10-Q: Cadiz Q3 2025: ATEC Drives Revenue, Mojave Bank Secures $51M

Cadiz Inc. reported increased revenue driven by its ATEC water filtration segment and secured a $51 million tribal investment for its Mojave Groundwater Bank project, despite continued operating losses.

Summary

• Total revenues for the nine months ended September 30, 2025, increased significantly to $11.2 million from $4.9 million in the prior year.
• Net loss for the nine months ended September 30, 2025, was $(24.4) million, an increase from $(22.5) million in the prior year.
• Basic and diluted net loss per common share improved to $(0.35) for the nine months ended September 30, 2025, compared to $(0.39) in the prior year, due to a higher weighted average share count.
• The Water Filtration Technology (ATEC) segment showed strong performance, with revenues increasing to $10.1 million for the nine months ended September 30, 2025, from $3.5 million in the prior year, and an improved gross margin of 44.1%.
• The Land and Water Resources segment, including the Mojave Groundwater Bank development, continued to incur significant operating losses of $(19.7) million for the nine months ended September 30, 2025.
• Cash and cash equivalents decreased to $4.4 million at September 30, 2025, from $17.3 million at December 31, 2024.
• The company secured a definitive agreement (Lytton Agreement) on October 27, 2025, for an unsecured term loan of up to $51 million from Lytton Rancheria of California to fund the construction of the Mojave Groundwater Bank.
• Proceeds from the Lytton Agreement will be used for construction, development, ownership, operation, and other ongoing costs of the Mojave Groundwater Bank, and to reimburse the company's expenses.
• The company is pursuing an additional $400 million in equity capital investments for Mojave Water Infrastructure Company, LLC (MWI), a special purpose entity for the Mojave Groundwater Bank.

Sentiment

Score: 6

Explanation: While losses increased and cash reserves declined, the significant revenue growth from ATEC and the securing of a $51 million tribal investment for the flagship Mojave Groundwater Bank project are strong positive developments. The ongoing pursuit of substantial additional capital for MWI indicates progress on long-term strategic goals, balancing the current financial burn rate.

Positives

• Significant revenue growth, with total revenues for the nine months ended September 30, 2025, reaching $11.2 million, up from $4.9 million in the prior year.
• Strong performance in the Water Filtration Technology (ATEC) segment, with revenues increasing to $10.1 million for the nine months ended September 30, 2025, from $3.5 million in the prior year.
• ATEC's gross margin improved significantly to 44.1% for the nine months ended September 30, 2025, from 31.4% in the prior year, driven by increased filter sales (308 filters shipped in 2025 vs. 132 in 2024).
• Secured a $51 million unsecured term loan from Lytton Rancheria of California (Lytton Agreement) for the Mojave Groundwater Bank construction, providing a first tranche of project capital.
• The Lytton Agreement allows for conversion of the loan into a 51% share of future cash flows from water-storage rights, potentially aligning interests with project success.
• Reduced cash used in operating activities for the nine months ended September 30, 2025, to $12.0 million from $15.3 million in the prior year.
• Successfully completed two direct offerings, raising net proceeds of $22.1 million in November 2024 and $18.3 million in March 2025.
• Entered into agreements with public water systems, private utility, and other private water providers for the purchase of 21,275 AFY of annual water supply, representing 85% of the Northern Pipeline's capacity.

Negatives

• Increased net loss for the nine months ended September 30, 2025, to $(24.4) million from $(22.5) million in the prior year.
• Increased operating loss for the nine months ended September 30, 2025, to $(18.2) million from $(16.6) million in the prior year, primarily due to higher professional fees for Mojave Groundwater Bank development.
• Significant decrease in cash and cash equivalents, from $17.3 million at December 31, 2024, to $4.4 million at September 30, 2025.
• Substantial increase in cash used in investing activities, totaling $11.3 million for the nine months ended September 30, 2025, compared to $0.5 million in the prior year, largely due to securing an option to purchase steel pipeline.
• Continued reliance on debt and equity financing to support working capital needs and development of water solutions, indicating that current operations do not fully support the business.
• Long-term debt, net, increased to $59.8 million at September 30, 2025, from $56.7 million at December 31, 2024.
• Accumulated deficit increased to $(682.4) million at September 30, 2025, from $(676.1) million at December 31, 2024.

Risks

• Limitations on liquidity and ability to raise capital may adversely affect the company.
• Inability to raise needed funds could force substantial reductions in operating expenses, adversely affecting the business plan and viability.
• No assurance can be given regarding the availability and terms of any new financing.
• Legal claims are inherently uncertain, 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.
• The company's tax years 2022 through 2024 remain subject to examination by the Internal Revenue Service, and tax years 2021 through 2024 by California tax jurisdictions.
• Use of net operating loss (NOL) carryforwards is subject to an annual limitation due to previous ownership changes.

Future Outlook

The company expects proceeds from the Lytton Agreement, combined with existing cash, to cover short-term working capital needs. ATEC operations are anticipated to be self-funded through existing capital and cash profits in 2025. For the longer term, additional capital will likely be required to finance working capital and capital expenditures, depending on the progress of the Mojave Groundwater Bank, MWI funding, ATEC operational needs, and agricultural asset expansion. The company is continuously evaluating cash requirements and financing methods, aiming to minimize shareholder dilution from equity placements. No assurances are given regarding the availability or terms of future financing.

Management Comments

• "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."
• "We manage our landholdings, 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, groundwater storage, water conveyance and custom-designed water filtration technology systems."
• "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."
• "Proceeds from draws under the Tribal Investment, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs."
• "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."

Industry Context

Cadiz Inc. positions itself as a critical water solutions provider in the Southwestern United States, addressing the urgent need for groundwater storage and reliable water supplies amidst climate change and drought. Its Mojave Groundwater Bank project, with a storage capacity of up to 1 million acre-feet, is compared to the Metropolitan Water District of Southern California's 1.2 million acre-feet storage in Lake Mead, highlighting the scale and regional importance of its proposed solution. The company's integrated approach, combining land, water, pipeline infrastructure, and ATEC water filtration technology, aims to meet growing demand from public water systems, government agencies, and commercial businesses for water security.

Comparison to Industry Standards

• The Mojave Groundwater Bank's potential storage capacity of up to 1 million acre-feet is significant, comparable to the 1.2 million acre-feet stored by the Metropolitan Water District of Southern California in Lake Mead, indicating a substantial contribution to regional water security.
• The company has secured agreements for 21,275 AFY of annual water supply, representing 85% of the Northern Pipeline's 25,000 AFY capacity, demonstrating strong market demand for its water conveyance services.
• ATEC's improved gross margin of 44.1% for the nine months ended September 30, 2025, suggests efficient operations and competitive pricing within the water filtration technology sector, although specific comparable companies or projects are not detailed in the filing.

Corporate Governance

Legal Proceedings

• No material changes to legal proceedings described in the Annual Report on Form 10-K for the year ended December 31, 2024.
• The company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business, but is not aware of any pending or threatened litigation expected to have a material adverse effect.

Related Party Transactions

• HHC $ Fund 2012 (Heerema), a significant shareholder (31.3% of common stock as of September 30, 2025), is a lender under the Third Amended Credit Agreement, providing senior secured convertible term loans and holding non-convertible term loans and a warrant.
• Lytton Rancheria of California (Lytton), a federally recognized Native American tribe, entered into a definitive agreement on October 27, 2025, to provide an unsecured term loan of up to $51 million for the Mojave Groundwater Bank. Lytton will receive commitment and funding fees in common stock and has the option to convert the loan into an ownership interest in Mojave Water Infrastructure Company, LLC (MWI).

Stakeholder Impact

• Shareholders: Potential for dilution from future equity raises, but also long-term value creation from successful development of the Mojave Groundwater Bank and ATEC growth. Preferred shareholders continue to receive dividends.
• Employees: Stock-based compensation awards are a significant component of compensation, aligning interests with company performance.
• Customers (public water systems, government agencies, commercial businesses): Benefit from expanded water supply, storage, and filtration solutions, addressing critical regional water needs.
• Lenders: Existing debt holders have extended maturities and new convertible debt terms, while the Lytton Agreement provides a new unsecured loan with potential for equity conversion.
• Local communities: The Mojave Groundwater Bank project aims to provide long-term water security for Southern California and the Southwestern United States.

Next Steps

• Draw up to $51 million in one or more installments from the Lytton Agreement prior to April 30, 2027.
• Fund the construction, development, ownership, operation, and other ongoing costs of the Mojave Groundwater Bank.
• Reimburse the company's expenses related to the Mojave Groundwater Bank.
• Complete due diligence with other potential investors for up to $400 million in equity capital investments in MWI.
• Begin construction of Northern Pipeline facilities in 2026.
• Begin construction of Southern Pipeline in 2027.
• MWI investors to seek available infrastructure grants and/or other financing alternatives, including potential revenue bond issuances through a to-be-formed financing Joint Powers Authority.
• Evaluate the amount of cash needed and the manner in which such cash will be raised on an ongoing basis.

Key Dates

Recommendation

Cadiz Inc. is in a critical development phase for its long-term water infrastructure projects, particularly the Mojave Groundwater Bank. While the company reported increased operating losses and a significant reduction in cash, the strong revenue growth from its ATEC water filtration segment and the successful securing of a $51 million tribal investment for the Mojave Groundwater Bank are positive indicators of progress on its strategic initiatives. The ongoing pursuit of an additional $400 million in equity for MWI further underscores the potential for future value creation. However, the company remains heavily reliant on external financing, and the main water projects are still pre-revenue, carrying inherent execution and funding risks. A "hold" recommendation reflects the balance between the promising long-term potential and the current financial challenges and development-stage risks. Investors should monitor the progress of the Mojave Groundwater Bank funding and construction, as well as the continued performance of the ATEC segment.

Keywords

Water solutions, Groundwater storage, Water filtration, Mojave Groundwater Bank, ATEC Water Systems, Water infrastructure, California water, SEC filing, CDZI, Water supply, Environmental services