CDZI — Q2 2026 Financial Report Analysis

Water project moves forward while the cash cushion gets thinner

Cadiz's Q2 2026 results (quarter ended June 30, 2026) show two separate stories. The operating business got much smaller: total revenue fell 76% to $1.0 million, from $4.1 million, because the ATEC water-filter unit shipped far fewer filters than in a year-ago quarter that included one very large job. The Mojave Groundwater Bank (the company's plan to pump, store and pipe desert groundwater to Southern California and Arizona water agencies) made real progress, mostly in July, after the quarter ended: a federal right-of-way grant for the Northern Pipeline, signed construction contracts that put a firm estimate of about $400 million on that pipeline, and a first non-binding deal with an Arizona water district. The net loss grew to $11.4 million from $7.7 million, and the cash to run the company until the project is financed now comes mostly from borrowing.

At a glance

• Revenue $1.0M, down 76%. ATEC filter sales fell to $0.8M from $3.7M. Q2 2025 was boosted by a one-off "mega project" for a Utah water district, so this is a tough comparison rather than lost customers.
• Shareholders' equity fell to $4.7M from $23.3M at year-end. Six months of losses have nearly wiped out the book value of the common shareholders' stake, while long-term debt rose to $87.0M from $72.7M.
• $1.25–1.5 billion is the estimated total cost to build both pipelines, unchanged from last quarter. Cadiz itself had $5.3M of unrestricted cash on June 30, so the project only happens if outside investors and government lenders pay for it.

Q2 2026 vs Q2 2025

Six-month figures point the same way: revenue $2.6M (vs $7.1M), net loss $20.0M (vs $17.3M), loss per common share $0.27 (vs $0.25).

Where the money came from and went

Cadiz has two reporting units. Land and Water Resources covers the desert property, the water project (which brings in no revenue yet) and 890 acres of alfalfa. Water Treatment Technology is ATEC, which sells filter systems that remove contaminants such as arsenic, Chromium-6 and PFAS from well water.

• ATEC swung from profit to loss. It made a $0.45M operating profit in Q2 2025 and lost $0.88M this quarter. Revenue dropped by four-fifths, and gross margin (the share of each sales dollar left after manufacturing costs) fell from 44.5% to 23.7%. The filing says the margin drop came from "spreading the fixed costs of manufacturing filters... over a reduced number of filters sold": the factory costs roughly the same to run whether it ships a lot of filters or a few. Management calls the volume drop "anticipated" because the 2025 quarter included the Central Utah Water Conservancy District's Vineyard Wellfield project.
• Overhead went up. General and administrative (G&A) expense, the cost of running the company, rose to $8.4M from $6.9M. Excluding stock-based pay, it rose only slightly, to $6.6M from $6.4M, because of "increased legal and consulting fees incurred in advancing the development of the Mojave Groundwater Bank." Most of the jump was non-cash stock awards to employees and consultants: $1.8M vs $0.5M.
• Interest costs are climbing because of the new loan. Net interest expense rose to $2.9M from $2.0M, which the filing attributes to borrowings under the Lytton Credit Agreement. That is an 8% unsecured loan from Lytton, which the filing calls the "Tribal Investment" and which serves as the first round of construction capital for the project. Cash interest more than doubled to $0.98M from $0.38M.
• A small accounting gain made the loss look slightly better. A $0.36M "gain on derivative liability" reflects the falling value of the company's obligation to give Lytton shares as a fee each time it draws on the loan. It is a non-cash, mark-to-market item, not income from operations.

Project progress: the quarter's real news

Almost all of the project news is dated July or August 2026, after the June 30 balance sheet date, but it is disclosed in this filing:

• Federal permit for the Northern Pipeline. In July the Bureau of Land Management granted a 45-year right-of-way to convert Cadiz's existing 220-mile pipeline to carry water and to build pump stations on federal land. Two lawsuits challenging that grant were filed on July 28 by conservation groups (groups led by the National Park Conservation Association and the Center for Biological Diversity). Neither Cadiz nor its project entity is a named defendant. The company "do[es] not believe" the outcome will be materially adverse, but a court could still delay the project.
• Construction prices locked in. Fenner Gap Mutual Water Company (the entity that will carry out the project) signed construction contracts with guaranteed maximum prices for the pump stations and pipeline replacement. Those prices support an estimate of about $400 million to put the Northern Pipeline into service. The Southern Pipeline to the Colorado River Aqueduct is still estimated at $850 million to $1.0 billion.
• Customers. 21,275 acre-feet per year (an acre-foot is roughly a year's water for two to three households) is already contracted through the Northern Pipeline at $1,650–2,100 per acre-foot in 2024 dollars, about 85% of its capacity. In July Cadiz signed a memorandum of understanding (a non-binding agreement in principle) with Arizona's Central Arizona Irrigation and Drainage District for up to 10,000 acre-feet per year. That deal still needs interstate water-exchange agreements before any water can be delivered.
• Financing structure. The pipelines would be built by a separate entity, Mojave Water Infrastructure Company (MWI). Cadiz says it is completing due diligence with private equity investors for up to $400 million of equity in MWI. The EPA invited Cadiz in February to apply for up to $194 million of low-cost federal WIFIA loans, and a joint powers authority formed in April with San Bernardino County could issue revenue bonds. If those deals close, Cadiz expects to put its pipelines into MWI in exchange for an upfront cash reimbursement plus an equity stake. That means outside investors would own part of the project's future cash flows.

Takeaway: This quarter's income statement says little about what Cadiz is worth. The value case rests on closing outside equity and federal loans for a $1.25–1.5 billion project, and July's permit plus fixed construction prices made that case firmer. Meanwhile the company is paying for its day-to-day costs with an 8% loan that has $11 million left to draw. Book equity is down to $4.7 million and two lawsuits are pending, so the window to close MWI financing before Cadiz needs more capital is narrowing.

What the headline numbers hide

• Cash burn is larger than the operating loss suggests. In the first half, operating activities used $12.2M of cash, up from $5.0M a year earlier. Part of that was working capital: inventory rose $0.8M and payables fell $0.7M. Add $3.4M of project engineering spending and $2.6M of preferred dividends, and roughly $18.1M went out in six months against $8.6M of cash at the start of the year. The difference came from a $15M Lytton draw in March. A further $10M was drawn in August, leaving $11M undrawn (available until April 30, 2027). Management says those draws plus cash on hand are "sufficient funds to meet our short-term working capital needs". At the first half's pace of about $3M a month, that leaves little room for delay.
• Preferred dividends come before common shareholders. The 8.875% Series A preferred stock (held through the CDZIP depositary shares) costs about $1.27M a quarter, roughly $5.1M a year, and is paid in cash. The dividends are cumulative, so any unpaid amount keeps building up and must be paid before common shareholders get anything. That pushes the loss attributable to common shareholders to $12.6M this quarter, from the $11.4M net loss. The preferred became redeemable at Cadiz's option ($25 per depositary share) from July 2, 2026, but with $5.3M of cash a redemption isn't realistic for now.
• A large share of interest is not paid in cash, so debt grows on its own. Of $5.4M of six-month net interest, $1.5M was "PIK" interest (paid by adding it to the loan balance), $1.7M was added to the related-party pipeline lease obligation and $1.2M was amortization of debt discount. That keeps cash burn down but increases what is owed. Separately, $0.34M of interest was capitalized into the project, meaning it was recorded as part of the project's cost instead of as an expense.
• The debt maturity wall moved back a year. On August 12 the Heerema-held secured and convertible loans ($21.2M of cash-interest term loans plus $36M of convertible loans, all at 7%) were extended from June 30, 2027 to June 30, 2028, and the lender's warrant was extended to match. That removes a near-term refinancing risk and suggests the main lender is willing to wait.
• Shareholders are being diluted, though slowly for now. Weighted shares rose 2.7% year on year to 84.1M. The Lytton loan pays 25,000 shares per $1M drawn, so the August draw adds about 250,000 more.
• Guidance vs before: the $1.25–1.5 billion total capital estimate is unchanged from last quarter. The new information is that the Northern Pipeline's ~$400M portion is now backed by contracted prices rather than an engineering estimate.

Outlook

Cadiz gives no revenue or earnings guidance. Its stated plan is to fund near-term costs from the Lytton loan and to fund ATEC from "existing capital, and anticipated cash profits generated from operations during 2026". That second part looks optimistic after two quarters of ATEC operating losses ($1.7M for the half). Management also says it "may need to raise additional capital" in the longer term.

Our read: things to watch over the next two quarters, in order of importance:

1. Whether MWI's equity raise (up to $400M) closes. A close would bring Cadiz an upfront cash reimbursement and would be the first proof that outside investors will pay for the project.
2. Progress on the WIFIA loan application (up to $194M).
3. The two BLM lawsuits. An injunction stopping work would be the main way the Northern Pipeline schedule could slip.
4. Cash at September 30, set against the $11M of loan capacity left.

Without a financing close, Cadiz will likely need to raise equity at some point in 2027, which would dilute existing shareholders.