CADIZ INC

Previous wording

Water Storage – The alluvium aquifer that lies beneath the Cadiz Property is also large enough for use as a water “banking” facility, capable of storing water “in-lieu” for supply customers and up to 1 million acre-feet of imported surplus water for return during drought periods. For comparison, Metropolitan Water District of Souther California ("MWD") stores approximately 1.2 million acre-feet of water in the largest surface reservoir in the United States, Lake Mead.

Current wording

Water Storage – The alluvium aquifer that lies beneath the Cadiz Property is also large enough for use as a water “banking” facility, capable of storing water “in-lieu” for supply customers and up to 1 million acre-feet of imported surplus water for return during drought periods. For comparison, Metropolitan Water District of Southern California stores approximately 1.2 million acre-feet of water in the largest surface reservoir in the United States, Lake Mead.

Previous wording

In the first quarter of 2024, we entered into agreements with multiple public water systems to purchase 15,000 AFY of annual water supply from us to be delivered via the Northern Pipeline. These agreements cumulatively represent 60% of the full capacity (25,000 AFY) of the Northern Pipeline.

Current wording

In the first two quarters of 2024, we entered into agreements with multiple public water systems to purchase 16,275 AFY of annual water supply from us to be delivered via the Northern Pipeline. These agreements cumulatively represent 65% of the full capacity (25,000 AFY) of the Northern Pipeline.

Previous wording

Through membership in Fenner Gap Mutual Water Company, a mutual water company to be owned by the participating water agencies, these agreements provide for delivery of purchased annual water supply over a 40-year term (take or pay), at an agreed upon market price estimated to start at approximately $850/AFY and subject to annual adjustment. Participating public agencies are expected to fund capital costs for conversion of the Northern Pipeline from gas to water, construction of pumping stations and appurtenant facilities, and would be able to seek infrastructure funding and grants.

Current wording

Through membership in Fenner Gap Mutual Water Company, a mutual water company to be owned by the participating water agencies, these agreements provide for delivery of purchased annual water supply over a 40-year term (take or pay), at an agreed upon market price estimated to start at approximately $850/AFY at the wellhead, subject to annual adjustment. In addition, participating public agencies are expected to fund costs of delivery of water from the Cadiz Property to their service area, and the capital costs for conversion of the Northern Pipeline from gas to water, including construction of pumping stations and appurtenant facilities. We anticipate that a portion of capital costs would be eligible for public infrastructure funding and grants. Also, forming a Master Limited Partnership (“MLP”) entity may allow for public agency partners and investors to act as limited partners and commit funding for the capital infrastructure costs required for the Water Project and/or obtain grant funding in exchange for an agreed-upon cash flow share from the project. Under an MLP structure, traditionally used for pipeline and real estate assets, we would act as General Partner and contribute our infrastructure assets to the partnership and a share of the long-term cash flows from the groundwater banking operations in exchange for the capital funding provided by the limited partners. We are in discussions with parties that could participate in establishing a MLP.

Previous wording

These agreements and off take facility construction will be subject to standard environmental review and a project-level permitting process.

Current wording

Final agreements and facility construction are subject to standard environmental review and a project-level permitting process.

Previous wording

We have not received significant revenues from our water supply, storage, or conveyance assets to date. Our revenues have been limited to rental income from our agricultural leases, sales from our alfalfa plantings and ATEC sales. As a result, we have historically incurred a net loss from operations. We incurred a net loss of $6.9 million in the three months ended March 31, 2024, compared to a $10.7 million net loss during the three months ended March 31, 2023. The lower loss in 2024 was primarily due a loss on early extinguishment of debt recorded in the amount of $5.3 million resulting from issuance of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in 2023, offset by higher compensation costs related to stock based non-cash bonus awards in 2024.

Current wording

We have not received significant revenues from our water supply, storage, or conveyance assets to date. Our revenues have been limited to rental income from our agricultural leases, sales from our alfalfa plantings and ATEC sales. As a result, we have historically incurred a net loss from operations. We incurred a net loss of $8.9 million in the three months ended June 30, 2024, compared to a $7.1 million net loss during the three months ended June 30, 2023. The higher 2024 loss was primarily due to higher stock compensation expense and increased interest expense related to the Third Amended Credit Agreement in 2024.

Previous wording

Revenues Revenue totaled $1.1 million during the three months ended March 31, 2024, primarily related to ATEC sales totaling $0.5 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.5 million and rental income from our agricultural leases totaling $0.1 million. Revenue totaled $0.1 million during the three months ended March 31, 2023, primary related to rental income from our agricultural leases.

Current wording

Revenues Revenue totaled $0.5 million during the three months ended June 30, 2024, primarily related to ATEC sales totaling $0.2 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.2 million and rental income from our agricultural leases totaling $0.1 million. Revenue totaled $0.8 million during the three months ended June 30, 2023, primarily related to ATEC sales totaling $0.4 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.3 million and rental income from our agricultural leases totaling $0.1 million.

Previous wording

Cost of Sales** **Cost of sales totaled $1.0 million during the three months ended March 31, 2024, comprised of $0.7 million related to our alfalfa crop harvest and $0.3 million related to ATEC. Cost of sales totaled $22 thousand during the three months ended March 31, 2023.

Current wording

Cost of Sales** **Cost of sales totaled $0.9 million during the three months ended June 30, 2024, comprised of $0.7 million related to our alfalfa crop harvest and $0.2 million related to ATEC. Cost of sales totaled $0.8 million during the three months ended June 30, 2023, which comprised of $0.4 million related to our alfalfa crop harvest and $0.4 million related to ATEC.

Previous wording

General and Administrative Expenses*** ***General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $3.5 million in the three months ended March 31, 2024, compared to $3.6 million in the three months ended March 31, 2023.

Current wording

General and Administrative Expenses*** ***General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $5.2 million in the three months ended June 30, 2024, compared to $5.2 million in the three months ended June 30, 2023.

Previous wording

Compensation costs for stock and option awards for the three months ended March 31, 2024, were $1.3 million, compared to $0.3 million for the three months ended March 31, 2023. The increase was primarily related to vesting of milestone stock awards related to completion of the Third Amended Credit Agreement and Supply Agreement Vesting Event (see Note 4 to the Condensed Consolidated Financial Statements – “Stock-Based Compensation Plans”).

Current wording

Compensation costs for stock and option awards for the three months ended June 30, 2024, were $1.1 million, compared to $0.2 million for the three months ended June 30, 2023. The higher 2024 expense was primarily due to stock-based non-cash awards to employees.

Previous wording

Interest Expense, net Net interest expense totaled $1.9 million during the three months ended March 31, 2024 compared to $1.3 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):

Current wording

Interest Expense, net Net interest expense totaled $1.9 million during the three months ended June 30, 2024 compared to $1.1 million during the same period in 2023. The following table summarizes the components of net interest expense for the two periods (in thousands):

Previous wording

Gains on Derivative Liabilities* *Gains on derivative liabilities totaled $0 during the three months ended March 31, 2024 compared to $0.1 million in the three months ended March 31, 2023, resulting from a remeasurement of a conversion option under the Company’s senior secured debt.

Current wording

Losses on Derivative Liabilities* *Losses on derivative liabilities totaled $0 during the three months ended June 30, 2024 compared to $0.4 million in the three months ended June 30, 2023, resulting from a remeasurement of a conversion option under the Company’s senior secured debt.

Previous wording

Loss*** on Early Extinguishment of Debt**** *Loss on early extinguishment of debt totaled $0 during the three months ended March 31, 2024, compared to a loss on early extinguishment of debt totaling $5.3 million recorded during the three months ended March 31, 2023, resulting from issuance of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in February 2023.

Current wording

Loss on Early Extinguishment of Debt* *Loss on early extinguishment of debt totaled $0 during the six months ended June 30, 2024 compared to $5.3 million in the six months ended June 30, 2023. The 2023 loss on early extinguishment of debt was a result of a conversion instrument, a repayment fee and elimination of debt discount associated with the paydown of $15 million of senior secured debt in February 2023.

Previous wording

On February 2, 2023, we entered into a First Amendment to Credit Agreement to amend certain provisions of the Credit Agreement (“First Amended Credit Agreement), Under the First Amended Credit Agreement, the lenders will have a right to convert up to $15 million of outstanding principal, plus any PIK interest and any accrued and unpaid interest (the “Convertible Loan”) into shares of our common stock at a conversion price of $4.80 per share (the “Conversion Price”). In addition, prior to the maturity of the Credit Agreement, we have the right to require that the lenders convert the outstanding principal amount, plus any PIK Interest and accrued and unpaid interest, of the Convertible Loan if the following conditions are met: (i) the average VWAP of the Company’s common stock on The Nasdaq Stock Market, or such other national securities exchange on which the shares of common stock are listed for trading, over 30 consecutive trading dates exceeds 115% of the then Conversion Price and (ii) there is no event of default under certain provisions of the Credit Agreement.

Current wording

On February 2, 2023, we entered into a First Amendment to Credit Agreement to amend certain provisions of the Credit Agreement (“First Amended Credit Agreement), Under the First Amended Credit Agreement, the lenders have a right to convert up to $15 million of outstanding principal, plus any PIK interest and any accrued and unpaid interest (the “Convertible Loan”) into shares of our common stock at a conversion price of $4.80 per share (the “Conversion Price”). In addition, prior to the maturity of the Credit Agreement, we have the right to require that the lenders convert the outstanding principal amount, plus any PIK Interest and accrued and unpaid interest, of the Convertible Loan if the following conditions are met: (i) the average VWAP of the Company’s common stock on The Nasdaq Stock Market, or such other national securities exchange on which the shares of common stock are listed for trading, over 30 consecutive trading dates exceeds 115% of the then Conversion Price and (ii) there is no event of default under certain provisions of the Credit Agreement.

Previous wording

Cash Used in Operating Activities. Cash used in operating activities totaled $2.9 million and $4.1 million for the three months ended March 31, 2024 and 2023, respectively. The cash was primarily used to fund general and administrative expenses related to our water development efforts, agricultural development efforts, and our ATEC business including increased working capital needs related to accounts receivable and inventory offset by increased accounts payable.

Current wording

Cash Used in Operating Activities. Cash used in operating activities totaled $9.9 million for each of the six months ended June 30, 2024 and 2023. The cash was primarily used to fund general and administrative expenses related to our water development efforts, agricultural development efforts, and our ATEC business including increased working capital needs related to accounts receivable and inventory offset by increased accounts payable.

Previous wording

Cash Used in Investing Activities. Cash used in investing activities totaled $0.2 million for the three months ended March 31, 2024, and $2.2 million for the three months ended March 31, 2023. The cash used in the 2024 period primarily related to the development cost for the planting of 125 additional acres of alfalfa. The cash used in the 2023 period primarily related to the development of three new wells.

Current wording

Cash Used in Investing Activities. Cash used in investing activities totaled $0.5 million for the six months ended June 30, 2024, and $3.2 million for the six months ended June 30, 2023. The cash used in the 2024 period primarily related to the development cost for the planting of 125 additional acres of alfalfa. The cash used in the 2023 period primarily related to the development of three new wells.

Previous wording

Cash Provided by Financing Activities***.***Cash provided by financing activities totaled $17.8 million for the three months ended March 31, 2024, compared with cash provided of $21.3 million for the three months ended March 31, 2023. Proceeds from financing activities for the 2024 period related to the issuance of long-term debt under the Third Amended Credit Agreement. Proceeds from financing activities for the 2023 period primarily related to the issuance of shares under direct offerings, offset by the paydown of $15 million of senior secured debt in February 2023.

Current wording

Cash Provided by Financing Activities***.***Cash provided by financing activities totaled $16.0 million for the six months ended June 30, 2024, compared with cash provided of $20.0 million for the six months ended June 30, 2023. Proceeds from financing activities for the 2024 period related to the issuance of long-term debt under the Third Amended Credit Agreement. Proceeds from financing activities for the 2023 period primarily related to the issuance of shares under direct offerings, offset by the paydown of $15 million of senior secured debt in February 2023.

Previous wording

***Short-Term Outlook.***The net proceeds of approximately $19.0 million from the completion of the Third Amended Credit Agreement in March 2024, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs. Our agricultural development and ATEC operations are expected to be funded using existing capital and cash profits generated from operations during 2024.

Current wording

***Short-Term Outlook.***The net proceeds of approximately $19.0 million from the completion of the Third Amended Credit Agreement in March 2024, together with cash on hand, provide us with sufficient funds to meet our short-term working capital needs. Our ATEC operations are expected to be funded using existing capital and cash profits generated from operations during 2024.