial statements.
In December 2023, the FASB issued 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 new standard will not have a material impact on the consolidated financial statements.
NOTE 2 – REPORTABLE SEGMENTS
The Company currently operates in reportable segments based upon its organizational structure and the way in which its operations are managed and evaluated. The Company’s largest segment is Land and Water Resources, which comprises all activities regarding its properties in the eastern Mojave Desert including pre-revenue development of the Water Project (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 acquired the assets of ATEC Systems, Inc. in November 2022 into its new subsidiary ATEC. There were no intersegment sales during the nine months ended September 30, 2024, and $
We evaluate our performance based on segment operating (loss). Interest expense, income tax expense and losses related to equity method investments are excluded from the computation of operating (loss) for the segments. Segment net revenue, segment operating expenses and segment operating (loss) information consisted of the following for the three and nine months ended September 30, 2024 and 2023:
Cadiz Inc.
| Three Months Ended September 30, 2024 | ||||||||||||
| (in thousands) | Land and Water Resources | Water Filtration Technology | Total | |||||||||
| Revenues | $ | $ | $ | |||||||||
| Costs and expenses: | ||||||||||||
| Cost of sales | ||||||||||||
| General and administrative | ||||||||||||
| Depreciation | ||||||||||||
| Total costs and expenses | ||||||||||||
| Operating income (loss) | $ | ( | ) | $ | $ | ( | ) | |||||
| Three Months Ended September 30, 2023 | ||||||||||||
| (in thousands) | Land and Water Resources | Water Filtration Technology | Total | |||||||||
| Revenues | $ | $ | $ | |||||||||
| Costs and expenses: | ||||||||||||
| Cost of sales | ||||||||||||
| General and administrative | ||||||||||||
| Depreciation | ||||||||||||
| Total costs and expenses | ||||||||||||
| Operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Nine Months Ended September 30, 2024 | ||||||||||||
| (in thousands) | Land and Water Resources | Water Filtration Technology | Total | |||||||||
| Revenues | $ | $ | $ | |||||||||
| Costs and expenses: | ||||||||||||
| Cost of sales | ||||||||||||
| General and administrative | ||||||||||||
| Depreciation | ||||||||||||
| Total costs and expenses | ||||||||||||
| Operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Cadiz Inc.
| Nine Months Ended September 30, 2023 | ||||||||||||
| (in thousands) | Land and Water Resources | Water Filtration Technology | Total | |||||||||
| Revenues | $ | $ | $ | |||||||||
| Costs and expenses: | ||||||||||||
| Cost of sales | ||||||||||||
| General and administrative | ||||||||||||
| Depreciation | ||||||||||||
| Total costs and expenses | ||||||||||||
| Operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Assets by operating segment are as follows (dollars in thousands):
| September 30, 2024 | December 31, 2023 | |||||||
| Operating Segment: | ||||||||
| Water and Land Resources | $ | $ | ||||||
| Water Filtration Technology | ||||||||
| $ | $ | |||||||
Goodwill by operating segment is as follows (dollars in thousands):
| September 30, 2024 | December 31, 2023 | |||||||
| Operating Segment: | ||||||||
| Water and Land Resources | $ | $ | ||||||
| Water Filtration Technology | ||||||||
| $ | $ | |||||||
Property, plant, equipment and water programs consist of the following (dollars in thousands):
| September 30, 2024 | ||||||||
| Water and Land Resources | Water Filtration Technology | |||||||
| Land and land improvements | $ | $ | ||||||
| Water programs | ||||||||
| Pipeline | ||||||||
| Buildings | ||||||||
| Leasehold improvements, furniture and fixtures | ||||||||
| Machinery and equipment | ||||||||
| Construction in progress | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Cadiz Inc.
| December 31, 2023 | ||||||||
| Water and Land Resources | Water Filtration Technology | |||||||
| Land and land improvements | $ | $ | ||||||
| Water programs | ||||||||
| Pipeline | ||||||||
| Buildings | ||||||||
| Leasehold improvements, furniture and fixtures | ||||||||
| Machinery and equipment | ||||||||
| Construction in progress | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
NOTE 3 – LONG-TERM DEBT
The carrying value of the Company’s senior secured debt and the Company's convertible note instrument approximates fair value.
On July 2, 2021, the Company entered into a $
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
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 $
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”). In connection with the First Amended Credit Agreement, the Company repaid $
Cadiz Inc.
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 $
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 $
On March 6, 2024, the Company entered into the Third Amended Credit Agreement. Before entering into the Third Amended Credit Agreement, Heerema purchased the outstanding secured non-convertible term loans under the Credit Agreement (“Assignment”) at a discount on behalf of the Company. The Assignment was considered a debt extinguishment resulting in a gain of $
The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from Heerema in an aggregate principal amount of $
Cadiz Inc.
In connection with the debts issued to Heerema, the Company issued a warrant to purchase
In the event of certain asset sales, the incurrence of indebtedness or a casualty or condemnation event, in each case, under certain circumstances as described in the Credit Agreement, the Company will be required to use a portion of the proceeds to prepay amounts under the secured debt. In the event of any additional issuance of depositary receipts (“Depositary Receipts”) representing interests in shares of
The Credit Agreement includes customary affirmative and negative covenants, including delivery of financial statements and other reports. The negative covenants limit the ability of the Company to, among other things, incur debt, incur liens, make investments, sell assets, pay dividends and enter into transactions with affiliates. In addition, the Credit Agreement includes customary events of default and remedies. The Company was in compliance with all covenants under the Credit Agreement as of September 30, 2024.
NOTE 4 – STOCK-BASED COMPENSATION PLANS
The Company has issued options and has granted stock awards pursuant to its 2019 Equity Incentive Plan, as described below.
2019 Equity Incentive Plan
The 2019 Equity Incentive Plan (“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
Effective July 1, 2021, under the 2019 EIP, each outside director receives $
Cadiz Inc.
Stock Awards to Directors, Officers, and Consultants
The Company has granted stock awards pursuant to its 2019 EIP.
Of the total
Additionally, in July 2022,
Of the
Additionally, in April 2022 the Company issued
Cadiz Inc.
In September 2024, the Company granted
Additionally,
The accompanying consolidated statements of operations and comprehensive loss include approximately $
NOTE 5 – INCOME TAXES
As of September 30, 2024, the Company had net operating loss (“NOL”) carryforwards of approximately $
As of September 30, 2024, the Company’s unrecognized tax benefits were immaterial.
The Company's tax years through 2023 remain subject to examination by the Internal Revenue Service, and tax years through 2023 remain subject to examination by California tax jurisdictions. In addition, the Company's loss carryforward amounts are generally subject to examination and adjustment for a period of years for federal tax purposes and years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.
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 all deferred assets. Accordingly, deferred tax asset has been reflected in the accompanying condensed consolidated balance sheet.
Cadiz Inc.
NOTE 6 – NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing the net loss by the weighted-average common shares outstanding. Options, deferred 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
NOTE 7 – LEASES & PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS
Effective February 1, 2024, the Company entered into a
The Company has operating leases for right-of-way agreements, corporate offices, vehicles and office equipment. The Company’s leases have remaining lease terms of
As a lessor, in February 2016, the Company entered into a lease agreement with Fenner Valley Farms LLC (“FVF”) (the “lessee”), pursuant to which FVF is leasing, for a
Depreciation expense on land improvements, buildings, leasehold improvements, machinery and equipment and furniture and fixtures was $
NOTE 8 – FAIR VALUE MEASUREMENTS
Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. The Company considers a security that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
Cadiz Inc.
In 2022, the Company recorded a contingent consideration liability in the amount of $
| Investments at Fair Value as of September 30, 2024 | ||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities | ||||||||||||||||
| Contingent consideration liabilities | $ | $ | $ | $ | ||||||||||||
| Total Liabilities | $ | $ | $ | $ | ||||||||||||
NOTE 9 – COMMON AND PREFERRED STOCK
Common Stock
The Company is authorized to issue
Series 1 Preferred Stock
The Company has issued a total of
Series A Preferred Stock
On June 29, 2021, the Company entered into an Underwriting Agreement with BRS as representative of the several underwriters named there, to issue and sell an aggregate of
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. The Certificate of Designation classified a total of
Cadiz Inc.
As set forth in the Certificate of Designation, the Series A Preferred Stock will rank, as to dividend rights and rights upon the Company’s liquidation, dissolution or winding up: (i) senior to Common Stock of the Company; (ii) junior to the Series 1 Preferred Stock with respect to the distribution of assets upon the Company’s voluntary or involuntary liquidation, dissolution or winding up; (iii) senior to the Series 1 Preferred Stock with respect to the payment of dividends and (iv) effectively junior to all the Company’s existing and future indebtedness (including indebtedness convertible into Common Stock or preferred stock) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) the Company’s existing or future subsidiaries.
Holders of Series A Preferred Stock, when and as authorized by the Company’s Board of Directors, are entitled to cumulative cash dividends at the rate of
Dividends on the Series A Preferred Stock underlying the depositary shares will continue to accumulate whether or not (i) any of our agreements prohibit the current payment of dividends, (ii) we have earnings or funds legally available to pay the dividends, or (iii) our Board of Directors does not declare the payment of the dividends.
Holders of depositary shares representing interests in the Series A Preferred Stock generally will have no voting rights. However, if we do not pay dividends on any outstanding shares of Series A Preferred Stock for six or more quarterly dividend periods (whether or not declared or consecutive), holders of the Series A Preferred Stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to elect two additional directors to the Board of Directors to serve until all unpaid dividends have been fully paid or declared and set apart for payment.
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 $
Cadiz Inc.
Shares of Series A Preferred Stock are convertible into shares of Common Stock if, and only if, a change of control or delisting event (each as defined in the Certificate of Designation) has occurred, and the Company has not elected to redeem the Series A Preferred Stock prior to the applicable conversion date. Upon any conversion, each share of Series A Preferred Stock will be converted into that number of shares of Common Stock equal to the lesser of (i) the quotient obtained by dividing (A) the sum of (x) the $
The Company has
NOTE 10 – COMMITMENTS AND CONTINGENCIES
In the normal course of its agricultural operations, the Company handles, stores, transports and dispenses products identified as hazardous materials. Regulatory agencies periodically conduct inspections and, currently, there are no pending claims with respect to hazardous materials.
Pursuant to cost-sharing agreements that have been entered into by participants in the Company’s Water Project, $
The Company recorded a contingent consideration liability in the amount of $
The Company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business. At this time, the Company is not aware of any other pending or threatened litigation that it expects will have a material adverse effect on its business, financial condition, liquidity, or operating results. Legal claims are inherently uncertain, however, and it is possible that the Company’s business, financial condition, liquidity and/or operating results could be adversely affected in the future by legal proceedings.
NOTE 11 – SUBSEQUENT EVENTS
On November 5, 2024, the Company completed the sale and issuance of
Cadiz Inc.
The Company intends to use the proceeds from the November 2024 Direct Offering to advance development of its water supply and groundwater banking project which may include acquisition of equipment and materials intended to be used in construction of facilities related to its northern and/or southern pipeline projects 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 it and its subsidiaries, business development activities, other capital expenditures, working capital, the expansion of the business and acquisitions, and general corporate purposes.
On November 10, 2024, the Company entered into an agreement that grants the Company an exclusive option to purchase 180 miles of existing 36-inch steel pipe expected to be utilized in the construction of the Mojave Groundwater Banking Project. This agreement has an initial two-year option term with a right to extend for up to an additional year through three 120-day extensions. The Company will make an initial payment of $
Cadiz Inc.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 as well as Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. 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 with a unique combination of land, water, pipeline and water filtration technology assets principally located in Southern California between water systems serving population centers in the Southwestern United States. Our portfolio of assets includes 2.5 million acre-feet of water supply (permits complete), 220 miles of existing, buried pipeline, 1 million acre-feet of groundwater storage capacity, and versatile, scalable and cost-effective water filtration technology.
We manage our landholdings, groundwater supply, pipeline and water filtration technology assets to offer a suite of integrated products and services to public water systems, government agencies and commercial customers that include reliable water supply, water storage, water conveyance and custom-designed water filtration technology systems.
Water Supply – We own vested water rights to withdraw 2.5 million acre-feet of groundwater at our property in the Cadiz Valley (“Cadiz Property” or “Cadiz Ranch”) for beneficial uses, including agricultural development on the Cadiz Property and to export to serve communities across Southern California. Because groundwater in the alluvium aquifer system beneath the Cadiz Property will continue to be lost to evaporation, surplus water that is captured and withdrawn before it evaporates is a new water supply (“conserved” water). We have completed environmental review in accordance with local, state and federal laws authorizing the management of the groundwater aquifer underlying the Cadiz Property which is expected to produce an average of 50,000 acre-feet of water per year (“AFY”) for 50 years for beneficial use in Southern California communities.
Water Storage – The aquifer beneath the Cadiz Property is part of a watershed estimated to contain 30-50 million acre-feet of groundwater already in storage and has been permitted for use as a water “banking” facility, capable of storing water “in-lieu” for supply customers and also up to 1 million acre-feet of imported surplus water for return during drought periods. For comparison, Lake Mead – the largest surface reservoir in the United States – can store up to 26 million acre-feet of water and is used by the Metropolitan Water District of Southern California to store approximately 1.2 million acre-feet of surface water.
Cadiz Inc.
Water Conveyance Infrastructure – We own an existing 220-mile 30-inch steel pipeline (“Northern Pipeline”), that intersects several water storage and conveyance facilities in Southern California, including the California Aqueduct, the Los Angeles Aqueduct, and the Mojave River Pipeline. We also own a 99-year lease with the Arizona & California Railroad Company that will allow us to construct a 43-mile water conveyance pipeline (“Southern Pipeline”) within an existing, active railroad right-of-way that extends from the Cadiz Ranch to the Colorado River Aqueduct. The capacity of the Northern Pipeline for water conveyance is 25,000 AFY. The capacity of the Southern Pipeline ranges from 75,000 AFY to 150,000 AFY depending on the pipeline diameter (54-inch to 84-inch) selected to accommodate imported water storage.
Water Filtration Technology – In 2022, we completed the acquisition of the assets of ATEC Water Systems, Inc. into ATEC Water Systems, LLC (“ATEC”), which provides innovative water filtration solutions for impaired or contaminated groundwater sources. ATEC’s specialized filtration media provide cost-effective, high-rate of removal for common groundwater impairments and contaminants that pose health risks in drinking water including iron, manganese, arsenic, Chromium-6, nitrates, and other constituents of concern.
Our addition of pipeline infrastructure and ATEC water filtration technology to our portfolio of land and water assets enabled us in 2023 to adjust our business model to begin offering integrated services and solutions to public water systems that address the urgent challenges of climate change and make significant progress in advancing contract negotiations for water supply with public water systems.
In the first three quarters of 2024, we entered into agreements with multiple public water systems to purchase 21,275 AFY of annual water supply from us to be delivered via the Northern Pipeline. These agreements cumulatively represent approximately 85% of the full capacity (25,000 AFY) of the Northern Pipeline.
Through membership in Fenner Gap Mutual Water Company, a mutual water company to be owned by the participating water agencies, these agreements provide for delivery of purchased annual water supply over a 40-year term (take or pay), at an agreed upon market price estimated to start at approximately $850/AFY at the wellhead, subject to annual adjustment. In addition, participating public agencies are expected to fund costs of delivery of water from the Cadiz Property to their service area, and the capital costs for conversion of the Northern Pipeline from gas to water, including construction of pumping stations and appurtenant facilities. We anticipate that the capital costs would be funded by Newco as discussed below and could be eligible for public infrastructure funding and grants. Final agreements and facility construction are subject to standard environmental review and a project-level permitting process.
We have also executed Letters of Intent with communities in San Bernardino County reserving up to 100,000 acre-feet of surplus water over the life of the Water Project for the benefit of local disadvantaged communities as part of the Mojave-San Bernardino County One Water Project (“One Water”) launched by the Victor Valley Wastewater Reclamation Authority (“VVWRA”). Under the program, we would make surplus available at cost after all first priority contracts are served. The One Water partners will join efforts to access grants and funding to support Northern Pipeline development.
Cadiz Inc.
We estimate that it would cost approximately $800 million for the construction of the facilities required to deliver water supplies and fully operationalize our groundwater banking project in the Mojave Desert (the “Mojave Groundwater Banking Project” or “Water Project”). In October 2024, we announced our intent to establish and manage a new entity, which is anticipated to be a limited partnership or limited liability company (“Newco”), with the participation of public sector or non-profit investors acting as limited partners to mobilize capital for the construction, ownership, and operation of the Mojave Groundwater Banking Project and its capital facilities in exchange for a share of revenues received by the Water Project. Newco is not expected to be a consolidating entity for accounting purposes with us. Newco partners are expected to contribute up to approximately $401 million to Newco and coordinate with us to seek available grant funding for remaining construction costs. Under the Newco structure, we would contribute our infrastructure assets, including the Northern Pipeline and the Southern Pipeline right-of-way and a share of the long-term cash flows from the groundwater banking operations to Newco in exchange for the capital funding provided by the limited partners In consideration of such transfer of assets, Newco is expected to pay us approximately $51 million upon closing of definitive agreements among other consideration and we would retain 49% of the water storage rights. Water supply purchase contracts entered into among us and public water providers will not be contributed to Newco.
We are expected to serve as the general partner or managing member of Newco. The distribution of profits from revenues anticipated to be received by Newco once the infrastructure is online would prioritize the Newco investors until they achieve an agreed annual yield with incremental distributions thereafter to us as the general partner/managing member, the investors and other Newco partners.
On October 30, 2024, we entered into a letter of intent (the “LOI”) with a non-profit investment fund that is a beneficiary of a federal grant award and is dedicated to financing sustainable infrastructure projects (the “Fund”). The LOI outlines the terms of a prospective investment by the Fund of up to $150 million as a limited partner in Newco subject to ongoing due diligence. We are in discussions with several additional potential qualified investors to fund all the capital required for Newco.
On November 10, 2024, we entered into an agreement that grants us an exclusive option to purchase 180 miles of existing 36-inch steel pipe expected to be utilized in the construction of the Mojave Groundwater Banking Project. This agreement has an initial two-year option term with a right to extend for up to an additional year through three 120-day extensions. We will make an initial payment of $5,000,000 to secure the option, with a $1,000,000 payment required for each extension. If the purchase option is exercised during the option term, we can acquire all or part of the pipeline assets at $155 per linear foot, with credits that could reduce the final purchase price depending on when the option is exercised. Additionally, we hold a right of first refusal to purchase the pipeline assets during the option term if the current owners receive a third-party offer for all or a portion of the remaining pipeline assets.
In October 2024, we entered into an agreement with a subsidiary of RIC Energy to build a hydrogen production facility at the Cadiz Ranch. As part of this agreement, Cadiz plans to supply land via a lease agreement and sell water to RIC Energy for its hydrogen development. Once the facility is operational following the current anticipated 6-year developmental and construction stages, we will be able to access hydrogen and solar energy from the facility to power our water operations and explore the use of onsite natural gas pipelines to store and transport hydrogen.
Cadiz Inc.
ATEC and our agricultural operations provide our current principal source of revenue, although our working capital needs are not fully supported by these operations at this time. 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.
Our current and future operations also include activities that further our commitments to sustainable stewardship of our land, water, pipeline and water filtration technology assets, 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 September 30, 2024, Compared to Three Months Ended September 30, 2023
We currently operate in two reportable segments. Our largest segment is Land and Water Resources, which comprises all activities regarding our properties in the eastern Mojave Desert, pre-revenue development of the Water Project (supply, storage and conveyance), and agricultural operations. Our second operating segment is Water Filtration Technology comprised of ATEC which provides innovative water filtration technology solutions for impaired or contaminated groundwater sources.
We evaluate our performance based on segment operating (loss). Interest expense, income tax expense and losses related to equity method investments are excluded from the computation of operating (loss) for the segments. Segment net revenue, segment operating expenses and segment operating (loss) information consisted of the following for the three months ended September 30, 2024 and 2023:
| Three Months Ended September 30, 2024 |
||||||||||||
| (in thousands) |
Land and Water Resources |
Water Filtration Technology |
Total |
|||||||||
| Revenues |
$ | 383 | $ | 2,841 | $ | 3,224 | ||||||
| Costs and expenses: |
||||||||||||
| Cost of sales |
557 | 1,852 | 2,409 | |||||||||
| General and administrative |
4,820 | 455 | 5,275 | |||||||||
| Depreciation |
292 | 15 | 307 | |||||||||
| Total costs and expenses |
5,669 | 2,322 | 7,991 | |||||||||
| Operating income (loss) |
$ | (5,286 | ) | $ | 519 | $ | (4,767 | ) | ||||
Cadiz Inc.
| Three Months Ended September 30, 2023 |
||||||||||||
| (in thousands) |
Land and Water Resources |
Water Filtration Technology |
Total |
|||||||||
| Revenues |
$ | 199 | $ | 169 | $ | 368 | ||||||
| Costs and expenses: |
||||||||||||
| Cost of sales |
513 | 179 | 692 | |||||||||
| General and administrative |
4,927 | 200 | 5,127 | |||||||||
| Depreciation |
277 | 31 | 308 | |||||||||
| Total costs and expenses |
5,717 | 410 | 6,127 | |||||||||
| Operating loss |
$ | (5,518 | ) | $ | (241 | ) | $ | (5,759 | ) | |||
We have not received significant revenues from our water supply, storage, or conveyance assets to date. Our revenues have been limited primarily to ATEC sales and sales from our alfalfa plantings and rental income from our agricultural leases. As a result, we have historically incurred a net loss from operations. We incurred a net loss of $6.8 million in the three months ended September 30, 2024, compared to a $6.9 million net loss during the three months ended September 30, 2023.
Our primary expenses are our ongoing overhead costs associated with the development of our water supply, storage, conveyance (i.e., general and administrative expense), farming expenses at the Cadiz Ranch, manufacturing operations of ATEC and our interest expense. We will continue to incur non-cash expenses in connection with our equity incentive compensation plan and PIK interest on our Convertible Debt.
Revenues Revenue totaled $3.2 million during the three months ended September 30, 2024, primarily related to ATEC sales totaling $2.8 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.3 million and rental income from our agricultural leases totaling $0.1 million. Revenue totaled $0.4 million during the three months ended September 30, 2023, primarily related to ATEC sales totaling $0.2 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.1 million and rental income from our agricultural leases totaling $0.1 million. The increase in ATEC sales primarily relates to revenues under a contract to deliver 320 filters for the Central Utah Water Conservancy District’s Vineyard Wellfield Groundwater Polishing Project (“Utah Project”) announced in 2023 and now being delivered.
Cost of Sales Cost of sales totaled $2.4 million during the three months ended September 30, 2024, which comprised of $1.9 million related to ATEC (32.1% gross margin) and $0.5 million related to our alfalfa crop harvest. Cost of sales totaled $0.7 million during the three months ended September 30, 2023, which comprised of $0.5 million related to our alfalfa crop harvest and $0.2 million related to ATEC.
General and Administrative Expenses General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $4.1 million in the three months ended September 30, 2024, compared to $4.5 million in the three months ended September 30, 2023. The decrease in 2024 is primarily related to nonrecurring corporate communications modernization expenses to our online, print, digital and social materials in 2023.
Cadiz Inc.
Compensation costs for stock and option awards for the three months ended September 30, 2024, were $1.2 million, compared to $0.7 million for the three months ended September 30, 2023. The higher 2024 expense was primarily due to stock-based non-cash awards to employees and consultants.
Depreciation Depreciation expense totaled $0.3 million during each of the three months ended September 30, 2024 and 2023.
Interest Expense, net Net interest expense totaled $2.0 million during the three months ended September 30, 2024 compared to $1.2 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):
| Three Months Ended |
||||||||
| September 30, |
||||||||
| 2024 |
2023 |
|||||||
| Cash interest on outstanding debt |
$ | 387 | $ | 366 | ||||
| PIK interest on outstanding debt | 662 | 276 | ||||||
| Interest added to lease obligation | 709 | 644 | ||||||
| Amortization of debt discount |
348 | 76 | ||||||
| Interest income |
(55 | ) | (164 | ) | ||||
| Other income |
(28 | ) | (25 | ) | ||||
| $ | 2,023 | $ | 1,173 | |||||
Increased interest expense is primarily due to increased borrowing under the Third Amended Credit Agreement. Interest income primarily relates to interest on investments in short-term deposits.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
We incurred a net loss of $22.5 million in the nine months ended September 30, 2024, compared to a $24.7 million net loss during the nine months ended September 30, 2023. The higher 2023 loss was primarily due to a loss on extinguishment of debt in the amount of $5.3 million resulting from issuance of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in February 2023, offset by a higher stock compensation expense and increased interest expense related to the Third Amended Credit Agreement in 2024.
Revenues Revenue totaled $4.9 million during the nine months ended September 30, 2024, primarily related to ATEC sales totaling $3.5 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $1.1 million and rental income from our agricultural leases totaling $0.3 million. Revenue totaled $1.3 million during the nine months ended September 30, 2023, primarily related to ATEC sales totaling $0.6 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.4 million and rental income from our agricultural leases totaling $0.3 million. The increase in ATEC sales primarily relates to revenues under our contract for the Utah Project.
Cadiz Inc.
Cost of Sales Cost of sales totaled $4.3 million during the nine months ended September 30, 2024, which comprised of $2.4 million related to ATEC (31.4% gross margin) and $1.9 million related to our alfalfa crop harvest. The 2024 alfalfa crop harvest net operating loss to date of $0.8 million primarily relates to continued suppressed market conditions for alfalfa on the West Coast. Cost of sales totaled $1.5 million during the nine months ended September 30, 2023, which comprised of $0.5 million related to ATEC and $1.0 million related to our alfalfa crop harvest.
General and Administrative Expenses General and administrative expenses, exclusive of stock-based compensation costs, totaled $12.7 million in the nine months ended September 30, 2024, compared to $13.2 million in the nine months ended September 30, 2023. The decrease in 2024 is primarily related to nonrecurring corporate communications modernization expenses to our online, print, digital and social materials in 2023.
Compensation costs for stock and option awards for the nine months ended September 30, 2024, were $3.6 million, compared to $1.1 million for the nine months ended September 30, 2023. The higher 2024 expense was primarily due to stock-based non-cash awards to employees and consultants in 2024.
Depreciation Depreciation expense totaled $0.9 million during each of the nine months ended September 30, 2024 and 2023.
Interest Expense, net Net interest expense totaled $5.9 million during the nine months ended September 30, 2024 compared to $3.6 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2024 |
2023 |
|||||||
| Cash interest on outstanding debt |
$ | 1,146 | $ | 1,273 | ||||
| PIK interest on outstanding debt | 1,686 | 711 | ||||||
| Interest added to lease obligation | 2,085 | 1,883 | ||||||
| Amortization of debt discount |
959 | 337 | ||||||
| Finance expense |
307 | - | ||||||
| Interest income |
(239 | ) | (542 | ) | ||||
| Other income |
(61 | ) | (25 | ) | ||||
| $ | 5,883 | $ | 3,637 | |||||
Increased interest expense is primarily due to increased borrowing under the Third Amended Credit Agreement. Interest income primarily relates to interest on investments in short-term deposits which were lower in 2024.
Losses on Derivative Liabilities Losses on derivative liabilities totaled $0 during the nine months ended September 30, 2024 compared to $220 thousand during the nine months ended September 30, 2023. The losses recorded in 2023 were a result of a remeasurement of a conversion option under our senior secured debt.
Cadiz Inc.
Loss on Early Extinguishment of Debt Loss on early extinguishment of debt totaled $0 during the nine months ended September 30, 2024, compared to $5.3 million in the nine months ended September 30, 2023. The 2023 loss on early extinguishment of debt was a result of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in February 2023.
Liquidity and Capital Resources
Current Financing Arrangements
As we have not received sufficient revenues or profits from our water, agriculture or water filtration technology activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence. Historically, we have addressed these needs primarily through secured debt financing arrangements and private equity placements.
Equity Offerings
In January 2023, we completed the sale and issuance of 10,500,000 shares of our 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 $40.3 million and aggregate net proceeds of approximately $38.5 million. A portion of the net proceeds were used to repay our debt in the principal amount of $15 million, together with fees and interest required to be paid in connection with such repayment. The remaining proceeds from the January 2023 Direct Offering were used for capital expenditures to accelerate development of water supply, storage, conveyance and treatment assets, working capital and development of additional water resources to meet increase demand on an accelerated timetable, and general corporate purposes.
On November 5, 2024, we completed the sale and issuance of 7,000,000 shares of our common stock to certain institutional investors in a registered direct offering (“November 2024 Direct Offering”). The shares of common stock were sold at a purchase price of $3.34 per share, for aggregate gross proceeds of $23.4 million and aggregate net proceeds of approximately $21.9 million.
We intend to use the proceeds from the November 2024 Direct Offering to advance development of our water supply and groundwater banking project which may include acquisition of equipment and materials intended to be used in construction of facilities related to our northern and/or southern pipeline projects which we expect 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 us and our subsidiaries, business development activities, other capital expenditures, working capital, and general corporate purposes.
Debt Offerings
In July 2021, we entered into a $50 million new credit agreement (“Credit Agreement”) (see Note 3 to the Condensed Consolidated Financial Statements – “Long-Term Debt”). The proceeds of the Credit Agreement, together with the proceeds from a depositary share offering, were used to (a) to repay all our outstanding senior secured debt obligations in the amount of approximately $77.6 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 depositary shares issued in a depositary share offering, and (c) to pay transaction related expenses. The remaining proceeds were used for working capital needs and for general corporate purposes.
Cadiz Inc.
On February 2, 2023, we entered into a First Amendment to Credit Agreement to amend certain provisions of the Credit Agreement (“First Amended Credit Agreement), Under the First Amended Credit Agreement, the lenders 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 our common stock at a conversion price of $4.80 per share (the “Conversion Price”). In addition, prior to the maturity of the Credit Agreement, we have the right to require that the lenders convert the outstanding principal amount, plus any PIK Interest and accrued and unpaid interest, of the Convertible Loan if the following conditions are met: (i) the average VWAP of our common stock on The Nasdaq Stock Market, or such other national securities exchange on which the shares of common stock are listed for trading, over 30 consecutive trading dates exceeds 115% of the then Conversion Price and (ii) there is no event of default under certain provisions of the Credit Agreement.
Under the First Amended Credit Agreement, the maturity date of the Credit Agreement was extended from July 2, 2024, to June 30, 2026.
On March 6, 2024, we entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund 2012 (“Heerema”) (see Note 3 to the Condensed Consolidated Financial Statements – “Long-Term Debt”). Before entering into the Third Amended Credit Agreement, Heerema purchased the outstanding secured non-convertible term loans under the Credit Agreement (“Assignment”). In connection with the Assignment, the existing holders of both the Convertible Loan and non-convertible term loans consented to effectuate the Third Amended Credit Agreement in consideration of a consent fee in the aggregate amount of $479,845 payable in the form of our common stock (valued at $2.89 per share, or 166,036 shares), which was registered pursuant to an effective shelf registration statement on Form S-3 and a prospectus supplement thereunder. The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from Heerema in an aggregate principal amount of $20 million, having a maturity date of June 30, 2027 (“New Secured Convertible Debt”); (b) the aggregate principal amount of the secured non-convertible term loans acquired by Heerema has been increased from $20 million to $21.2 million and the applicable repayment fee in respect thereof has been eliminated; (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.
The annual interest rate remains unchanged at 7.00%. Interest on $21.2 million of the remaining principal amount will be paid in cash. Interest on the aggregate $36 million principal amount of the New Secured Convertible Debt and existing Convertible Loan is paid in kind on a quarterly basis.
Cadiz Inc.
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, as amended, do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any common equity financing. We do not expect the loan covenants to materially limit our ability to finance our water and agricultural development activities.
Cash Used in Operating Activities. Cash used in operating activities totaled $15.3 million for the nine months ended September 30, 2024, and $15.4 million for the nine months ended September 30, 2023. The cash was primarily used to fund general and administrative expenses related to our water development efforts, agricultural development efforts, and our ATEC business including increased working capital needs related to accounts receivable and inventory offset by increased accounts payable.
Cash Used in Investing Activities. Cash used in investing activities totaled $0.5 million for the nine months ended September 30, 2024, and $3.8 million for the nine months ended September 30, 2023. The cash used in the 2024 period primarily related to the development cost for the planting of 125 additional acres of alfalfa. The cash used in the 2023 period primarily related to the development of three new wells.
Cash Provided by Financing Activities. Cash provided by financing activities totaled $14.7 million for the nine months ended September 30, 2024, compared with cash provided of $18.9 million for the nine months ended September 30, 2023. Proceeds from financing activities for the 2024 period related to the issuance of long-term debt under the Third Amended Credit Agreement. Proceeds from financing activities for the 2023 period primarily related to the issuance of shares under direct offerings, offset by the paydown of $15 million of senior secured debt in February 2023.
Outlook
Short-Term Outlook. The net proceeds of approximately $21.9 million from the completion of the November 2024 Direct Offering, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs. Our ATEC operations are expected to be funded using existing capital and cash profits generated from operations during 2024.
Long-Term Outlook. In the longer term, we may need to raise additional capital to finance working capital needs and capital expenditures (see “Current Financing Arrangements”, above). Our future working capital needs will depend upon the specific measures we pursue in the entitlement and development of our water supply, storage, conveyance resources and other developments. Future capital expenditures will depend on the progress of the Water Project including the funding of Newco, ATEC operational needs and any further expansion of our agricultural assets, and ATEC operational needs.
Cadiz Inc.
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”.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Reg. 240.12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
The Company established disclosure controls and procedures to ensure that material information related to the Company, including its consolidated entities, is accumulated and communicated to senior management, including the Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”) and to its Board of Directors. Based on their evaluation as of September 30, 2024, the Company's Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and such information is accumulated and communicated to management, including the principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Controls Over Financial Reporting
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in the Company's internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Cadiz Inc.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Cadiz Inc.
PART II - OTHER INFORMATION
| Legal Proceedings |
There have been no material changes to legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2023.
| Risk Factors |
Other than the below added risk factor, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2023.
We may not be able to execute our plans for the construction, ownership, and operation of our Mojave Groundwater Banking Project through the anticipated establishment of a new company for such purpose and obtain the requisite funding.
On October 30, 2024, we entered into a letter of intent with a non-profit investment fund that outlines a prospective investment by the investment fund to support the establishment of a new entity to mobilize capital for the construction, ownership, and operation of the Mojave Groundwater Banking Project. The letter of intent is not binding and there is no guarantee that we will be able to enter into binding definitive agreements for the formation and operation of the new entity, or that the proposed transactions pursuant to the letter of intent will move forward based on the terms described in such letter of intent. Even if we do enter into definitive agreements for the formation and operation of the new entity, we may not be able to obtain the requisite funding necessary for the construction of facilities for the Mojave Groundwater Banking Project or that funding may not be available on terms satisfactory to the parties or in sufficient amounts, or the progress of the project may not proceed as planned, or the definitive agreements entered into, if any, may not generate our anticipated benefits. These events would materially and adversely affect the success of the Mojave Groundwater Banking Project and, as a result, materially and adversely affect our business, financial condition and operations.
| Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable.
| Defaults Upon Senior Securities |
Not applicable.
| Mine Safety Disclosures |
Not applicable.
Cadiz Inc.
| Other Information |
| a. | Information required under Form 8K. |
None.
| b. | Modifications to nomination process. |
None.
| c. | Insider trading arrangements. |
During the nine months ended September 30, 2024, director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| Exhibits |
The following exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.
| ** 4.1 |
| ** 4.2 |
| ** 10.1 |
Northern Pipeline Delivery Agreement, dated August 13, 2024, by and among Cadiz, Inc., Cadiz Real Estate LLC, Fenner Gap Mutual Water Company and Cucamonga Valley Water District. |
| ** 10.2 |
Employment Agreement between Cadiz Inc. and Cathryn Rivera dated as of September 16, 2024 |
| * 10.3 |
Successor Agent and Amendment Agreement |
| ** 10.4 |
Renewable Energy System Site Lease and Easement Agreement, dated October 21, 2024, between Cadiz Real Estate LLC and RIC Development, LLC |
| ** 10.5 |
Placement Agent Agreement, dated as of November 4, 2024, by and between the Company and B. Riley Securities, Inc. |
| ** 10.6 |
Purchase Option Agreement, dated November 10, 2024, by and among GMHR Acquisitions Co., LLC, LKM Industries, Inc., North West Iron & Metal LLC and Cadiz Inc. |
| * 31.1 |
| * 31.2 |
| * 32.1 |
| * 32.2 |
| * 101.INS |
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| * 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
| * 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| * 101.DEF |
Inline XBRL Extension Definition Linkbase Document |
| * 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
| * 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * |
Filed concurrently herewith. |
| ** |
Previously filed. |
Cadiz Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cadiz Inc.
| By: |
/s/ Susan Kennedy | November 13, 2024 | ||
| Susan Kennedy |
Date |
|||
| Chief Executive Officer |
||||
| (Principal Executive Officer) |
||||
| By: |
/s/ Stanley E. Speer | November 13, 2024 | ||
| Stanley E. Speer |
Date |
|||
| Chief Financial Officer and Secretary |
||||
| (Principal Financial Officer) |
||||
EXHIBIT 10.3
SUCCESSOR AGENT AND AMENDMENT AGREEMENT
This SUCCESSOR AGENT AND AMENDMENT AGREEMENT (this “Agreement”) is dated as of July 23, 2024, by and among (1) CADIZ INC., a Delaware corporation (“Cadiz”), CADIZ REAL ESTATE LLC, a Delaware limited liability company (“CRE”), ATEC WATER SYSTEMS, LLC, a Delaware limited liability company (“ATEC”), OCTAGON PARTNERS LLC, a California limited liability company (“Octagon”; and together with Cadiz, CRE and ATEC, each a “Borrower” and collectively, the “Borrowers”), (2) the other Loan Parties (as defined in the Credit Agreement described below), (3) the Lenders (as defined below) party hereto, which collectively constitute all of the Lenders, (4) B. RILEY SECURITIES, INC. (“B. Riley”), in its capacity as Agent (as defined in the Credit Agreement) (in such capacity, the “Existing Agent”), and (5) ALTER DOMUS (US) LLC (“Alter Domus”), in its capacity as successor Agent (in such capacity, the “Successor Agent”).
WHEREAS, the Borrowers, the lenders party thereto from time to time (the “Lenders”) and the Existing Agent, inter alios, entered into that certain Credit Agreement, dated as of July 2, 2021 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms not otherwise defined herein have the meanings given in the Credit Agreement);
WHEREAS, B. Riley desires to resign from its capacity as Agent under the Credit Agreement and the other Loan Documents, and the Lenders party hereto, which collectively constitute the Required Lenders, desire to appoint Alter Domus, as successor Agent under the Credit Agreement and the other Loan Documents;
WHEREAS, the Borrowers consent to the appointment of Alter Domus as successor Agent under the Credit Agreement and the other Loan Documents; and
WHEREAS, Alter Domus desires to accept such appointments.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the parties hereto, intending to be legally bound, hereby agree as follows:
|
1. |
Resignation and Appointment of Agents. |
|
a. |
With effect from the Effective Date (as defined below): |
|
i. |
the Existing Agent’s resignation as the Agent is hereby effective; |
|
ii. |
the Lenders party hereto, which collectively constitute the Required Lenders, hereby (A) waive the requirement that the Existing Agent provide the Lenders with ten (10) days’ notice of its resignation in accordance with Section 8.9 of the Credit Agreement and (B) appoint Alter Domus to act as the successor Agent under the Loan Documents; |
|
iii. |
Alter Domus hereby accepts such appointments; |
|
iv. |
each Loan Party acknowledges and agrees that Alter Domus, as the successor Agent, shall be the Agent for all purposes under the Loan Documents; and |
|
v. |
each of the parties hereto agrees to execute, at the Borrowers’ joint and several expense, all documents and instruments, and approve or make all filings, that the Successor Agent or the Required Lenders reasonably determine are necessary to evidence the appointment of Alter Domus as the successor Agent. |
|
2. |
Rights, Duties and Obligations. |
|
a. |
As of the Effective Date, the Successor Agent is hereby vested with all the rights, powers, privileges and duties of the Existing Agent in its capacity as Agent in accordance with the terms of the Loan Documents. |
|
b. |
As of the Effective Date, and except as set forth in Section 2(c), Section 2(e) and Section 4 below, the rights, powers, duties and obligations of the Existing Agent, in its capacity as Agent under the Loan Documents, shall be removed and discharged, respectively. Nothing in this Section 2 shall be deemed to affect the indemnification of Existing Agent and payment of expenses for the Existing Agent as provided for in Sections 2(h) and 5(a)(iii) hereof or pursuant to the Loan Documents (including, without limitation, Sections 8.3, 8.7 and 9.5 thereof). |
|
c. |
As of the Effective Date, the Existing Agent hereby assigns to the Successor Agent, and the Successor Agent hereby assumes, all Liens and all other rights, titles, interests, powers, powers of attorney, and privileges (including any claims, awards, and judgments) of the Existing Agent as secured creditor or lien holder under the Credit Agreement, the Security Documents and the other Loan Documents, including, without limitation, all Liens evidenced by (i) Uniform Commercial Code financing statements, (ii) the Deed of Trust and any other Mortgage and (iii) any intellectual property security agreements filed with the United States Patent and Trademark Office or the United States Copyright Office, as applicable. All such Liens shall continue and remain in effect in all respects following the Effective Date and are hereby ratified and reaffirmed by the Loan Parties. On and after the Effective Date, any Collateral in the possession or control of the Existing Agent, for the benefit of itself and the Secured Lenders, shall be deemed to be held or controlled, as applicable, by the Existing Agent, as agent and bailee for the Successor Agent, for the benefit of the Successor Agent and the Secured Lenders, until such time as such Collateral has been delivered to the Successor Agent or new control agreements in respect thereof have been entered into in favor of the Successor Agent, as applicable. Without limiting the generality of the foregoing, (i) any and all references to B. Riley on any publicly filed document (to the extent such filing relates to Liens assigned to the Successor Agent hereby and until such filing is modified to reflect the interest of Alter Domus, as Successor Agent) shall constitute a reference to “B. Riley Securities, Inc.” as the nominee and collateral sub-agent of the Successor Agent solely for purposes of perfection and (ii) any reference to B. Riley as an additional insured and/or loss payee under any insurance (including title insurance) required to be maintained pursuant to the Loan Documents shall constitute a reference to “B. Riley Securities, Inc.” as collateral sub-agent of the Successor Agent. |
|
d. |
Each of the Existing Agent and the Loan Parties hereby authorize the Successor Agent to file any assignments or amendments with respect to Uniform Commercial Code financing statements, filings with the United States Patent and Trademark Office and the United States Copyright Office, and any other filings in respect of the Collateral as the Successor Agent or the Required Lenders deem reasonably necessary or desirable as determined in consultation with the Existing Agent to evidence the assignment of the Liens to the Successor Agent hereby. Each of the Loan Parties shall promptly deliver, or cause to be delivered, to the Successor Agent all insurance certificates and endorsements, naming the Successor Agent as loss payee or additional insured, as appropriate, as required by the Credit Agreement. |
|
e. |
As of the Effective Date, notwithstanding anything herein or in the Credit Agreement to the contrary, Sections 8 and 9.5 of the Credit Agreement together with any other provision of any Loan Document that is intended to be for the benefit of any resigning or predecessor Agent shall survive the Existing Agent’s resignation thereunder and hereunder and shall inure to the benefit of B. Riley and its Affiliates in respect of any action taken or omitted to be taken by the Existing Agent pursuant to the Credit Agreement, under or in connection with this Agreement, or the Loan Documents or any amendment, amendment and restatement, modification or waiver of the provisions hereof or thereof, or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder (including without limitation for any actions taken or omitted to be taken by any of them in connection with any of the foregoing while Existing Agent was acting as Agent and while Existing Agent was acting as bailee or sub-agent for the Successor Agent) or the consummation of the transactions contemplated hereby or thereby, whether taken or omitted to be taken before or after the Effective Date, in its capacity as Agent under the Loan Documents. |
|
f. |
The Successor Agent is not assuming any liability (i) under or related to the Loan Documents that may have arisen or accrued prior to the Effective Date, or (ii) for any and all claims under or related to the Loan Documents that may have arisen or accrued prior to the Effective Date. |
|
g. |
(i) The Successor Agent shall bear no responsibility or liability for any action taken or omitted to be taken by the Existing Agent or any other event or action related to the Loan Documents that occurred on or prior to the Effective Date (including, without limitation, calculations, determinations, or distributions made under the Loan Documents by the Existing Agent on or prior to the Effective Date), and (ii) the Existing Agent shall bear no responsibility or liability for any future action taken or omitted to be taken by the Successor Agent in its capacity as such or for any other event or action related to Loan Documents that may occur on or after the Effective Date (including, without limitation, calculations, determinations, or distributions made under the Loan Documents by the Successor Agent on or after the Effective Date). |
|
h. |
The Successor Agent’s right to indemnification and other protections as set forth in the Loan Documents, subject to the limitations set forth therein, shall apply with respect to any and all losses, claims, damages, liabilities, costs and expenses that the Successor Agent or any of its Affiliates and the respective officers, directors, employees, agents, attorneys-in-fact and controlling persons of the Successor Agent and such Affiliates (collectively with the Successor Agent, the “Successor Agent Related Parties”) suffer, incur or are threatened with arising out of or relating to (i) this Agreement and any other documents related to the appointment of the Successor Agent, (ii) the performance of the parties hereto of their respective obligations hereunder, (iii) the consummation of the transactions, succession and assignment contemplated hereby, (iv) any actions, omissions, events, occurrences or claims described in clauses 2(f) and (g)(i) above, or (v) any actions taken or omitted by any of the parties to this Agreement prior to the Effective Date. |
|
i. |
The Successor Agent shall be entitled to conclusively rely upon, and shall not incur any liability for relying upon (including, without limitation, for the purpose of making any calculation, determination, or distribution under the Loan Documents), the records, Register, and other information supplied to it by any Lender, the Existing Agent, any Borrower or the other Loan Parties in connection with this Agreement and the appointment by Alter Domus as Successor Agent. The Loan Parties and the Lenders party hereto acknowledge and agree that the Successor Agent (i) shall be entitled to rely upon, and shall be fully protected in relying upon, the list of Loan Documents set forth in Schedule II (together, the “Specified Finance Documents”) as being a complete list of all of the Loan Documents to which the Existing Agent is a party as of the Effective Date (including all amendments, supplements, waivers and consents to the Specified Finance Documents as in effect on the Effective Date), and (ii) shall not be deemed to have any knowledge or notice of any Loan Document (including, without limitation, any instruments, filings, or documents related to Liens on the Collateral) that is not set forth on Schedule II until it has actually received a copy or notice of such Loan Document, as applicable. |
|
j. |
The Successor Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof is given after the Effective Date to the Successor Agent by any Borrower or a Lender in accordance with the Credit Agreement. |
|
k. |
It is understood and agreed that Alter Domus, in succeeding to the position of the Successor Agent, (i) has undertaken no analysis of the Security Documents or the Collateral and (ii) has made no determination as to (x) the validity, enforceability, effectiveness or priority of any Liens granted or purported to be granted pursuant to the Security Documents or (y) the accuracy or sufficiency of the documents, filings, recordings and other actions taken to create, perfect or maintain the existence, perfection or priority of the Liens granted or purported to be granted pursuant to the Security Documents. Alter Domus shall be entitled to assume that, as of the date hereof, all Liens purported to be granted pursuant to the Security Documents are valid and perfected Liens having the priority intended by the Lenders and the Loan Documents. |
|
xx. |
Each of the Lenders party hereto acknowledges and agrees that the Successor Agent shall have no obligation for (i) perfecting, maintaining, monitoring, preserving or protecting the security interest or Lien granted under the Credit Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby; (ii) the filing, re-filing, recording, re-recording, or continuing of any document, financing statement, mortgage, assignment, notice, instrument of further assurance, or other instrument in any public office at any time or times (except, in the case of this clause (iii), to the extent explicitly directed by the Required Lenders; it being agreed that any costs incurred by the Successor Agent in connection therewith will be payable by the Borrower); or (iii) providing, maintaining, monitoring, or preserving insurance on or the payment of taxes with respect to any Collateral. |
|
3. |
Certification. The Existing Agent hereby certifies the following as of the Effective Date: |
|
a. |
Current Lenders. To the best of the Existing Agent’s knowledge, the Existing Agent has delivered to the Successor Agent a true, accurate and correct copy of the Register as of the Effective Date. |
|
b. |
Loan Status. To the best of the Existing Agent’s knowledge, Schedule I sets forth (i) the outstanding principal amount of, and accrued and unpaid interest in respect of each of the Loans outstanding as of the Effective Date and (ii) any other fees, charges and expenses due and payable to the Existing Agent (in its capacity as such) as of the Effective Date. |
|
c. |
Possessory Collateral. Schedule III sets forth a list of all possessory collateral held by the Existing Agent (in its capacity as such) for the benefit of the Secured Lenders. |
This Agreement is hereby made without recourse or representation or warranty of any kind, nature or description on part of the Existing Agent except as specified in this Section 3. Without limiting the generality of the foregoing, the Existing Agent has not made any representation or warranty as to the financial condition of the Borrowers or any Loan Party, values, quality, quantities or locations of inventory or other assets or the collectability or realizability of any Collateral or Obligations or as to the legality, validity, enforceability, perfection or priority of any Obligations or Collateral.
|
4. |
Covenants of Existing Agent. |
|
a. |
The Existing Agent covenants and agrees that it will, in each case at the Loan Parties’ joint and several expense: |
|
i. |
deliver, or cause to be delivered, promptly to the Successor Agent, (A) execution versions of the Credit Agreement and the other Loan Documents listed in Schedule II, and (B) for each Lender to which the Existing Agent has knowledge, its (1) individual contact information and (2) email address; provided, that the Loan Parties hereby consent to all actions taken by Existing Agent and the Successor Agent pursuant to this Section 4; |
|
ii. |
deliver, or cause to be delivered, to the Successor Agent, all possessory collateral set forth on Schedule III following the Effective Date; |
|
iii. |
use commercially reasonable efforts to deliver, or cause to be delivered, promptly to the Successor Agent, copies of any written notices, financial statements and other written requests (if any) delivered by the Borrowers to the Existing Agent under the Credit Agreement or otherwise received by the Existing Agent, in each case, to the extent such notices, statements or requests have not already been delivered to the Lenders; |
|
iv. |
execute all documents as are reasonably necessary to effectuate the purposes of this Agreement and as may be reasonably requested by the Successor Agent to vest the rights, interests and privileges of the Existing Agent under the Loan Documents to the Successor Agent; and |
|
v. |
take all actions that are reasonably necessary to effectuate the purposes of this Agreement and as may be reasonably requested by the Successor Agent or its representatives to facilitate the transfer of information to the Successor Agent in connection with the Loan Documents subject to Section 4(c) below. |
|
b. |
The Loan Parties and the Lenders party hereto hereby approve of all actions taken, and which may be taken from time to time, by the Existing Agent and the Successor Agent pursuant to clause (a) of this Section 4. |
|
c. |
It is the intention and understanding of the Existing Agent and the Successor Agent that the Existing Agent may, but shall have no obligation to, disclose to, share with or otherwise exchange with the Successor Agent information and documents under this Section 4 that is otherwise protected against disclosure by privilege, doctrine or rule of confidentiality (such information and documents, “Privileged Information”) and the disclosure, sharing or other exchange of any Privileged Information by Existing Agent shall in no way give rise to, or be deemed to give rise to, any duty, obligation or liability of any kind or nature on the part of Existing Agent in connection therewith (including, without limitation, any duty or obligation to disclose, share or exchange any other or further Privileged Information or any liability for any failure to do so); provided, that that any exchange of privileged information (x) will not waive any applicable privilege, doctrine or rule of protection from disclosure, (y) will not diminish the confidentiality of the Privileged Information, and (z) will not be asserted as a waiver of any such privilege, doctrine or rule by the Existing Agent or the Successor Agent; provided, further, that if reasonably required by Existing Agent with respect to any Privileged Information, the Existing Agent may condition its sharing of such Privileged Information with the Successor Agent on Successor Agent entering into an agreement reasonably requested by Existing Agent that further effectuates the intentions set forth in the foregoing proviso. |
|
5. |
Fees, Expenses and Indemnification of the Agent. |
|
a. |
Commencing on the Effective Date: |
|
i. |
the Successor Agent shall be entitled to receive its agency fees and expenses set forth in a separate fee letter, dated as of the date hereof (the “Successor Agency Fee Letter”), between the Borrowers and the Successor Agent. |
|
ii. |
each of the Successor Agency Fee Letter and this Agreement shall constitute a Loan Document, and all fees, costs, expenses and compensation payable thereunder and hereunder shall constitute Obligations, and to the extent such Obligations are Secured Obligations, secured equally and ratably by the Collateral; and |
|
iii. |
the Existing Agent shall cease to be entitled to receive agency fees and expenses pursuant to the Loan Documents required to be paid to the Agent under the Loan Documents after the Effective Date; provided, that the Existing Agent shall remain entitled to receive any unpaid agent fees and expenses (including, without limitation, any reasonable and documented out-of-pocket legal fees) accrued as of immediately prior to the Effective Date and owed to it pursuant to the Loan Documents. The Loan Parties agree to pay to Existing Agent, on the date hereof, any and all due and outstanding third party fees, costs and other expenses reasonably incurred by Existing Agent prior to the Effective Date solely in connection with performing its role as Agent as provided under the Loan Documents, including, without limitation, reasonable attorneys’ fees, to the extent payable or reimbursable by the Loan Parties pursuant to the Loan Documents. |
|
b. |
All provisions of the Credit Agreement providing for the payment of fees and expenses of, and providing rights, protections, privileges, immunities, exculpations, and indemnities for the benefit of, the Existing Agent shall remain in full force and effect for the benefit of the Successor Agent. In addition, the Loan Parties hereby agree, jointly and severally, to pay all reasonable and documented out-of-pocket costs and expenses of the Successor Agent (including, without limitation, reasonable and documented fees and expenses of one primary counsel to the Successor Agent (and if necessary, a single firm of local counsel to the Successor Agent in each relevant jurisdiction)) reasonably incurred by it in connection with the negotiation, preparation, execution and delivery of this Agreement and any other documents related to the appointment of the Successor Agent or any actions taken pursuant to this Agreement or such related documents. |
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c. |
Each of the parties hereto hereby agrees that neither Existing Agent nor any of its Affiliates shall be under any obligation to share, rebate, disgorge or refund any fees or expense reimbursement it has received or is entitled to receive under the Loan Documents (including under this Agreement). |
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d. |
Anything in this Agreement to the contrary notwithstanding, it is understood and agreed that, the Existing Agent shall retain no duties, obligations or liabilities as Existing Agent, including, without limitation, any duty to take any action or exercise any right, power or privilege (including, without limitation, the exercise of any rights or remedies under the Loan Documents) under the Loan Documents unless expressly required hereby and, in any event, then only to the extent consistent with the Credit Agreement (including, without limitation, the provisions of Section 8 and Section 9.5 thereof) and the other Loan Document; provided, that the Existing Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person; provided, further, that the Existing Agent may also rely upon, but shall not be obligated to act upon, any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon; provided, further, that the Existing Agent may consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in good faith in accordance with the advice of any such counsel, accountants or experts. |
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6. |
Loan Documents. |
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a. |
The parties hereby agree and acknowledge that, from and after the Effective Date, Alter Domus shall be, and shall be deemed to be, the Agent under the Credit Agreement and the other Loan Documents. In furtherance of the foregoing, from and after the Effective Date, all defined terms referencing B. Riley as the Agent in the Credit Agreement and the other Loan Documents shall be deemed to reference Alter Domus as the Agent thereunder. |
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b. |
Alter Domus hereby directs that its address for notices shall be as follows: |
Alter Domus (US) LLC
225 W. Washington St., 9th Floor
Chicago, Illinois 60606
Attention: Nick Keelan
Telephone No.: (312) 564-5088
E-mail: ADPC@alterdomus.com, Legal_Agency@alterdomus.com
with a copy to (which shall not constitute notice):
Arnold & Porter Kaye Scholer LLP
250 West 55th Street
New York, NY 10019
Attention: Alan Glantz
Telephone No.: (212) 836-7253
E-mail: alan.glantz@arnoldporter.com
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c. |
Effective as of the Effective Date, the Loan Parties, the Lenders party hereto, and the Successor Agent hereby agree that the Credit Agreement shall be amended as follows: |
|
i. |
The Credit Agreement is hereby amended (x) to add a new Exhibit J thereto entitled “Notice of Borrower Conversion” in the form of Annex A hereto and (y) to replace the existing Exhibit I thereto entitled “Notice of Lender Conversion” with a new Exhibit I in the form of Annex B hereto. |
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ii. |
Section 2.6(e) of the Credit Agreement is hereby amended to add the following at the beginning thereof:
The Borrowers shall notify the Agent by written notice of any mandatory prepayment under this Section 2.6 by no later than 2:00 p.m., New York City time, one (1) Business Day before the date of prepayment (or by such later time or date agreed to by the Agent in its reasonable discretion). Each such notice shall specify the prepayment date and a reasonably detailed calculation of the amount of such prepayment. |
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iii. |
Section 2.7 of the Credit Agreement is hereby amended by adding the following sentence at the end thereof:
All payments applied to the Secured Loans or Unsecured Convertible Loans, as applicable, under this Section 2.7 shall be applied first to the interest in respect of such Loans and second, on a pro rata basis, to the principal of such Loans and to the Applicable Repayment Fee (if any) with respect to such Loans. |
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iv. |
Section 2.8 of the Credit Agreement is hereby amended to add the following sentences at the end thereof:
Except as otherwise specifically provided herein, all payments under this Agreement shall be made by the Borrowers to the Agent for the ratable account of the Lenders entitled thereto, and received by the Agent not later than 3:00 p.m. (New York time) on the date when due and shall be made in immediately available funds in Dollars to the Agent. For purposes of computing interest or fees, any payments under this Agreement that are received by the Agent later than 3:00 p.m. (New York time), may, in the Agent’s discretion, be deemed to have been made on the next succeeding Business Day. Unless otherwise specified herein, whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the due date thereof shall be the immediately succeeding Business Day. Unless otherwise contemplated herein, if at any time insufficient funds are received by and available to the Agent to pay fully all amounts of principal, interest, premiums, reimbursable expenses, fees and other amounts then due hereunder, such funds shall be applied in the order of priority set forth in the second to last paragraph of Section 7. Unless the Agent shall have received notice from the Borrowers prior to the date on which any payment is due to the Agent for the account of the Lenders hereunder that the Borrowers will not make such payment, the Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption and in its sole discretion, distribute to the Lenders entitled thereto the amount due. In such event, if the Borrowers have not in fact made such payment, then each of such Lenders severally agrees to repay to the Agent forthwith on demand the amount so distributed to such Lender. If any Lender shall fail to make any payment required to be made by it hereunder, or pursuant to Section 8.7, then the Agent may, in its discretion and notwithstanding any contrary provision hereof, apply any amounts thereafter received by the Agent for the account of such Lender for the benefit of the Agent to satisfy such Lender’s obligations to the Agent until all such unsatisfied obligations are fully paid. |
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v. |
Section 2.14(b) of the Credit Agreement is hereby amended by adding the words “in the form attached as Exhibit J” immediately prior to the parenthetical “(the “Notice of Borrower Conversion”)” appearing therein. |
|
vi. |
Section 2.16 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Notice to Agent in respect of Lender Conversions and Borrower Conversions. Notwithstanding anything to the contrary contained in Section 2.13 or Section 2.14, all Convertible Loans subject to a Lender Conversion or a Borrower Conversion shall be deemed to be outstanding and held by the applicable Convertible Lender unless and until the Agent has received a copy of the executed Notice of Lender Conversion or Notice of Borrower Conversion, as applicable, from the applicable Convertible Lender (in the case of a Lender Conversion) or from the Borrower (in the case of a Borrower Conversion) (which applicable notice of conversion the Agent may conclusively be permitted to rely on as evidence that the conversion contemplated in such notice will be consummated on the date specified therein). As of the effective date of conversion specified in any Notice of Lender Conversion or Notice of Borrower Conversion, as applicable, received by the Agent hereunder, the principal amount of the applicable Convertible Loans, and accrued and unpaid interest thereon), that are specified in such notice as being converted to shares of Common Stock shall promptly be reflected by the Agent in the Register as being cancelled. Each Convertible Lender and Borrower expressly (a) acknowledges and agrees (i) to the terms hereof, including, without limitation, the provisions of this Section 2.16 permitting the Agent to conclusively rely on a Notice of Lender Conversion or Notice of Borrower Conversion, as applicable, in reflecting the cancellation of the applicable Convertible Loans (and accrued interest thereon) in the Register without the consent of such Convertible Lender, the Borrowers or any other Person, (ii) that as specified in the applicable notice, such Convertible Lender will be deemed to have converted its Convertible Loans to shares of Common Stock , (iii) that the applicable Convertible Lender or the Borrower, as applicable, can notify the Agent of any conversion of Convertible Loans to shares of Common Stock in a Notice of Lender Conversion or Notice of Borrower Conversion, as applicable, and such notice shall be deemed effective for the purposes set forth therein and all purposes hereunder and the other Loan Documents, including under this Section 2.16, (iv) the Agent does not have any duty, responsibility or obligation (A) under any agreements relating to the equity of any Loan Party or any affiliate thereof, or the issuance or conversion thereof or (B) to inquire or ascertain whether a Lender Conversion or a Borrower Conversion is permitted or required thereunder and (v) that Agent shall not have any liability to any Convertible Lender, Borrower or other Person arising from, out of, or in connection with any Lender Conversion or Borrower Conversion consummated or purported to be consummated and (b) waives any and all claims or causes of action against the Agent and its Affiliates and the respective partners, directors, officers, employees, trustees, agents and advisors of the Agent and such Affiliates arising from, out of, or in connection with any Lender Conversion or Borrower Conversion or other transaction consummated or purported to be consummated pursuant thereto or any actions taken by the Agent in accordance with this Section 2.16. Notwithstanding anything set forth herein to the contrary, the Agent, upon receiving a Notice of Lender Conversion or Notice of Borrower Conversion, as applicable, shall be under no duty whatsoever, and shall be under no obligation, to inquire or investigate as to whether the applicable Lender Conversion or a Borrower Conversion has occurred. |
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vii. |
Section 7 of the Credit Agreement is hereby amended by adding the following proviso at the end of the penultimate paragraph thereunder:
; provided that all payments applied to the Loans under this Section 7 shall be applied first to the interest in respect of such Loans and second, on a pro rata basis, to the principal of such Loans and to the Applicable Repayment Fee (if any) with respect to such Loans. |
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viii. |
Section 8.1 of the Credit Agreement is hereby amended by adding the following two sentences at the end thereof:
The Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Secured Lenders hereby irrevocably appoints and authorizes the Agent to act as the agent of such Secured Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Agent, as “collateral agent” (and any co-agents, sub-agents and attorneys-in-fact appointed by the Agent pursuant to Section 8.2 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder or under any intercreditor agreement at the direction of the Agent), shall be entitled to the benefits of all provisions of this Section 8 and Section 9.5 (along with any such co-agents, sub-agents and attorneys-in-fact, as though they were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto, and all references to “Agent” in this Section 8 shall be read as including a reference to the Agent acting in its capacity as “collateral agent”. |
|
ix. |
Section 8.3 of the Credit Agreement is hereby amended by adding the following two sentences at the end thereof:
The Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided, that the Agent shall not be required to take any action that, in its reasonable opinion or the reasonable opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable law. The Agent shall have no obligation for (a) perfecting, maintaining, monitoring, preserving or protecting the security interest or Lien granted under this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby; (b) the filing, re-filing, recording, re-recording, or continuing of any document, financing statement, mortgage, assignment, notice, instrument of further assurance, or other instrument in any public office at any time or times; or (c) providing, maintaining, monitoring, or preserving insurance on or the payment of taxes with respect to any Collateral. |
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x. |
Section 8.7 of the Credit Agreement is hereby amended by adding the following three sentences immediately prior to the last sentence thereof:
Without limitation of the foregoing, the Lenders shall reimburse the Agent upon demand, ratably according to their respective holdings of the outstanding Loans in effect on the date on which reimbursement is sought under this Section 8.7, of any costs or out-of-pocket expenses (including reasonable fees and disbursements of counsel) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrowers and without limiting the obligation of the Borrowers to do so. For purposes of clarification (i) if any indemnification or reimbursement under this Section 8.7 is sought after the date on which the Loans are paid in full, the Loan holdings of the Lenders shall be determined immediately prior to such date and (ii) the indemnification obligations of the Lenders set forth in the first sentence hereof shall apply, in addition to the Agent, to the officers, directors, employees, affiliates, agent and controlling person of the Agent (and all references to “Agent” in the first sentence hereof shall include a reference to such Persons). |
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xi. |
Section 8.11 of the Credit Agreement is hereby amended by adding the following sentence at the end thereof:
For the avoidance of doubt and notwithstanding anything to the contrary contained herein, the Agent shall not be required to advance, expend or risk its own funds in connection with any exercise of the purchase right granted to the Agent pursuant to Section 4(b)(i) or Section 4(b)(ii) of the Subordination Agreement relating to the Lease Agreement. |
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xii. |
Section 8 of the Credit Agreement is hereby amended by adding a new Section 8.12 at the end thereof that read as follows:
8.12 Erroneous Payments.
(a) If the Agent (x) notifies a Lender, or any Person who has received funds on behalf of a Lender (any such Lender or other recipient (and each of their respective successors and assigns), a “Payment Recipient”) that the Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately succeeding clause (b)) that any funds (as set forth in such notice from the Agent) received by such Payment Recipient from the Agent or any of its Affiliates were erroneously or mistakenly transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender or other Payment Recipient on its behalf) (any such funds, whether transmitted or received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and (y) demands in writing the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Agent pending its return or repayment as contemplated below in this Section 8.12 and held in trust for the benefit of the Agent, and such Lender shall (or, with respect to any Payment Recipient who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than five (5) Business Days thereafter (or such later date as the Agent may, in its sole discretion, specify in writing), return to the Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received). A notice of the Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error. |
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b. |
Without limiting the immediately preceding clause (a), each Lender or any Person who has received funds on behalf of a Lender (and each of their respective successors and assigns), agrees that if it (or a Payment Recipient on its behalf) receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in this Agreement or in a notice of payment, prepayment or repayment sent by the Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Agent (or any of its Affiliates), or (z) that such Lender or other such Payment Recipient, otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each such case: |
|
i. |
it acknowledges and agrees that (A) in the case of clause (x) or (y) of this Section 8.12(b), an error and mistake shall be presumed to have been made (absent written confirmation from the Agent to the contrary) and (B) in the case of clause (z) of this Section 8.12(b), an error and mistake has been made, in each case of the foregoing clauses (A) and (B), with respect to such payment, prepayment or repayment; and |
|
ii. |
such Lender shall (and shall cause any other Payment Recipient that receives funds on its respective behalf to) promptly (and, in all events, within one (1) Business Day of its knowledge of the occurrence of any of the circumstances described in clauses (x), (y) or (z) of this Section 8.12(b)) notify the Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Agent pursuant to this Section 8.12(b). For the avoidance of doubt, the failure to deliver a notice to the Agent pursuant to this Section 8.12(b) shall not have any effect on a Payment Recipient’s obligations pursuant to Section 8.12(a) or on whether or not an Erroneous Payment has been made. |
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c. |
Each Lender hereby authorizes the Agent to set off, net and apply any and all amounts at any time owing to such Lender under any Loan Document, or otherwise payable or distributable by the Agent to such Lender under any Loan Document or from any other source against any amount that the Agent has demanded to be returned under the Section 8.12(a). |
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d. |
The parties hereto agree that (x) irrespective of whether the Agent may be equitably subrogated, in the event that an Erroneous Payment (or portion thereof) is not recovered from any Payment Recipient that has received such Erroneous Payment (or portion thereof) for any reason, the Agent shall be subrogated to all the rights and interests of such Payment Recipient (and, in the case of any Payment Recipient who has received funds on behalf of a Lender, to the rights and interests of such Lender under the Loan Documents with respect to such amount (the “Erroneous Payment Subrogation Rights”) and (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party; provided that, this Section 8.12 shall not be interpreted to increase (or accelerate the due date for), or have the effect of increasing (or accelerating the due date for), the Obligations of the Borrowers relative to the amount (and/or timing for payment) of the Obligations that would have been payable had such Erroneous Payment not been made by the Agent; provided further, that for the avoidance of doubt, the immediately preceding clauses (x) and (y) shall not apply to the extent any such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Agent from the Borrowers for the purpose of making such Erroneous Payment. |
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e. |
Notwithstanding anything to the contrary contained herein, and for the avoidance of doubt, in no event shall the occurrence of an Erroneous Payment (or the existence of any Erroneous Payment Subrogation Rights or other rights of the Agent in respect of an Erroneous Payment) result in the Agent becoming, or being deemed to be, a Lender hereunder or the holder of any Loans hereunder. |
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f. |
To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Erroneous Payment received, including, without limitation, any defense based on “discharge for value” or any similar doctrine. |
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g. |
Each party’s obligations, agreements and waivers under this Section 8.12 shall survive the resignation or replacement of the Agent, any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the commitments to lend and/or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document. |
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xiii. |
Section 9.5(a) of the Credit Agreement is hereby amended be deleting the reference to “one counsel to the Agent” where it appears therein and substituting “one primary counsel to the Agent and of one local counsel to the Agent in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions)” therefor. |
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xiv. |
Section 9.6(a) of the Credit Agreement is hereby amended by replacing the penultimate sentence thereunder with the following sentences:
In addition to, and without limitation of, the foregoing provisions of this Section 9.6(a), no assignment by a Lender shall be effective (and the Agent shall not be required to record any assignment by a Lender in the Register) unless and until (i) the Agent has received a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, (ii) the parties to the applicable Assignment and Assumption shall have paid to the Agent a processing and recordation fee of $3,500 (unless waived by the Agent in its sole discretion), (iii) the assignee, if it is not already a Lender prior to the date of such assignment, shall have delivered to the Agent an administrative questionnaire and the tax forms required under Section 2.12(g), and all customary documentation and other information reasonably requested by the Agent in connection with applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act and (iv) any written consent to such assignment required by this Section 9.6 shall have been obtained. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice. |
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xv. |
Section 9 of the Credit Agreement is hereby amended by adding the following new Section 9.15 at the end thereof:
9.15 Borrower Representative
Each Borrower irrevocably appoints Cadiz, and Cadiz shall act, under this Agreement and the other Loan Documents, as the borrower representative, agent, attorney-in-fact and legal representative of such other Borrowers for all purposes, including, without limitation, (i) submitting borrowing requests, disbursement instructions, reports, information, or any other notice or communication to be made or given by any of them under this Agreement or any other Loan Document, and (ii) receiving account statements and other notices and communications to any of them from the Agent, or any Lender (Cadiz, acting in such capacity, the “Borrower Representative”), and agrees that the Borrower Representative may execute such documents and provide such authorizations on behalf of the Borrowers as the Borrower Representative deems appropriate in its sole discretion and each Borrower shall be obligated by all of the terms of any such document and/or authorization executed on its behalf, and any notice or communication delivered by the Agent or any Lender to the Borrower Representative shall be deemed delivered to each Borrower. The Agent and each Lender may rely, and shall be fully protected in relying, on any disbursement instruction, report, information or any other notice or communication made or given by the Borrower Representative in writing, whether in its own name, as the Borrower Representative, on behalf of any other Borrower or on behalf of the Borrowers, and neither the Agent nor any Lender has any obligation to make any inquiry or request any confirmation from or on behalf of any other Borrower as to the binding effect on it of any such notice, request, instruction, report, information, other notice or communications, nor shall the joint and several character of the Borrowers’ obligations hereunder be affected. |
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7. |
Conditions Precedent to Effectiveness. |
|
a. |
The obligations of the parties hereto set forth herein shall become effective immediately upon the date (the “Effective Date”) when each of the following conditions shall first have been satisfied (which may be satisfied concurrently with the Effective Date): |
|
i. |
the Existing Agent, the Successor Agent, the Lenders and the Loan Parties shall have executed and delivered this Agreement; |
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ii. |
B. Riley shall have received from the Borrowers payment in immediately available funds of all reasonable costs and expenses, and all fees and other amounts due and payable to it as the Existing Agent through the Effective Date in accordance with the terms of the Loan Documents and this Agreement (including reasonable and documented out-of-pocket fees and expenses of counsel in the applicable amount set forth on Schedule I); and |
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iii. |
Alter Domus shall have received: (1) a duly executed counterpart of the Successor Agency Fee Letter from the Borrowers and (2) payment in immediately available funds of all fees required to be paid on the Effective Date under the Successor Agent Fee Letter and all costs and expenses incurred by the Successor Agent in connection with this Agreement and the transactions contemplated hereby required to be paid by the Borrowers under Section 5(b), to the extent a reasonably detailed invoice therefor is received by Cadiz at least two Business Days prior to the Effective Date, including, without limitation, reasonable and documented attorneys’ fees and expenses. |
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8. |
Entire Agreement. This Agreement states the entire agreement and supersedes all prior agreements, written or verbal, between the parties hereto with respect to the subject matter hereof and may not be amended except in writing signed by a duly authorized representative of each of the respective parties hereto. Except as specifically modified by this Agreement, the Credit Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. This Agreement shall be deemed a Loan Document. The Credit Agreement and the other Loan Documents represent the entire agreement of the Loan Parties, the Agent and the Lenders with respect to the subject matter thereof, and there are no promises, undertakings, representations or warranties by any party hereto or thereto relative to the subject matter hereof not expressly set forth or referred to in the Credit Agreement or in the other Loan Documents. |
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9. |
Waiver. No delay or failure on the part of any party hereto in exercising any right, power or remedy hereunder shall effect or operate as a waiver thereof, nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. |
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10. |
GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The provisions of Sections 9.11 and 9.14 of the Credit Agreement are incorporated into this Agreement by reference, mutatis mutandis. |
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11. |
Covenants, Representations and Approvals. |
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a. |
Each Loan Party hereby represents and warrants that: |
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i. |
it is duly authorized to execute and deliver this Agreement and perform its obligations hereunder and that such execution, delivery and performance is not prohibited by law; and |
|
ii. |
it approves of the appointment of Alter Domus as successor Agent to B. Riley under the Credit Agreement and the other Loan Documents in accordance with this Agreement; |
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b. |
Each Lender party hereto (i) represents and warrants that it is duly authorized to execute and deliver this Agreement and perform its obligations hereunder and that such execution, delivery and performance is not prohibited by law and (ii) agrees that the Existing Agent and Successor Agent may conclusively rely upon (and shall be fully protected in relying upon) the Register in confirming that the Lenders party hereto constitute the Lenders. |
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c. |
The Existing Agent represents and warrants that it is duly authorized to execute and deliver this Agreement and perform its obligations hereunder and that such execution, delivery and performance is not prohibited by law. |
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d. |
The Successor Agent represents and warrants that it is duly authorized to execute and perform its obligations under this Agreement and that such execution is not prohibited by law. |
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12. |
Release of Claims. |
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a. |
Each of the Loan Parties, on behalf of itself and its agents, representatives, officers, directors, advisors, employees, subsidiaries, Affiliates, successors and assigns (collectively, “Releasors”), hereby forever and irrevocably waives, releases and discharges the Existing Agent, and its officers, directors, partners, general partners, limited partners, Affiliates, managing directors, members, stockholders, trustees, shareholders, representatives, employees, principals, agents, parents, subsidiaries, joint ventures, predecessors, successors, assigns, beneficiaries, heirs, executors, personal or legal representatives and attorneys of any of them (collectively, the “Releasees”), of and from any and all claims, causes of action, suits, obligations, demands, debts, agreements, promises, liabilities, controversies, costs, damages, expenses and fees whatsoever related to the Loan Documents or the transactions related thereto, whether arising from any act, failure to act, omission, misrepresentation, fact, event, transaction or other cause, and whether based on any federal, state, local or foreign law or right of action, at law or in equity or otherwise, foreseen or unforeseen, matured or unmatured, known or unknown, accrued or not accrued, which any Releasor now has, has ever had or may hereafter have against any Releasee arising contemporaneously with or prior to the Effective Date or on account of or arising out of any matter, cause, circumstance or event occurring contemporaneously with or prior to the Effective Date (collectively, the “Released Claims”), in each case except to the extent caused by the willful misconduct or gross negligence of the Releasees, as determined by a final, non-appealable judgment of a court of competent jurisdiction. |
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b. |
Each of the Loan Parties, on behalf of itself and its agents, representatives, officers, directors, advisors, employees, subsidiaries, Affiliates, successors and assigns, hereby unconditionally and irrevocably agrees that it will not sue any Releasee on the basis of any Released Claim, in each case except to the extent caused by the willful misconduct or gross negligence of the Releasees, as determined by a final, non-appealable judgment of a court of competent jurisdiction. |
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13. |
Severability. In the event that any provision of this Agreement, or the application of such provision to any person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be affected and shall continue to be valid and enforceable to the fullest extent permitted by law. The illegality or unenforceability of any provision of the Credit Agreement or any instrument or agreement required thereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of the Credit Agreement or any instrument or agreement required thereunder. |
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14. |
Counterparts and Facsimile. This Agreement may be signed in counterparts, all of which together shall constitute one and the same instrument. The parties hereto may provide signatures to this Agreement by facsimile or electronic mail, and such facsimile or electronic mail signatures shall be deemed to be the same as original signatures. The words “execution,” “signed,” “signature” and words of like import contained herein shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act. |
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
B. RILEY SECURITIES, INC.,
as the Existing Agent
By: /s/ Michael McCoy
Name: Michael McCoy
Title: CFO
ALTER DOMUS (US) LLC,
as the Successor Agent
By: /s/ Matthew Trybula
Name: Matthew Trybula
Title: Associate Counsel
HHC $ FUND 2012,
as a Lender
By: /s/ PH Heerema
Name: PH Heerema
Title:
BRF FINANCE CO. LLC,
as a Lender
By: /s/ Phil Ahn
Name: Phil Ahn
Title: CFO
BRC PARTNERS OPPORTUNITY FUND L.P.,
as a Lender
By: /s/ Wes Cummins
Name: Wes Cummins
Title: Authorized Person
272 CAPITAL MASTER FUND LTD.,
as a Lender
By: /s/ Wes Cummins
Name: Wes Cummins
Title: Authorized Person
CADIZ INC., as a Borrower
By: /s/ Stanley E. Speer
Name: Stanley E. Speer
Title: Chief Financial Officer
CADIZ REAL ESTATE LLC,
as a Borrower
By: /s/ Stanley E. Speer
Name: Stanley E. Speer
Title: Chief Executive Officer, Manager and Chairman
ATEC WATER SYSTEMS, LLC,
as a Borrower
By: /s/ Stanley E. Speer
Name: Stanley E. Speer
Title: Chief Financial Officer
OCTAGON PARTNERS LLC,
as a Borrower
By: /s/ Stanley E. Speer
Name: Stanley E. Speer
Title: Manager
Schedule I
Loan Status
|
AMOUNTS |
UNSECURED CONVERTIBLE LOANS |
SECURED CONVERTIBLE LOANS |
NON-CONVERTIBLE LOANS |
|
Outstanding Principal: |
$16,565,886.50 |
$20,456,789.10 |
$21,200,000.00 |
|
Accrued Interest: |
$74,086.33 |
$91,487.31 |
$94,811.11 |
Fees, Charges and Expenses due and payable to the Existing Agent:
$28,544.60
Schedule II
Specified Finance Documents
|
1. |
Credit Agreement, dated as of July 2, 2021, by and among the Borrowers, the Lenders party thereto, B. Riley Securities, Inc., as Agent, and the other parties party thereto (as amended by that certain First Amendment to Credit Agreement, dated as of February 2, 2023, that certain Correction to First Amendment to Credit Agreement, dated as of March 9, 2023, that certain Second Amendment to Credit Agreement, dated as of August 14, 2023 and that certain Third Amendment to Credit Agreement and First Amendment to Security Agreement, dated as of March 6, 2024). |
|
2. |
Security Agreement, dated as of July 2, 2021, by and among the Borrowers, the other Loan Parties from time to time party thereto in favor of B. Riley Securities, Inc., as Agent (as amended by that certain Third Amendment to Credit Agreement and First Amendment to Security Agreement, dated as of March 6, 2024). |
|
3. |
Joinder Agreement, dated as of November 9, 2022, by and between ATEC and the Existing Agent and acknowledged and agreed to by the other Borrowers. |
|
4. |
Joinder Agreement, dated as of March 6, 2024, by and between Octagon and the Existing Agent and acknowledged and agreed to by the other Borrowers. |
|
5. |
Pledge Agreement, dated as of May 2, 2024, by Lee H Odell in favor of the Existing Agent. |
|
6. |
Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated as of July 2, 2021, by and among Cadiz, CRE and Octagon each as Trustor, B. Riley Securities, Inc. as Beneficiary and Fidelity National Title Company as Trustee, for the benefit of Beneficiary (as amended by that certain First Amendment to Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated as of February 2, 2023, that certain Second Amendment to Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated as of April 12, 2024). |
|
7. |
Subordination, Non-disturbance and Attornment Agreement, dated July 13, 2021, by and between the Existing Agent and Limoneira Company and acknowledged by CRE. |
|
8. |
Subordination, Non-disturbance and Attornment Agreement, dated July 20, 2021, by and between the Existing Agent and SoCal Hemp JV LLC and acknowledged by CRE. |
|
9. |
Warrant No. W-1, dated July 2, 2021, issued by Cadiz in favor of B. Riley Principal Investments, LLC |
|
10. |
Warrant No. W-2, dated July 2, 2021, issued by Cadiz in favor of B. Riley Principal Investments, LLC |
|
11. |
Common Stock Purchase Warrant, dated March 6, 2024, issued by Cadiz in favor of HHC $ Fund 2012. |
|
12. |
Landlord’s Disclaimer and Consent, dated as of January 10, 2023, by Timothy and Kay Richmond as landlord in favor of the Existing Agent. |
|
13. |
Consent to Transaction letter, dated as of August 17, 2023, by the Existing Agent to Cadiz and CRE. |
|
14. |
Consent and Release under the Credit Agreement, dated as of February 26, 2024, by and among the Borrowers, the Existing Agent and the Lenders. |
|
15. |
UCC Financing Statements listed below: |
|
Entity |
Filing Jurisdiction |
Corporate Form |
Secured Party |
UCC Filing Numbers |
Original UCC Filing Date |
UCC Filing Exp. Date |
|
Cadiz Inc. |
Delaware Secretary of State |
Corporation |
B. Riley Securities, Inc. |
2021 5173910 |
07/02/2021 |
07/02/2026 |
|
Cadiz Inc. |
Delaware Secretary of State |
Corporation |
B. Riley Securities, Inc. |
2024 1476264 |
03/06/2024 |
03/06/2029 |
|
Cadiz Inc. |
San Bernadino County Clerk, California |
Corporation |
B. Riley Securities, Inc. |
2021-0301701 |
07/02/2021 |
07/02/2026 |
|
Cadiz Real Estate LLC |
Delaware Secretary of State |
Corporation |
B. Riley Securities, Inc. |
2021 5174280 |
07/02/2021 |
07/02/2026 |
|
Cadiz Real Estate LLC |
Delaware Secretary of State |
Limited Liability Company |
B. Riley Securities, Inc. |
2024 1476348 |
03/06/2024 |
03/06/2029 |
|
Cadiz Real Estate LLC |
San Bernadino County Clerk, California |
Limited Liability Company |
B. Riley Securities, Inc. |
2021-0301702 |
07/02/2021 |
07/02/2026 |
|
ATEC Water Systems, LLC |
Delaware Secretary of State |
Limited Liability Company |
B. Riley Securities, Inc. |
2022 9330085 |
11/09/2022 |
11/09/2027 |
|
ATEC Water Systems, LLC |
Delaware Secretary of State |
Limited Liability Company |
B. Riley Securities, Inc. |
2024 1475985 |
03/06/2024 |
03/06/2029 |
|
Octagon Partners LLC |
California Secretary of State |
Limited Liability Company |
B. Riley Securities, Inc. |
U240024070318 |
03/06/2024 |
03/06/2029 |
|
Octagon Partners LLC |
San Bernadino County Clerk, California |
Limited Liability Company |
B. Riley Securities, Inc. |
2021-0301700 |
07/02/2021 |
07/02/2026 |
Schedule III
Possessory Collateral
|
1. |
Stock Certificate C-1 representing 300,000 common stock of SWI ESTATE INC. held by Cadiz Inc. and the accompanying stock transfer power. |
ANNEX A
FORM OF NOTICE OF BORROWER CONVERSION
[Notice Address for Applicable Convertible Lender]
Re: Notice of Borrower Conversion
Reference is made to that certain Credit Agreement, dated as of July 2, 2021 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Cadiz Inc., a Delaware corporation (“Cadiz”), Cadiz Real Estate LLC, a Delaware limited liability company, the lenders from time to time party thereto (the “Lenders”), and B. Riley Securities, Inc., as administrative agent for the Lenders. Capitalized terms used herein without definition are used as defined in the Credit Agreement.
The undersigned hereby elects to convert all of the outstanding principal amount and accrued and unpaid interest, if any, (less any tax required by law to be deducted or withheld) on the [Unsecured][Secured] Convertible Loans held by each [Unsecured][Secured] Convertible Lender under the Credit Agreement, into shares of Common Stock of Cadiz in the amounts and as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the [Unsecured][Secured] Convertible Lenders, the [Unsecured][Secured] Convertible Lenders will pay all transfer taxes payable with respect thereto and shall promptly deliver such certificates and opinions as reasonably requested by Cadiz in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Borrower Conversion, the undersigned represents and warrants to the [Unsecured][Secured] Convertible Lenders that (i) the Threshold Price for such [Unsecured][Secured] Convertible Loans has been satisfied in accordance with Section 2.14 of the Credit Agreement and (ii) it is in compliance with clauses (i) through (iii) of Section of 2.14(a) of the Credit Agreement.
Date to Effect Conversion:
Outstanding Principal Amount of [Unsecured][Secured] Convertible Loans to be Converted: $___________________, which Conversion shall be ratable among all [Unsecured][Secured] Convertible Loans
Accrued and Unpaid Interest on [Unsecured][Secured] Convertible Loans to be Converted: $____________________, which Conversion shall be ratable among all [Unsecured][Secured] Convertible Loans
Number of shares of Common Stock to be issued:
Signature:
Name:
cc: Alter Domus (US) LLC
225 W. Washington St., 9th Floor
Chicago, Illinois 60606
Attention: [Tad White]
[tad.white@alterdomus.com];ADPC@alterdomus.com, Legal_Agency@alterdomus.com]
ANNEX B
FORM OF NOTICE OF LENDER CONVERSION
Cadiz Inc.
550 South Hope Street, Suite 2850
Los Angeles, CA 90017
Attention: Chief Financial Officer
Re: Notice of Lender Conversion
Reference is made to that certain Credit Agreement, dated as of July 2, 2021 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Cadiz Inc., a Delaware corporation (“Cadiz”), Cadiz Real Estate LLC, a Delaware limited liability company, the lenders from time to time party thereto (the “Lenders”), and B. Riley Securities, Inc., as administrative agent for the Lenders. Capitalized terms used herein without definition are used as defined in the Credit Agreement.
The undersigned hereby elects to convert principal and accrued and unpaid interest, if any, on the [Secured/Unsecured] Convertible Loans held by the undersigned under the Credit Agreement, into shares of Common Stock of Cadiz in the amounts and as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by Cadiz in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.
[By the delivery of this Notice of Lender Conversion, the undersigned represents and warrants to Cadiz that its ownership of the Common Stock does not exceed the amounts specified under Section 2.15 of the Credit Agreement, as determined in accordance with Section 13(d) of the Exchange Act.][1]
The undersigned agrees to comply with any applicable prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.
Conversion calculations:
Lender Conversion Date:
Principal Amount of [Secured/Unsecured] Convertible Loans to be Converted: $___________________
Accrued and Unpaid Interest to be Converted: $___________________
Number of shares of Common Stock to be issued:
Signature:
Name:
cc: Alter Domus (US) LLC
225 W. Washington St., 9th Floor
Chicago, Illinois 60606
Attention: Nick Keelan
Telephone No.: (312) 564-5088
E-mail: ADPC@alterdomus.com, Legal_Agency@alterdomus.com
[1] To be included by any Unsecured Convertible Lender delivering this notice.
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Susan Kennedy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cadiz Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: November 13, 2024
/s/ Susan Kennedy
Susan Kennedy
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Stanley E. Speer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cadiz Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: November 13, 2024
/s/ Stanley E. Speer
Stanley E. Speer
Chief Financial Officer and Secretary
EXHIBIT 32.1
STATEMENT PURSUANT TO SECTION 906 THE SARBANES-OXLEY ACT OF 2002
BY PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
I, Susan Kennedy, herby certify, to my knowledge, that:
1. the accompanying Quarterly Report on Form 10-Q of Cadiz Inc. for the period ended September 30, 2024 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities and Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Cadiz Inc.
IN WITNESS WHEREOF, the undersigned has executed this Statement as of the date first written above.
Dated: November 13, 2024
/s/ Susan Kennedy
Susan Kennedy
Chief Executive Officer
EXHIBIT 32.2
STATEMENT PURSUANT TO SECTION 906 THE SARBANES-OXLEY ACT OF 2002
BY PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
I, Stanley E. Speer, herby certify, to my knowledge, that:
1. the accompanying Quarterly Report on Form 10-Q of Cadiz Inc. for the period ended September 30, 2024 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities and Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Cadiz Inc.
IN WITNESS WHEREOF, the undersigned has executed this Statement as of the date first written above.
Dated: November 13, 2024
/s/ Stanley E. Speer
Stanley E. Speer
Chief Financial Officer and Secretary