10-Q: Cadiz Inc. Reports First Quarter 2025 Results, Highlights Mojave Groundwater Bank Development

Sentiment:

Quarterly Report 14 May 2025 4:43 PM

Cadiz Inc. reports a net loss for Q1 2025, driven by increased development costs for the Mojave Groundwater Bank, while advancing water supply agreements and infrastructure projects.

Capital raiseThe company completed a direct offering of 5,715,000 shares of common stock at $3.50 per share on March 7, 2025, generating net proceeds of approximately $18.3 million.Cadiz established Mojave Groundwater Storage Company LLC (now Mojave Water Infrastructure Company, LLC (MWI)) to fund capital costs in partnership with public sector, tribal and other investors that we expect will contribute up to $401 million equity capital.As of May 2025, Cadiz has entered into letters of intent and a letter of agreement with potential MWI investors for up to $425 million.

Worse than expectedThe company's net loss increased from $6.9 million in Q1 2024 to $9.6 million in Q1 2025.

Summary

Cadiz Inc. reported a net loss of $9.6 million for the three months ended March 31, 2025, compared to a $6.9 million net loss for the same period in 2024.
The increased loss was primarily due to higher professional fees related to the Mojave Groundwater Bank development and increased stock-based compensation expenses.
Total revenues for Q1 2025 were $2.954 million, up from $1.121 million in Q1 2024, driven by increased sales in the Water Filtration Technology segment (ATEC).
The company completed a direct offering of 5,715,000 shares of common stock at $3.50 per share on March 7, 2025, generating net proceeds of approximately $18.3 million.
Cadiz is focused on developing its water supply, storage, and conveyance assets, including the Mojave Groundwater Bank, and is negotiating water supply contracts with public water systems.
The company estimates it will cost approximately $800 million to construct all required facilities to complete the Mojave Groundwater Bank.
Cadiz established Mojave Groundwater Storage Company LLC (now Mojave Water Infrastructure Company, LLC (MWI)) to fund capital costs in partnership with public sector, tribal and other investors that we expect will contribute up to $401 million equity capital.
As of May 2025, Cadiz has entered into letters of intent and a letter of agreement with potential MWI investors for up to $425 million.
The company owns vested water rights to withdraw 2.5 million acre-feet of groundwater and has 1 million acre-feet of groundwater storage capacity.
Cadiz owns a 220-mile pipeline and a 99-year lease for a 43-mile pipeline right-of-way.
The company's ATEC Water Systems provides innovative water filtration solutions.
Cadiz is pursuing agreements with public water systems for the purchase of 21,275 AFY of annual water supply from us to be delivered via the Northern Pipeline.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While revenue increased, the net loss also increased. The company is making progress on its Mojave Groundwater Bank project, but it still relies on financing to fund its operations.

Positives

Revenue increased significantly due to strong performance in the ATEC Water Filtration Technology segment, with sales totaling $2.4 million.
The company successfully raised $18.3 million through a direct offering, strengthening its financial position.
Progress is being made in securing funding for the Mojave Groundwater Bank project, with letters of intent and a letter of agreement signed for up to $425 million in potential investments.
Agreements are in place with public water systems for the purchase of 21,275 AFY of annual water supply, representing 85% of the Northern Pipeline's capacity.
The company secured an exclusive option to purchase up to 180 miles of steel pipe for the Mojave Groundwater Bank development.

Negatives

The company experienced a larger net loss in Q1 2025 compared to Q1 2024, primarily due to increased expenses related to the Mojave Groundwater Bank development and stock-based compensation.
The company continues to rely on debt and equity financing to support its working capital needs and project development.
The company has not received significant revenues from its water supply, storage, or conveyance assets to date.

Risks

The company's ability to execute its business plan depends on securing additional financing, which may not be available on favorable terms or at all.
Limitations on the company's liquidity and ability to raise capital could adversely affect its operations and development plans.
The Mojave Groundwater Bank project requires significant capital investment and is subject to regulatory and environmental risks.
The letters of intent and letter of agreement with potential MWI investors are non-binding and subject to ongoing due diligence.
The company's future working capital needs will depend on the specific measures it pursues in the entitlement and development of its water resources.

Future Outlook

The company expects its ATEC operations to be funded using existing capital and cash profits generated from operations during 2025, and may need to raise additional capital to finance working capital needs and capital expenditures in the longer term.

Management Comments

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.

Industry Context

Cadiz is positioning itself to address the growing need for water security in the Southwestern United States by developing water supply, storage, and conveyance infrastructure. The company's focus on groundwater resources and water filtration technology aligns with the increasing demand for sustainable water management solutions in the face of climate change and drought conditions.

Comparison to Industry Standards

The Metropolitan Water District of Southern California stores approximately 1.2 million acre-feet of water in Lake Mead, while Cadiz's aquifer system is capable of storing up to 1 million acre-feet of imported surplus water.
The company estimates it will cost approximately $800 million to construct all required facilities to complete the Mojave Groundwater Bank, including conversion of the Northern Pipeline to water conveyance and construction of the Southern Pipeline, the wellfield and power facilities.
The company is pursuing agreements with public water systems for the purchase of 21,275 AFY of annual water supply from us to be delivered via the Northern Pipeline.

Stakeholder Impact

Shareholders: Dilution from equity offerings, potential for long-term value creation from water projects.
Employees: Stock-based compensation, job security dependent on project success.
Customers: Potential for reliable water supply and water filtration solutions.
Suppliers: Opportunities for contracts related to project development.
Creditors: Repayment of debt dependent on project success and cash flow generation.

Next Steps

Continue development of the Mojave Groundwater Bank.
Finalize agreements with MWI investors.
Pursue infrastructure grants and/or bond issuances to fund remaining construction costs.
Advance contract negotiations for water supply with public water systems.
Continue to monitor and manage liquidity and capital resources.

Key Dates

Date	Description
2016-02-29	Date of Fenner Valley Farms LLC (FVF) lease agreement.
2019-07-10	Date of original approval of the 2019 Equity Incentive Plan.
2020-03-05	Date of conversion and exchange agreements for Series 1 Preferred Stock.
2021-06-29	Date of Underwriting Agreement with B. Riley Securities, Inc. for Depositary Share Offering.
2021-07-01	Date of filing the Certificate of Designation for the Series A Preferred Stock.
2021-07-02	Date of entering into a $50 million senior secured credit agreement.
2022-12-31	Date of ATEC Acquisition.
2023-02-02	Date of entering into a First Amendment to Credit Agreement.
2024-01-01	Start date for vesting of Nonmilestone Restricted Stock Units (RSUs).
2024-02-01	Effective date of 26-year right-of-way agreement with the United States Bureau of Land Management (BLM).
2024-03-06	Date of entering into the Third Amendment to Credit Agreement.
2024-11-05	Date of completion of the sale and issuance of 7,000,000 shares of its common stock to certain institutional investors in a registered direct offering.
2025-03-07	Date of completion of the sale and issuance of 5,715,000 shares of its common stock to certain institutional investors in a registered direct offering.
2025-03-31	End of the quarterly period covered by the report.
2025-04-15	Date of dividend payment on Series A Preferred Stock.
2025-05-12	Date as of which the Registrant had 81,876,376 shares of common stock outstanding.
2025-05-14	Date of report signature.
2026-07-02	Shares of Series A Preferred Stock will be redeemable at the Company's option.

Keywords

Mojave Groundwater Bank, water storage, water supply, ATEC Water Systems, water filtration, pipeline, Cadiz Inc., water rights, financing, equity offering

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