CDZI 10-K & 10-Q changes, risk factors and insider trading

For example, while we presently hold agreements with multiple public water systems for their purchase of 21,275 AFY and are in discussions with additional public water agencies to enter agreements for the full supply capacity of our Mojave Groundwater Bank (50,000 AFY) any contracts will be subject to conditions precedent including standard environmentalregulatory review and permitting. There is no assurance that we can meet the conditions precedent for any of these contracts and even if we do, there is no assurance that we can receivemeet the needed permitsthem in a timely manner.

We haveare enteredcurrently intoengaged lettersin the completion of intentdue diligence with aprivate non-profitequity investment fund and Lytton Rancheria of California, a federally recognized Native American Tribe, as well as a letter of agreement with a publicly traded company,investors related to potential investments in MGSCMWI by these entities to support the construction, ownership, and operation of the Mojave Groundwater Bank. TheAny agreements announced with these potential investors are not binding and there is no guarantee that we will be able to enter into binding definitive agreements or that the proposed transactions pursuant to the current letters of intent andor letterterm of agreementsheets will move forward based on the terms described in such agreements. Even if we do enter into definitive agreements for investments into the construction, ownership and operations of the Mojave Groundwater Bank, we may not be able to obtain the requisite total funding necessary for the construction of all facilities for the Mojave Groundwater Bank or such additional funding may not be available on terms satisfactory to the parties or in sufficient amounts, or the progress of the Mojave Groundwater Bank may not proceed as planned, or the definitive agreements entered into, if any, may not generate our anticipated benefits. These events could materially and adversely affect the success of the Mojave Groundwater Bank and, as a result, materially and adversely affect our business prospects.

We will continue to require additional working capital to meet our cash resource needs until such time as our asset development programs, including the Mojave Groundwater Bank, and water filtration technology business produce revenues sufficient to fund operationsoperations, or we receive reimbursement for costs advanced for development of the Mojave Groundwater Bank fromthrough MGSCthe Lytton Credit Agreement and payment from MGSC of $51 millionMWI among other considerationsconsideration for our transfer of assets into MGSC.MWI. If we cannot raise funds if and when needed, we might be forced to make substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company. We cannot assure you that our current lenders, or any other lenders, will give us additional credit should we seek it. If we are unable to obtain additional credit, we may engage in further debt or equity financings. Our ability to obtain financing will depend, among other things, on the status of our asset development programs and water filtration technology business and general conditions in the capital markets at the time financing is sought. Any further equity or convertible debt financings would result in the dilution of ownership interests of our current stockholders.

Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks pose a risk to our security and our customers', partners', suppliers' and third-party service providers' products, systems and networks and the confidentiality, availability and integrity of the data. We remain potentially vulnerable to additional known or unknown threats, including threats generated through increasingly sophisticated technologies such as artificial intelligence, despite our attempts to mitigate these risks. We also may have access to sensitive, confidential or personal data or information that is subject to privacy and security laws, regulations or customer-imposed controls. Our efforts to protect sensitive, confidential or personal data or information, may nonetheless leave us vulnerable to material security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, production downtimes and operational disruptions. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action. Additionally, violations of privacy or cybersecurity laws (including the California Consumer Privacy Act), regulations or standards increasingly lead to class-action and other types of litigation, which can result in substantial monetary judgments or settlements. Therefore, any such security breaches could have a material adverse effect on us.

Water Supply – WeIn accordance with local, state, and federal laws, we own vested water rights toauthorizing withdrawthe withdrawal of an average of 50,000 acre-feet per year, or 2.5 million acre-feet of groundwater over 50 years, from the aquifer system underlying our property in the Cadiz Valley (“Cadiz Ranch”) for beneficial uses, including agricultural development on our property and export to serve communities across Southernthe California.region. Because allthe watergroundwater in the aquifer system willis eventually be lost to evaporation, surplus water that is captured and withdrawn before it evaporates is a new water supply (i.e. “conserved” water). We have completed environmental review in accordance with local, state and federal laws authorizing the management of the groundwater aquifer underlying the Cadiz Ranch which is expected to produce an average of 50,000 acre-feet of water per year for 50 years for beneficial use in Southern California communities.

Water Storage – The alluvium aquifer thatsystem lies beneath theat Cadiz Ranch 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, MWDMetropolitan Water District of Southern California stores approximately 1.2 million acre-feet of water in Lake Mead, the largest surface reservoir in the United States, Lake Mead.States.

Water Conveyance Infrastructure – We own the Northern Pipeline, an existing 220-mile 30-inch steel pipeline,pipeline (“Northern Pipeline”), that intersects several water storage and conveyance facilities in Southern California, including the California Aqueduct, the Los Angeles Aqueduct, and the Mojave River Pipeline. The maximum potential capacity of the Northern Pipeline for water conveyance is anticipated to be 25,000 AFY with expected throughput to be between 20,000 – 23,000 AFY. We also own a 99-year lease with the ARZCArizona & California Railroad Company that will allow us to construct thea 43-mile water conveyance pipeline (“Southern Pipeline”) within the existing, active railroad ROWright-of-way that extends from the Cadiz Ranch to the Colorado River Aqueduct.Aqueduct (“CRA”). We currently expect the capacity of the Southern Pipeline to be 150,000120,000 AFY to accommodate imported water storage. We hold an option to purchase up to 180 miles of existing unused 36” steel pipeline that can be used in construction of the Southern Pipeline system or to replace certain components of the Northern Pipeline.

Water Filtration Technology – In 2022, we completed the acquisition of ATEC,the assets of ATEC Water Systems, Inc. into ATEC Water Systems, LLC (“ATEC”), which provides innovative water filtration solutions for impaired or contaminated groundwater sources. ATEC’s specialized filtration media provide cost-effective, high-rate of removal for common groundwater impairments and contaminants that pose health risks in drinking water including iron, manganese, arsenic, Chromium-6, nitrates, per-and-polyfluoroalkyl substances (PFAS) and other constituents of concern.

In 2024, we entered into agreements with public water systems, private utility and other private water providers for their purchase of 21,275 AFY of annual water supply from us to be delivered via the Northern Pipeline. Through membership in FGMWC,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 oron paydelivery), at an agreed upon market price estimated to start at approximately $850/AFY (in 2024 dollars) and subject to annual adjustment. Participating publicwater agenciesproviders are also expected to pay a portion of operating costs and the capital costs for constructionconversion of facilities.

Revenues. Revenue totaled $16.3 million during the year ended December 31, 2025, primarily related to ATEC sales totaling $14.5 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $1.4 million and rental income from agricultural leases totaling $0.4 million. Revenue totaled $9.6 million during the year ended December 31, 2024, primarily related to ATEC sales totaling $7.9 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $1.3 million and rental income from agricultural leases totaling $0.4 million. Revenue totaled $2.0 million during the year ended December 31, 2023, primarily related to ATEC sales totaling $0.8 million, sales from the harvest from our 760 acres of commercial alfalfa crop totaling $0.8 million and rental income from our agricultural leases totaling $0.4 million. The increase in ATEC sales primarily relates to revenues underfrom ashipment contractof 441 filters in 2025 compared to delivershipment 320of 286 filters for the Central Utah Water Conservancy District’s Vineyard Wellfield Groundwater Polishing Project (“Utah Project”) announced in 2023 and now being delivered.2024.

General and Administrative Expenses. General and administrative expenses during the year ended December 31, 2024,2025, exclusive of stock-based compensation costs, totaled $19.7$24.2 million compared with $17.3$19.7 million for the year ended December 31, 2023.2024. The increase in 20242025 was primarily a result of increased professionallegal and consulting fees incurred in advancing the development of the Mojave Groundwater Bank and increased marketing outreachcommissions campaignand activitysales inexpenses 2024.related to ATEC growth. General and administrative expense for ATEC totaled $4.5 million in 2025 compared to $1.8 million for 2024 compared to $0.8 million for 2023. The increase was primarily driven by the growth in the ATEC operations.2024.

Compensation costs from stock and option awards for the year ended December 31, 2024,2025, totaled $4.6$5.3 million compared with $1.5$4.6 million for the year ended December 31, 2023.2024. The higher 20242025 expense was primarily due to an increase in stock-based non-cash awards to employees and consultants in 2024 compared to 2023.consultants.

Depreciation. Depreciation expense totaled $1.3 million and $1.2 million during each the years ended December 31, 20242025 and 2023.2024, respectively.

Increased interest expense is primarily due to increased borrowing under the Third AmendedLytton Credit Agreement. Interest income primarily relates to interest on investments in short-term deposits which were lower in 2024.deposits.

OnIn November 5, 2024, we completed the sale and issuance of 7,000,000 shares of our common stock to certain institutional investors in a registered direct offering (“November 2024 Direct Offering”). The shares of common stock were sold at a purchase price of $3.34 per share, for aggregate gross proceeds of $23.4 million and aggregate net proceeds of approximately $22.1 million.

On March 7, 2025, we completed the sale and issuance of 5,715,000 shares of our common stock to certain institutional investors in a registered direct offering (“March 2025 Direct Offering”) (see Note 14 of the Condensed Consolidated Financial Statements – “Subsequent Events”). The shares of common stock were sold at a purchase price of $3.50 per share, for aggregate gross proceeds of approximately $20.0 million and aggregate net proceeds of approximately $18.3 million.

$5$5.0 million of the net proceeds from the November 2024 Direct Offering were paid in January 2025 to secure an exclusive option finalized in December 2024 to purchase up to 180 miles of steel pipe intended to be used for the development of the Mojave Groundwater Bank. The remaining proceeds from the November 2024 Direct Offering and the proceeds from the March 2025 Direct Offering arewere intended to beprimarily used for capital and other expenses related to the development and construction of the Mojave Groundwater Bank, which may include acquisition of equipment and materials intended to be used in construction of facilities related to our Northern and/or Southern Pipelines, which we expect to begin in 2025. Net proceeds from the offerings may also be used for the equipment and materials related to wellfield infrastructure on land owned by us and our subsidiaries, business development activities, other capital expenditures, working capital, the expansion of our business and general corporate purposes.

In July 2021, we entered into a $50 million new credit agreement (“Credit Agreement”) (see Note 7 to the Condensed Consolidated Financial Statements – “Long-Term Debt”). The proceeds of the Credit Agreement, together with the proceeds from the Depositary Share Offering, were used to (a) repay all our outstanding senior secured debt obligations in the amount of approximately $77.6 million, (b) to deposit approximately $10.2 million into a segregated account, representing an amount sufficient to pre-fund eight quarterly dividend payments on the Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering, and (c) to pay transaction related expenses. The remaining proceeds were used for working capital needs and for general corporate purposes.

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’sour 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.

On March 6, 2024, we entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund 2012 (“Heerema”) (see Note 7 to the Condensed Consolidated Financial Statements – “Long-Term Debt”). Before entering into the Third Amended Credit Agreement, Heerema purchased the outstanding secured non-convertible term loans under the Credit Agreement (“Assignment”). In connection with the Assignment, the existing holders of both the Convertible Loan and non-convertible term loans consented to effectuate the Third Amended Credit Agreement in consideration of a consent fee in the aggregate amount of $479,845 payable in the form of our common stock (valued at $2.89 per share, or 166,036 shares), which was registered pursuant to an effective shelf registration statement on Form S-3 and a prospectus supplement thereunder. The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from Heerema in an aggregate principal amount of $20 million, having a maturity date of June 30, 2027 (“New Secured Convertible Debt”); (b) the aggregate principal amount of the secured non-convertible term loans acquired by Heerema has been increased from $20 million to $21.2 million and the applicable repayment fee in respect thereof has been eliminated; (c) the Convertible Loan existing prior to the Third Amended Credit Agreement, in an aggregate principal amount of approximately $16 million plus interest accruing thereon, has become unsecured; and (d) extension of the maturity date for the existing Convertible Loan and non-convertible loans to June 30, 2027.

Cash Used for Operating Activities. Cash used for operating activities totaled $18.9 million for the year ended December 31, 2025, and $21.5 million for the year ended December 31, 2024, and $20.9 million for the year ended December 31, 2023.2024. 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. The decrease in cash used in operating activities was primarily driven by a decrease in working capital needs at ATEC due to completion of the final shipment of the contracted 320 filters for the Central Utah Water Conservancy District’s Vineyard Wellfield Groundwater Polishing Project during the second quarter of 2025.

Cash Used for Investing Activities. Cash used for investing activities in the year ended December 31, 2024,2025, was $1.2$12.6 million, compared with $5.8$1.2 million for the year ended December 31, 2023.2024. The cash used in 2025 was primarily related to securing an exclusive option to purchase up to 180 miles of steel pipeline intended to be used for the development of the Mojave Groundwater Bank for $5.0 million, conversion of wells from diesel to natural gas, Northern Pipeline inspection costs, and engineering design costs related to the Mojave Groundwater Bank project. The cash used in the 2024 period primarily related to the development costscost for the planting of 125 additional acres of alfalfa and the payment of a deferred portion of the purchase price related to the ATEC acquisition. The cash used in the 2023 period primarily related to the development of three new wells.alfalfa.

Cash Provided by Financing Activities. Cash provided by financing activities totaled $35.5$25.4 million for the year ended December 31, 2024,2025, compared with cash provided by financing activities of $17.6$35.5 million for the year ended December 31, 2023.2024. Proceeds from the financing activities in the 2025 period primarily related to the issuance of shares under a direct offering and an initial $15 million borrowing under the Lytton Credit Agreement offset by the payment of the remaining deferred portion of the purchase price related to the ATEC acquisition. Proceeds from financing activities for the 2024 period primarily related to the issuance of long-term debt under the Third Amended Credit Agreement and to the issuance of shares under a direct offering. 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.

Short-Term Outlook. TheProceeds netfrom proceedsdraws ofunder approximatelythe $18.3Lytton Credit Agreement, including the $15 million fromdraw themade completion of thein March 2025 Direct Offering,2026, 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 2025.2026.

Long-Term Outlook. In the longer term, we may need to raise additional capital to finance working capital needs and capital expenditures (see “Current Financing Arrangements”, above). Our future working capital needs will depend upon the specific measures we pursue in the entitlement and development of our water supply, storage, conveyance resources and other developments. Future capital expenditures will depend on the progress of the Mojave Groundwater Bank, including the funding of MGSC,MWI, ATEC operational needs and any further expansion of our agricultural assets. Additionally, timing of reimbursement of development costs advanced related to the Mojave Groundwater Bank and the expectedtiming of receipt of $51 millionfunds for the anticipated transfer of assets into MWI will impact the need to raise additional capital.

We are evaluating the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. We may meet any future cash requirements through a variety of means, including equity or debt placements, or through the sale or other disposition of assets. Equity placements would be undertaken only to the extent necessary, so as to minimize the dilutiondilutive effect of any such placements upon our existing stockholders. No assurances can be given, however, as to the availability or terms of any new financing. Limitations on our liquidity and ability to raise capital may adversely affect us. Sufficient liquidity is critical to meet our resource development activities.

(1) Liquidity. Management assesses whether thewe Company hashave sufficient liquidity to fund itsour costs for the next twelve months from the financial statement issuance date. Management evaluates the Company’sour liquidity to determine if there is a substantial doubt about the Company’sour ability to continue as a going concern. In the preparation of this liquidity assessment, management applies judgement to estimate the significant assumptions related to theour projected cash flows of the Company including the following: (i) projected cash outflows, (ii) projected cash inflows, (iii) categorization of expenditures as discretionary versus non-discretionary, and (iv) the ability to raise capital. The cash flow projections are based on known or planned cash requirements for operating costs as well as planned costs for project development.

Limitations on the Company’sour liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet the Company’sour activities. Although the Companywe currently expectsexpect itsour sources of capital to be sufficient to meet itsour near-term liquidity needs, there can be no assurance that itsour liquidity requirements will continue to be satisfied. If the Companywe cannot raise needed funds, itwe might be forced to make substantial reductions in itsour operating expenses, which could adversely affect itsour ability to implement itsour current business plan and ultimately impact itsour viability as a company.

We are a water solutions provider with a unique combination of land, water, pipelinewater and water filtrationinfrastructure assets located in Southern California between major water systems serving population centers in the Southwestern United States. Our portfolio of assets includes 2.5 million acre-feet of permitted water supply, 1 million acre-feet of groundwater storage capacity, 220 miles of existing, underground pipeline,pipeline 43infrastructure, over 100 miles of right-of-way entitlements for pipeline construction, and versatile, scalable and cost-effective water filtrationtreatment technology that removes contaminants and constituents of concern from groundwater. Our customers are public and private water systems, government agencies and commercial businesses.

We manage our landholdings,landholdings and water supply, pipeline and water filtrationtreatment 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 technologytreatment systems.

Water Conveyance – We own an existing 220-mile 30-inch steel pipeline (“Northern Pipeline”), that intersects several water storage and conveyance facilities in Southern California, including the California Aqueduct, the Los Angeles Aqueduct, and the Mojave River Pipeline. The maximum potential capacity of the Northern Pipeline for water conveyance is anticipated to be 25,000 AFY with expected21,275 throughputAFY tounder becontract. betweenIn 20,000July –2026, 23,000we AFY.received a 45-year right-of-way grant from the U.S. Department of the Interior and the Bureau of Land Management (“BLM”) that authorizes the conversion and operation of the Northern Pipeline for water conveyance including the construction of pump stations and related facilities on federal land. We also own a 99-year lease with the Arizona & California Railroad Company (“ARZC”) that willauthorizes allowconstruction us to constructof a 43-mile water conveyance pipeline (“Southern Pipeline”) within the existing,active activeARZC railroad right-of-way that extends from the Cadiz Ranch to the Colorado River Aqueduct (“CRA”). We currently expect the capacity of the Southern Pipeline to be 120,000 AFY to accommodate imported water storage. We hold an option to purchase up to 180 miles of existing unused 36” steel pipeline that can be used in construction of the Southern Pipeline system or to replace certain components of the Northern Pipeline.

Water FiltrationTreatment Technology – In 2022, we completed the acquisition of the assets of ATEC Water Systems, Inc. into ATEC Water Systems, LLC (“ATEC”), which provides innovative water filtrationtreatment solutions for impaired or contaminated groundwater sources. ATEC’s specialized filtration media provide cost-effective, high-rate of removal for common groundwater impairments and contaminants that pose health risks in drinking water including iron, manganese, arsenic, Chromium-6, nitrates, per-and-polyfluoroalkyl substances (PFAS) and other constituents of concern.

Our addition of pipeline infrastructure and ATEC water filtrationtreatment technology to our portfolio of land and water assets has enabled us to adjust our business model to begin offering integrated services and solutions to public water systems that address the urgent challenges of climate change and make significant progress in advancing contract negotiations for water supply with public water systems.

Beginning in 2024, we entered into long-term agreements with public water systems, private utility and other private water providers for the delivery of 21,275 AFY of annual water supply from the Mojave Groundwater Bank via the Northern Pipeline, representing approximately 85% of capacity of the Northern Pipeline and 45% of total average long-term supply available under our current permits. Through membership in Fenner Gap Mutual Water Company, the mutual water company we formed to carry out the project, participating water providers will purchase, for up to a 50-year term (take on delivery), their contracted water supply at an agreed upon market price between $1,450$1,650 - $1,950$2,100/AFY (2024 dollars) that is estimated to provide a netvolumetric returncommodity ofprice approximatelyfor $850/AFYwater (2024at dollarsthe wellhead, plus operations, maintenance, and subjectpro-rated to annual inflation adjustment), after payment of operations and maintenance costs and a pro rata portion of capitalpower costs for constructionconveyance ofand theprorated facilitiescapital ofcharge theper Mojaveacre-foot Groundwaterfor Bankdedicated project.pipeline capacity. The cost to participating water providers is estimated at this time without consideration of expected grant funding or low-interest government loans that may reduce capital costs.

We expect the remaining water supply available under our current permit to be contracted for delivery via the Southern Pipeline. We are in discussion with several additional parties interested in contracting for the supply from the Southern Pipeline, including multiple water providers, municipalities and tribes in Arizona that could take delivery from the Colorado River’s Central Arizona Project under exchange agreements as well as existing Southern California based water users.

In addition to available water supply, the Mojave Groundwater Bank offers one million acre-feet of imported storage capacity and an additional 150,000 acre-feet for carryover storage of existing contracted supplies. We are in discussions with multiple parties with interest in contracting for storage capacity in the project. We expect the capacity charge for contracted storge capacity will range from $1,500 - $3,000 per acre-foot, plus annual maintenance and operational fees. In October 2025, we executed an MOU with the U.S. Bureau of Reclamation to explore incorporating the Mojave Groundwater Bank, including supply and storage capacity, into long-term Colorado River system planning, as federal authorities contemplate solutions to the ongoing drought and long-term stress on the river system.

To finance construction of all improvements and required facilities to operate the Mojave Groundwater Bank project including the Northern Pipeline, Southern Pipeline and related facilities currently estimated at $1.25 - $1.5 billion,facilities, we established a new special purpose business entity Mojave Water Infrastructure Company LLC (“MWI”) that we expect will fundfinance these capital costs in partnership with public sector, tribal and other investors.investors through equity contributions as well as debt and/or grant financing opportunities.

We are currently engaged in the completion of due diligence with private equity investors for up to a targeted $400 million in equity commitments to MWI. In October 2025, we entered into the Lytton Credit Agreement, pursuant to which we may require Lytton to provide up to $51 million in an unsecured loan facility, convertible into the Storage Cash Flows Right, which Lytton would then contribute to MWI, in exchange for equity interests in MWI on the same economic terms offered to other equity investors in MWI. The Lytton Credit Agreement represents the first tranche of up to approximately $451 million in total equity capital being raised by us through MWI, to construct, own and operate the Mojave Groundwater Bank (see Note 3 to the Consolidated Financial Statements – “Long-Term Debt”).

In addition, we are currently engaged in the completion of due diligence with private equity investors for up to a targeted $400 million in equity commitment to MWI. Upon completion of definitive agreements for an estimated additional $400 million in equity capital investments in MWI, we expect to contribute to MWI our pipeline infrastructure assets, including the Northern Pipeline and the Southern Pipeline right-of-way.and Intheir addition,right-of-ways and entitlements, as well as cash flows under the NPL water supply agreements. Lytton would also contribute to MWI theits Storage Cash Flows Right (see Note 3 to the Consolidated Financial Statements – “Long-Term Debt”). Accordingly, MWI investors would be expected to share in the cash flows generated from the constructed facilities including from the supply agreements and the Storage Cash Flows Right. Under this potential structure, in consideration of our transfer of assets, we expect to receive an upfront capital reimbursement payment at closing and an equity interest in MWI, entitling us to share in the long-term cash flows generated by MWI, among other consideration.

MWI investors are expected to coordinate with us and project participants to seek available infrastructure grants and/or other financing alternatives.alternatives such as public debt and infrastructure debt financing. In February 2026 we received an invitation from the U.S. Environmental Protection Agency (“EPA”) to apply for up to $194 million under the Water Infrastructure Finance and Innovation Act (“WIFIA”) program to support Northern Pipeline conversion costs. This pre-application invitation reserves federal funding for the project while we advance through the underwriting process.

ATEC and our agricultural operations provide our current principal source of revenue, although our working capital needs are not fully supported by these operations at this time. 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.

Our current and future operations also include activities that further our commitments to sustainable stewardship of our land, water, pipeline and water filtrationtreatment technology assets, good governance and corporate social responsibility. We believe these commitments are important investments that will assist in maintenance of sustained stockholder value.

Three Months Ended MarchJune 31,30, 2026, Compared to Three Months Ended MarchJune 31,30, 2025

We currently operate in two reportable segments. Our largest segment is Land and Water Resources, which comprises all activities regarding our properties in the eastern Mojave Desert, pre-revenue development of the Mojave Groundwater Bank (supply, storage and conveyance), and agricultural operations. Our second operating segment is Water FiltrationTreatment Technology comprised of ATEC which provides innovative water filtrationtreatment technology solutions for impaired or contaminated groundwater sources.

We evaluate our performance based on segment operating (loss). Interest expense, income tax expense and lossesgain relatedon toderivative equity method investmentsliability are excluded from the computation of operating income (loss) for the segments. Segment net revenue, segment operating expenses and segment operating (loss)/income information consisted of the following for the three months ended MarchJune 31,30, 2026 and 2025:

We have not received significant revenues from our water supply, storage, or conveyance assets to date. Our revenues have been limited primarily to ATEC sales and sales from our alfalfa plantings and rental income from our agricultural leases. As a result, we have historically incurred a net loss from operations. We incurred an operating loss of $6.8$8.8 million in the three months ended MarchJune 31,30, 2026, compared to a $7.5$5.8 million operating loss during the three months ended MarchJune 31,30, 2025. The reducedhigher operating loss in 2026 was primarily due to higherdecreased compensationgross costsprofits relatedfrom toATEC stockdriven basedby non-cashreduced bonusfilter awardssales and increased legal and consulting fees incurred in 2025.advancing the development of the Mojave Groundwater Bank. Net loss for the three months ended MarchJune 31,30, 2026 was $8.6$11.4 million compared to a $9.6$7.7 million net loss during the three months ended MarchJune 31,30, 2025.

Revenues Revenue totaled $1.6$1.0 million during the three months ended MarchJune 31,30, 2026 primarily related to ATEC sales totaling $1.3$0.8 million, sales from the harvest from our 890 acres of commercial alfalfa crop totaling $0.2$0.1 million and rental income from agricultural leases totaling $0.1 million. Revenue totaled $3.0$4.1 million during the three months ended MarchJune 31,30, 2025, primarily related to ATEC sales totaling $2.4$3.7 million, sales from the harvest from our 890 acres of commercial alfalfa crop totaling $0.5$0.3 million and rental income from agricultural leases totaling $0.1 million. The decrease in ATEC revenues primarily reflects an anticipated reduction in volume of filters shipped in the firstsecond quarter of 2026 compared to 2025. Filter revenues in the 1stsecond quarter of 2025 primarily related to a mega project for the Central Utah Water Conservancy District’s Vineyard Wellfield Groundwater Polishing Project.

Cost of Sales Cost of sales totaled $1.2$1.0 million during the three months ended MarchJune 31,30, 2026, comprised of $0.9$0.6 million related to ATEC (27.6%23.7% gross margin) and $0.3$0.4 million related to our alfalfa crop harvest. Cost of sales totaled $2.1$2.7 million during the three months ended MarchJune 31,30, 2025, comprised of $1.6$2.1 million related to ATEC (35.2%44.5% gross margin) and $0.5$0.6 million related to our alfalfa crop harvest. The decrease in ATEC gross margin is primarily driven by the reduced filter sales over whichspreading the fixed costs of manufacturing filters included in cost of sales canover bea spread.reduced number of filters sold.

General and Administrative Expenses General and administrative expenses during the three months ended MarchJune 31,30, 2026, exclusive of stock-based compensation costs, totaled $6.4$6.6 million compared to $5.3$6.4 million for the three months ended MarchJune 31,30, 2025. The increase in 2026expenses was primarily due to increased legal and consulting fees incurred in advancing the development of the Mojave Groundwater Bank, accrued cash bonuses recorded in the 2026 period and increased marketing commissions and sales expenses related to ATEC.Bank. General and administrative expense for ATEC totaled $1.1$1.0 million during the three months ended MarchJune 31,30, 2026 compared with $0.7$1.2 million for the same period in 2025. The reduction in ATEC costs was primarily related to reduced marketing commissions from the lower filter sales.

Compensation costs for stock and option awards for the three months ended MarchJune 31,30, 2026, were $0.5$1.8 million, compared to $2.8$0.5 million for the three months ended MarchJune 31,30, 2025. The higher 20252026 expense was primarily due to higher stock-based non-cash awards to employees and consultants in 20252026 compared to 20262025 (see Note 4 to the Condensed Consolidated Financial Statements – “Stock-Based Compensation Plans”).

Depreciation Depreciation expense totaled $0.4 million during the three months ended MarchJune 31,30, 2026 compared to $0.3 million during the three months ended MarchJune 31,30, 2025.

Interest Expense, net Net interest expense totaled $2.5$2.9 million during the three months ended MarchJune 31,30, 2026, compared to $2.1$2.0 million during the same period in 2025. The following table summarizes the components of net interest expense for the two periods (in thousands):

As we have not received sufficient revenues or gross profits from our water, agriculture or water filtrationtreatment technology activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence. Historically, we have addressed these needs primarily through secured debt financing arrangements and private equity placements.

On March 6, 2024, we entered into a Third Amendment to Credit Agreement and First Amendment to Security Agreement (“Third Amended Credit Agreement”) with HHC $ Fund 2012 (“Heerema”) (see Note 3 to the Condensed Consolidated Financial Statements – “Long-Term Debt”). Before entering into the Third Amended Credit Agreement, Heerema purchased the outstanding secured non-convertible term loans under the Credit Agreement (“Assignment”). In connection with the Assignment, the existing holders of both the Convertible Loan and non-convertible term loans consented to effectuate the Third Amended Credit Agreement in consideration of a consent fee in the aggregate amount of $479,845 payable in the form of our common stock (valued at $2.89 per share, or 166,036 shares), which was registered pursuant to an effective shelf registration statement on Form S-3 and a prospectus supplement thereunder. The Third Amended Credit Agreement provides, among other things, (a) a new tranche of senior secured convertible terms loans from Heerema in an aggregate principal amount of $20 million, having a maturity date of June 30, 2027 (“New Secured Convertible Debt”); (b) the aggregate principal amount of the secured non-convertible term loans acquired by Heerema has been increased from $20 million to $21.2 million and the applicable repayment fee in respect thereof has been eliminated; (c) the Convertible Loan existing prior to the Third Amended Credit Agreement, in an aggregate principal amount of approximately $16 million plus interest accruing thereon, has become unsecured; and (d) extension of the maturity date for the existing Convertible Loan and non-convertible loans to June 30, 2027. On August 12, 2026, the maturity date of each of these loans was extended to June 30, 2028.

The proceeds from the Tribal Investment will be used to fund the construction, development, ownership, operation, and other ongoing costs of the Mojave Groundwater Bank, and to reimburse our expenses related thereto. We made an initial draw of $15 million for reimbursement of Mojave Groundwater Bank project expenses and to support development activities in November 2025 and2025, a second draw of $15 million in March 2026, and a third draw of $10 million in August 2026 (see Note 3 to the Consolidated Financial Statements – “Long-Term Debt”). An additional $21$11 million remains undrawn under the Lytton Credit Agreement.

Cash Used in Operating Activities. Cash used in operating activities totaled $5.5$12.2 million for the threesix months ended MarchJune 31,30, 2026 and $3.6$5.0 million for the threesix months ended MarchJune 31,30, 2025. 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 working capital needs. The increase in cash used in operating activities was driven by the increased cash losses from operations in 2026 primarily resulting from increasedreduced legalATEC filter sales and consultingcorresponding feesworking incurredcapital in advancing the development of the Mojave Groundwater Bank.activity.

Cash Used in Investing Activities. Cash used for investing activities for the threesix months ended MarchJune 31,30, 2026, was $0.2$3.4 million, compared with $6.3$10.8 million for the threesix months ended MarchJune 31,30, 2025. The cash used in 2026 was primarily related to engineering design costs related to the Mojave Groundwater Bank project. The cash used in the 2025 was primarily related to securing an exclusive option to purchase up to 180 miles of steel pipeline for the development of the Mojave Groundwater Bank for $5.0 million.million, costs to convert three wells to natural gas of $3.5 million, and pipe inspection costs of $1.2 million for the Northern Pipeline.

Cash Provided by Financing Activities. Cash provided by financing activities totaled $13.7$12.2 million for the threesix months ended MarchJune 31,30, 2026, compared with cash provided by financing activities of $16.8$14.3 million for the threesix months ended MarchJune 31,30, 2025. Proceeds from the financing activities in the 2026 period primarily related to a $15 million draw under the Lytton Credit Agreement in March 2026. Proceeds from financing activities for the 2025 period primarily related to the issuance of shares under a direct offering.

Short-Term Outlook. Proceeds from draws under the Lytton Credit Agreement, including the $15 million draw made in March 2026 and the $10 million draw made in August 2026, 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 anticipated cash profits generated from operations during 2026.