Cadiz Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited. Cadiz is a California water-resources development and agribusiness company; current revenue is primarily agricultural lease income, while it develops its proposed Cadiz Valley Water Project.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / prior balance |
|---|---|---|
| Revenue | $0.142 million | $0.139 million |
| Operating loss | $3.785 million | $3.197 million |
| Net loss | $5.912 million | $5.944 million |
| Net loss applicable to common stock | $7.177 million | $5.944 million |
| Basic and diluted loss per common share | $0.16 | $0.16 |
| Operating cash used | $3.222 million | $2.823 million |
| Investing cash used | $0.630 million | $0.650 million |
| Cash provided by financing | $10.418 million | $14.854 million |
General and administrative expense was $3.806 million, including $0.433 million of stock-based compensation; depreciation was $0.121 million. Net interest expense was $1.991 million, down from $2.542 million. Revenue was not sufficient to support operating costs, so operating and profit margins were negative.
At March 31, cash and cash equivalents were $18.819 million; restricted cash was $7.603 million, including $6.338 million long-term. Working capital was $17.0 million. Total debt was approximately $47.1 million, comprising $47.029 million long-term and $0.082 million current debt. The balance sheet also included $19.303 million of long-term related-party lease obligations. Total liabilities were $74.131 million.
Changes, financing and unusual items
- Revenue was nearly unchanged year over year, while operating loss widened by $0.588 million, mainly reflecting higher general and administrative costs. Management attributed the higher compensation expense to non-cash stock-based awards.
- Net loss was approximately flat. The common-stock loss increased because the quarter included $1.265 million of Series A preferred dividends; the preferred dividend is not included in reported net loss.
- On March 23, Cadiz raised approximately $11.7 million net through a registered direct offering of 6,857,140 common shares at $1.75 per share. Outstanding common shares rose to 50,750,304 from 43,656,169 at year-end.
- The company’s $50 million senior secured credit agreement matures July 2, 2024 and bears 7% annual interest. It reported compliance with debt covenants and no scheduled principal payments before maturity. The debt is secured by substantially all company assets and includes lender conversion rights and prepayment fees.
- Following a change in Executive Chair on February 4, 2022, 170,000 unvested restricted stock units accelerated and vested under an amended employee agreement.
Outlook, risks and contingencies
Management said the March equity offering and cash on hand were sufficient for short-term working-capital needs, but additional capital will be needed over the longer term for working capital and development spending. Potential funding sources include equity or debt financing, asset dispositions, and cost reductions; the company gave no assurance that financing will be available on acceptable terms.
The Water Project has permits described by the company as authorizing management of groundwater to make an average of 50,000 acre-feet per year available for 50 years, as well as storage of imported water. Additional permitting and regulatory work is required to use the Northern Pipeline or construct and operate the Southern Pipeline. The project has not yet generated significant revenue, and execution, permitting, financing, and the ability to secure customers remain important uncertainties. Management reported no material changes to previously disclosed legal proceedings or risk factors.
Important facts for investors to verify
- Current liquidity, cash use, and financing needs against the company’s development timetable.
- Debt terms, covenant compliance, lender conversion provisions, and the future cost of preferred dividends.
- Project-specific permits, remaining approvals and conveyance work, binding water-supply agreements, and the timing of any revenue.
- Share dilution from the March offering and potential future equity financing, as well as stock-based awards.