Executive Summary / Key Takeaways

• Cadiz Inc. (CDZIP) is a development-stage water solutions provider uniquely positioned with significant land, water rights, pipeline infrastructure, and filtration technology assets in drought-stricken Southern California.
• The core investment thesis hinges on the successful development and monetization of the Mojave Groundwater Bank project, which aims to provide long-term water supply and storage solutions, addressing a critical regional need.
• Recent financial results for Q1 2025 show increased revenue driven by the ATEC water filtration segment, but also a wider net loss primarily due to higher development costs for the Mojave project and increased non-cash compensation.
• The Company has secured recent equity financing ($18.3M net in March 2025) and is actively pursuing significant external capital ($425M in potential MWI investor funding) and strategic partnerships to fund the estimated $800M Mojave Groundwater Bank construction.
• Key factors for investors to monitor are the closing of definitive agreements for the Mojave Water Infrastructure Company (MWI) funding, progress on project construction expected to begin in 2025, and the Company's ability to secure additional long-term financing amidst ongoing operating losses.

A Deep Dive into Cadiz Inc.'s Water Strategy

Cadiz Inc. operates at the nexus of a critical challenge facing the Southwestern United States: water scarcity. Positioned in Southern California, a region grappling with persistent drought and increasing demand, the Company holds a unique portfolio of assets encompassing vast landholdings, significant groundwater rights, existing and planned pipeline infrastructure, and proprietary water filtration technology. This combination forms the foundation of CDZIP's strategy to become a vital provider of reliable, long-term water supply, storage, and conveyance solutions to public water systems, government agencies, and commercial customers.

Unlike traditional regulated water utilities such as American States Water Company (AWR), California Water Service Group (CWT), Essential Utilities, Inc. (WTRG), and SJW Group (SJW), which primarily focus on established distribution networks and regulated rate bases, Cadiz is fundamentally a development story. Its value proposition is tied to unlocking the potential of its substantial, largely untapped water resources and infrastructure. While established utilities benefit from stable, regulated earnings and extensive existing infrastructure, CDZIP's competitive edge lies in its ability to potentially bring new, climate-resilient water supplies and storage capacity online in a region desperate for both.

The Company's assets include vested water rights to withdraw 2.5 million acre-feet of groundwater and the capacity for 1.0 million acre-feet of groundwater storage within the aquifer system underlying its Cadiz Ranch property. This Mojave Groundwater Bank is central to its strategy, aiming to produce an average of 50,000 acre-feet per year (AFY) for 50 years for beneficial use. Complementing this is infrastructure: an existing 220-mile Northern Pipeline with a 25,000 AFY capacity, and a planned 43-mile Southern Pipeline (with a right-of-way entitlement) expected to handle 150,000 AFY for imported water storage. The Company also holds an option to purchase up to 180 miles of steel pipe, potentially for use in these projects.

Adding a crucial layer to its integrated approach is the Water Filtration Technology segment, ATEC Water Systems LLC. Acquired in 2022, ATEC provides innovative filtration solutions for impaired groundwater. This technology is designed for cost-effective, high-rate removal of contaminants like iron, manganese, arsenic, Chromium-6, nitrates, and PFAS. While specific quantitative performance metrics for ATEC's technology compared to alternatives are not detailed in the Company's recent filing, external analysis suggests its technology offers higher efficiency in groundwater treatment, potentially translating to lower treatment costs compared to more standardized systems used by broader utilities. This technological capability allows CDZIP to offer a more complete solution, addressing water quality concerns alongside supply and storage, differentiating it from competitors who may rely on less specialized or less cost-efficient treatment methods for specific contaminants. The strategic intent behind ATEC is clear: to provide a versatile, scalable component to CDZIP's integrated water solutions offering, enhancing its appeal to potential customers facing water quality challenges.

Financial Performance Reflecting Development Stage

Given its focus on large-scale project development, Cadiz Inc. is not yet generating significant revenue from its core water supply and storage assets. The Company's current revenues are primarily derived from its ATEC filtration business and, to a lesser extent, agricultural operations and leases.

For the three months ended March 31, 2025, total revenues were $3.0 million, a substantial increase from $1.1 million in the same period of 2024. This growth was largely attributable to the ATEC segment, which saw revenues jump from $0.5 million in Q1 2024 to $2.4 million in Q1 2025. This increase in ATEC sales was primarily driven by revenues under a contract to deliver 320 filters for the Central Utah Water Conservancy District's Vineyard Wellfield Groundwater Polishing Project. Revenue from the Land and Water Resources segment, primarily agriculture, saw a slight decrease from $0.6 million to $0.5 million year-over-year.

Despite the revenue growth from ATEC, the Company's operating loss widened to $7.5 million in Q1 2025, compared to $4.9 million in Q1 2024. This higher loss was mainly due to increased general and administrative expenses, which rose from $4.7 million to $8.1 million. Excluding non-cash stock-based compensation, G&A expenses increased from $3.5 million to $5.3 million, primarily driven by higher legal and consulting fees incurred to advance the development of the Mojave Groundwater Bank. Stock-based compensation expense also increased significantly, from $1.3 million to $2.8 million, reflecting an increase in non-cash awards. The net loss for the quarter increased to $9.6 million, up from $6.9 million in the prior year period.

These financial results underscore CDZIP's current operational reality: it is investing heavily in the development of its major water assets, leading to significant operating losses, while its existing businesses (ATEC, agriculture) provide some revenue but are not yet sufficient to offset these development costs. This contrasts sharply with the profitability and stable margins of established utilities like AWR, CWT, WTRG, and SJW, which benefit from mature infrastructure and regulated revenue streams. CDZIP's current financial profile reflects its position earlier on the growth curve, prioritizing long-term asset value creation over near-term profitability.

Funding the Future: Strategic Initiatives and Capital Needs

Funding the ambitious Mojave Groundwater Bank project is paramount to CDZIP's investment thesis. The estimated total cost to construct the required facilities, including pipeline conversion, Southern Pipeline construction, wellfield, and power facilities, is approximately $800 million. To finance this, the Company is pursuing a multi-pronged approach, including strategic partnerships and external capital raises.

A key initiative is the establishment of the Mojave Water Infrastructure Company, LLC (MWI). This entity is intended to partner with public sector, tribal, and other investors to fund the capital costs. As of May 2025, CDZIP has entered into non-binding letters of intent and a letter of agreement with potential MWI investors for up to $425.0 million. Upon closing definitive agreements, CDZIP expects to contribute its pipeline infrastructure assets and an anticipated 51% share of the long-term cash flows from groundwater banking and storage operations to MWI. In return, CDZIP is expected to receive approximately $76.0 million in cash, among other considerations, and retain 49% of the water storage rights. The Company also plans to coordinate with partners to seek infrastructure grants and other financing alternatives, such as bond issuances through a potential Joint Powers Authority, to cover the remaining construction costs.

This MWI structure is designed to bring in necessary capital while allowing CDZIP to retain a significant interest in the long-term cash flows and water storage capacity. The expected $76.0 million cash payment from MWI, upon closing, would provide a significant boost to CDZIP's liquidity, potentially reducing the need for immediate, dilutive equity financing for certain development costs.

In parallel, CDZIP has been active in the capital markets to bridge its funding needs during this development phase. In March 2025, the Company completed a registered direct offering, raising approximately $18.3 million in net proceeds by issuing 5.71 million shares at $3.50 per share. This followed a similar offering in November 2024 that yielded approximately $22.1 million net. Proceeds from these offerings are earmarked for capital and other expenses related to the Mojave Groundwater Bank development, including securing an option for steel pipe ($5.0 million used in January 2025), wellfield infrastructure, business development, and general corporate purposes.

The Company's liquidity position at March 31, 2025, showed cash and cash equivalents of $21.6 million and total cash, cash equivalents, and restricted cash of $24.3 million. While the net proceeds from the March 2025 offering are expected to provide sufficient funds for near-term working capital needs, the long-term outlook clearly indicates that additional capital will be required to finance future working capital and significant capital expenditures associated with the Mojave project. Management acknowledges this reliance on future financing, noting that limitations on liquidity and the ability to raise capital could adversely affect the Company's ability to implement its business plan.

The Company's debt structure includes senior secured and convertible loans with a maturity date of June 30, 2027. Interest on a portion of the debt is paid in kind, adding to the principal balance. While the debt covenants allow for additional equity financing and permit the Company to retain 100% of common equity proceeds, the overall debt level and the need for substantial future capital remain key considerations for investors. Compared to the lower debt-to-equity ratios of established utilities like CWT (0.84) and WTRG (1.25), CDZIP's higher leverage (0.67 Debt/Equity TTM, but this ratio can fluctuate significantly for development-stage companies) and reliance on external funding highlight its higher risk profile.

The recent water supply agreements, signed in 2024, represent a significant operational milestone. These agreements with multiple public water systems cover the purchase of 21,275 AFY, representing 85% of the Northern Pipeline's capacity, over a 40-year "take or pay" term. The agreed-upon market price, estimated to start around $850/AFY (subject to annual adjustment), provides a clear line of sight to a substantial future revenue stream once the necessary infrastructure is completed and water delivery commences. These contracts validate the market demand for CDZIP's water resources and provide a foundation for future cash flows, a critical component of the long-term investment thesis.

Risks and the Path Forward

Investing in Cadiz Inc. at this stage involves significant risks, primarily centered around execution and financing. The successful development of the Mojave Groundwater Bank, an estimated $800 million project, is not guaranteed. While the Company has secured potential investor interest for MWI, these are non-binding letters of intent and agreement, subject to due diligence and the closing of definitive agreements. Delays or failure to secure the full required funding could significantly impact the project timeline and costs.

Furthermore, the Company's ongoing operating losses necessitate continuous access to capital. While recent equity raises provide near-term liquidity, the need for substantial additional financing in the long term is clear. The availability and terms of future equity or debt placements, or asset dispositions, are uncertain and could be impacted by market conditions or project progress. Failure to raise needed funds could force the Company to scale back operations, jeopardizing its ability to execute its business plan.

Competitive pressures, while different from those faced by regulated utilities, also exist. While CDZIP offers unique assets and integrated solutions, the broader water market includes alternatives like desalination and conservation technologies, as well as the established infrastructure and customer relationships of incumbent utilities. CDZIP must successfully demonstrate the cost-effectiveness and reliability of its solutions to capture market share against these alternatives.

Despite these risks, the potential rewards are substantial if CDZIP successfully executes its strategy. Southern California's water challenges are persistent and growing, creating a strong demand backdrop for new, reliable water sources and storage. The Company's unique asset base, particularly its groundwater resources and strategic pipeline routes, provides a differentiated position. The ATEC technology adds a valuable component to its integrated offering.

The outlook hinges on key milestones expected in 2025 and beyond: the successful closing of the MWI funding agreements, the commencement of construction on the Mojave Groundwater Bank facilities, and the continued growth of the ATEC business. The expected $76.0 million cash inflow from MWI and the future revenue from the 40-year water supply agreements are critical steps towards transitioning from a development-stage company to a cash-generating water provider.

Conclusion

Cadiz Inc. represents a high-potential, high-risk investment opportunity deeply tied to addressing the critical water needs of Southern California. The Company possesses a compelling combination of strategic assets – vast water rights, storage capacity, and crucial infrastructure pathways – complemented by its ATEC filtration technology, positioning it to offer integrated solutions in a water-stressed region.

The investment thesis is fundamentally a story of asset development and monetization. While recent financial performance reflects the significant costs associated with advancing the Mojave Groundwater Bank project, the Company has demonstrated an ability to raise capital through equity offerings and is actively pursuing a transformative funding partnership via MWI. The signed water supply agreements provide a tangible glimpse of the substantial, long-term revenue streams that could materialize upon successful project completion.

Success for CDZIP is contingent upon navigating the complexities of large-scale infrastructure development and securing the necessary long-term financing. The closing of the MWI transaction and the commencement of construction are critical near-term catalysts to watch. If the Company can successfully execute its plan, leveraging its unique assets and integrated approach to bring the Mojave Groundwater Bank online, it has the potential to unlock significant value and establish itself as a key player in Southern California's future water security landscape, offering a differentiated alternative to traditional water utilities.