Investment in Equity Method Investments

12 Months Ended

Jun. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investment in Equity Method Investments

Note 3 - Investment in Equity Method Investments

In April 2019, the Company and an unrelated entity, Delaware Water Company, LLC (Delaware) formed a limited liability company called Enviro WaterTek LLC (“Enviro”). Enviro is owned 50% by the Company and 50% by Delaware, and the Company accounts for its investment in Enviro under the equity method in accordance with ASC 323 as the Company’s investments in Enviro, an unconsolidated entity and for which it has the ability to exercise significant influence but not control. From inception up to June 30, 2023, Enviro had no operations.

In September 2021, the Company and Delaware entered into a separate agreement under Enviro for a specific project (referred to as “Ameredev”). Delaware has certain contracts in place to provide recycled water to operators of certain active oil and gas wells. Under the agreement, the Company contributed $1.2 million that was used by Ameredev to increase the capacity of certain pipelines and water treatment facilities operated by Delaware. Pursuant to the agreement, for each barrel of recycled water that Ameredev sells, Delaware will receive $0.10 per barrel, and the Company will receive $0.05 per barrel (referred to as usage fees), with the balance of net income (loss) from Ameredev being allocated 70% to Delaware and 30% to the Company. The Ameredev agreement will terminate the earlier of three years (unless extended by unanimous agreement of the Board and Members of Ameredev) from the date of the agreement or by unanimous agreement of the Board and Members of Ameredev.

During the year ended June 30, 2022, the Company recorded total revenues from Ameredev of $46,000, made up of $33,000 from the sale of reactors, and $13,000 from usage fees. During the year ended June 30, 2022, the Company recognized a loss of $48,000 related to the equity method investment. As of June 30, 2022, balance of equity method investment amounted to $1,149,000.

During the year ended June 30, 2023, the Company recorded total revenues from Ameredev of $20,000 from usage fees. In addition, the Company also recorded a loss from equity method investment of $36,000 to account for the Company’s 30% share in the net loss of Ameredev.

Based upon the operations of Ameredev and the facts and circumstance of the industry it operates, due to a number of factors, Management has concluded that it was no longer possible to determine reasonable and objectively supportable projections and estimates with regards to the recoverability of the equity method investment. As such, at June 30, 2023, the Company determined the equity method investment was impaired and recorded an additional $1,112,000 in loss to its investment. Total loss from equity method investment for the year ended June 30, 2023 was $1,148,000.

The following table summarizes the activity of the Company’s equity method investment:

	Equity Method Investment
Balance at June 30, 2021	$	–
Contributions to equity method investment		1,223,000
Loss from Company’s 30% share in the net loss of Ameredev		(48,000	)
Distribution from equity method investment		(26,000	)
Balance at June 30, 2022		1,149,000
Loss from Company’s 30% share in the net loss of Ameredev		(36,000	)
Impairment of equity method investment		(1,112,000	)
Distribution from equity method investment		–
Balance at June 30, 2023	$	1,000