CADIZ INC (Form: 10-Q, Received: 11/08/2013 13:47:58)

Securities and Exchange Commission

Washington, D. C. 20549

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended September 30, 2013

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from ..... to .....

Commission File Number 0-12114

( Exact name of registrant specified in its charter)

DELAWARE	77-0313235
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

550 South Hope Street, Suite 2850
Los Angeles, California	90071
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (213) 271-1600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ___ Accelerated filer √ Non-accelerated filer ___ Smaller Reporting Company ___

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2).

As of November 5, 2013, the Registrant had 16,152,756 shares of common stock, par value $0.01 per share, outstanding.

	For the Three Months
	Ended September 30,
($ in thousands except per share data)	2013			2012

Revenues	$	182		$	287

Costs and expenses:
Cost of sales		292			293
General and administrative		2,934			2,965
Depreciation		63			97

Total costs and expenses		3,289			3,355

Operating loss		(3,107	)		(3,068	)

Interest expense, net		(1,689	)		(1,665	)

Loss before income taxes		(4,796	)		(4,733	)
Income tax provision		1			3

Net loss and comprehensive loss applicable to common stock	$	(4,797	)	$	(4,736	)

Basic and diluted net loss per common share	$	(0.31	)	$	(0.31	)

Basic and diluted weighted average shares outstanding		15,453			15,439

See accompanying notes to the consolidated financial statements.

	For the Nine Months
	Ended September 30,
($ in thousands except per share data)	2013			2012

Revenues	$	190		$	324

Costs and expenses:
Cost of sales		292			295
General and administrative		9,629			8,683
Depreciation		191			285

Total costs and expenses		10,112			9,263

Operating loss		(9,922	)		(8,939	)

Interest expense, net		(5,715	)		(4,821	)
Loss on extinguishment of debt and debt refinancing		(1,055	)		-

Loss before income taxes		(16,692	)		(13,760	)
Income tax provision		5			8

Net loss and comprehensive loss applicable to common stock	$	(16,697	)	$	(13,768	)

Basic and diluted net loss per common share	$	(1.08	)	$	(0.89	)

Basic and diluted weighted average shares outstanding		15,451			15,438

See accompanying notes to the consolidated financial statements.

	September 30,			December 31,
($ in thousands except share data)	2013			2012

ASSETS

Current assets:
Cash and cash equivalents	$	5,141		$	1,685
Accounts receivable		356			260
Inventories		217			-
Prepaid expenses and other		471			404

Total current assets		6,185			2,349

Property, plant, equipment and water programs, net		43,883			44,074
Goodwill		3,813			3,813
Debt issuance costs		1,122			81
Other assets		2,975			201

Total Assets	$	57,978		$	50,518

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	963		$	957
Accrued liabilities		1,224			1,395
Current portion of long-term debt		11			11

Total current liabilities		2,198			2,363

Long-term debt, net		87,090			63,250
Deferred revenue		750			750
Other long-term liabilities		923			923

Total Liabilities		90,961			67,286

Stockholders’ deficit:
Common stock - $.01 par value; 70,000,000 shares
authorized; shares issued and outstanding – 15,452,756 at
September 30, 2013 and 15,438,961 at December 31, 2012		154			154
Additional paid-in capital		301,521			301,039
Accumulated deficit		(334,658	)		(317,961	)
Total stockholders’ deficit		(32,983	)		(16,768	)

Total Liabilities and Stockholders’ Deficit	$	57,978		$	50,518

See accompanying notes to the consolidated financial statements.

	For the Nine Months
	Ended September 30,
($ in thousands)	2013			2012

Cash flows from operating activities:
Net loss	$	(16,697	)		(13,768	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		191			285
Amortization of debt discount and issuance costs		1,418			2,196
Interest expense added to loan principal		4,297			2,628
Loss on early extinguishment of debt and debt refinancing		835			-
Compensation charge for stock and share options		483			314
Changes in operating assets and liabilities:
Increase in accounts receivable		(96	)		(233	)
Increase in inventories		(217	)		(316	)
Increase in prepaid expenses and other		(67	)		(606	)
(Increase) decrease in other assets		(2,774	)		31
Increase in accounts payable		173			76
(Decrease ) increase in accrued liabilities		(172	)		974
Increase in deferred revenue		-			250

Net cash used for operating activities		(12,626	)		(8,169	)

Cash flows from investing activities:
Additions to property, plant and equipment		(167	)		(1,449	)
Increase in restricted cash		-			(428	)

Net cash used for investing activities		(167	)		(1,877	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		17,500			56
Debt issuance costs		(1,243	)		-
Principal payments on long-term debt		(8	)		(7	)

Net cash provided by financing activities		16,249			49

Net increase (decrease) in cash and cash equivalents		3,456			(9,997	)

Cash and cash equivalents, beginning of period		1,685			11,370

Cash and cash equivalents, end of period	$	5,141		$	1,373

See accompanying notes to the consolidated financial statements.

( $ in thousands except per share data)

					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Deficit

Balance as of December 31, 2012		15,438,961	$	154	$	301,039	$	(317,961	)	$	(16,768	)

Stock awards		13,795		-		-		-			-

Stock-based compensation expense		-		-		482		-			482

Net loss and comprehensive loss		-		-		-		(16,697	)		(16,697	)

Balance as of September 30, 2013		15,452,756	$	154	$	301,521	$	(334,658	)	$	(32,983	)

See accompanying notes to the consolidated financial statements.

NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Consolidated Financial Statements have been prepared by Cadiz Inc., also referred to as “Cadiz” or “the Company”, without audit and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2012.

Basis of Presentation

The foregoing Consolidated Financial Statements include the accounts of the Company and contain all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair statement of the Company’s financial position, the results of its operations and its cash flows for the periods presented and have been prepared in accordance with generally accepted accounting principles in the United State of America (“U.S. GAAP”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements. The results of operations for the nine months ended September 30, 2013, are not necessarily indicative of results for the entire fiscal year ending December 31, 2013.

The financial statements of the Company have been prepared using accounting principles applicable to a going concern, which assumes realization of assets and settlement of liabilities in the normal course of business. The Company incurred losses of $16.7 million for the nine months ended September 30, 2013, and $13.8 million for the nine months ended September 30, 2012. The Company had working capital of $4.0 million at September 30, 2013, and used cash in operations of $12.6 million for the nine months ended September 30, 2013, and $8.2 million for the nine months ended September 30, 2012.

Cash requirements during the nine months ended September 30, 2013, primarily reflect: (i) certain administrative costs related to the Company’s water project development efforts; (ii) litigation costs; and (iii) a $3.3 million cash payment in March 2013 related to the lease agreement with the Arizona & California Railroad Company to use a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline. Currently, the Company’s sole focus is the development of its land and water assets.

In June 2006, the Company raised $36.4 million through the private placement of a five-year zero coupon convertible term loan with Peloton Partners LLP (“Peloton”), as administrative agent, and an affiliate of Peloton and another investor, as lenders (the “Term Loan”). In April 2008, the Company was advised that Peloton’s interest in the Term Loan had been assigned to an affiliate of Lampe, Conway & Company LLC (“Lampe Conway”), and Lampe Conway subsequently replaced Peloton as administrative agent of the loan. In June 2009, the Company completed arrangements to amend the Term Loan and extend its maturity to June of 2013. This facility was further modified as to certain of its conversion features in October 2010, in connection with a new $10 million working capital facility with its existing lenders. In October 2012, the Company increased the capacity of its existing Term Loan facility with an additional $5 million facility.

On March 5, 2013, the Company completed arrangements with its senior lenders to refinance its then existing $66 million Term Loan. Under the terms of the new arrangements, the existing lenders held $30 million of non-convertible secured debt at the time of the transaction, with the balance of the Company’s outstanding debt of approximately $36 million held in a convertible bond instrument. Further, the Company increased the capacity of the convertible bond instrument with an additional $17.5 million to be used for working capital purposes. See Note 2, “Long-Term Debt”. In July 2013, the majority of the $30 million of non-convertible secured debt was acquired in a private transaction by MSD Credit Opportunity Master Fund, L.P. (“MSD Credit”). In October 2013, the Company completed arrangements with MSD Credit to increase the secured debt facility by $10 million to fund additional working capital (“New Term Loan”). See Note 8, “Subsequent Events”.

On July 31, 2013, the Company filed a new shelf registration statement on Form S-3 registering the issuance of up to $40 million in shares of the Company’s common stock, preferred stock, warrants, subscription rights, units and certain debt instruments in one or more public offerings.

The $10 million in additional working capital raised in October 2013, as discussed above, together with our existing cash resources, provides the Company with sufficient funds to meet its expected working capital needs until mid-2015. Based upon the Company’s current and anticipated usage of cash resources, and depending on its progress toward implementation of the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project” or “Project”), it may require additional working capital during 2015. The Company will evaluate the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. The Company 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 dilutive effect of any such placements upon our existing stockholders. Limitations on the Company’s liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet its resource development activities. Although the Company currently expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that its liquidity requirements will continue to be satisfied. If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately its viability as a company.

Principles of Consolidation

The consolidated financial statements include the accounts of Cadiz Inc. and all subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Supplemental Cash Flow Information

No cash payments, including interest, are due on the corporate term debt or the convertible bond prior to their maturities.

The Company recorded non-cash additions to fixed assets of $923,000 at September 30, 2013, and $1,090,000 at December 31, 2012, which were accrued at the respective period ends, for costs directly attributable to the development of the Water Project.

Recent Accounting Pronouncements

Offsetting Assets and Liabilities

In December 2011 and December 2012, the FASB issued accounting standards updates modifying the disclosure requirements about the nature of an entity's rights of offsetting assets and liabilities in the consolidated balance sheet under master netting agreements and related arrangements associated with financial and derivative instruments. The guidance requires increased disclosure of the gross and net recognized assets and liabilities, collateral positions and narrative descriptions of setoff rights. The adoption of this pronouncement did not have a material impact on the Company’s Consolidated Financial Statements and accompanying disclosures.

Presentation of Items Reclassified Out of Accumulated Other Comprehensive Income

In February 2013, the FASB issued an accounting standards update which requires disclosure related to items reclassified out of accumulated other comprehensive income (AOCI). The guidance requires entities to present separately, for each component of other comprehensive income (OCI), current period reclassifications and the remainder of the current period OCI. In addition, for certain current period reclassifications, an entity is required to disclose the effect of the item reclassified out of AOCI on the respective line item of net income. The adoption of this pronouncement did not have a material impact on the Company’s Consolidated Financial Statements and accompanying disclosures.

Joint and Several Liabilities

In February 2013, the FASB issued an accounting standard update which modifies the requirements for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The guidance requires companies to measure these obligations as the sum of the amount the company has agreed with co-obligors to pay and any additional amount it expects to pay on behalf of one or more co-obligors. This guidance is effective for all fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements and accompanying disclosures.

Presentation of Unrecognized Tax Benefits

In July 2013, the FASB issued an accounting standards update which will require an unrecognized tax benefit be presented on the balance sheet as a reduction of a deferred tax asset for a net operating loss ("NOL") or tax credit carryforward under certain circumstances. The guidance is effective for all fiscal years, and interim periods within those years, beginning December 15, 2013. The Company does not expect this guidance to have a material impact on the consolidated financial statements.

NOTE 2 – LONG-TERM DEBT

At September 30, 2013 and December 31, 2012, the carrying amount of the Company’s outstanding debt is summarized as follows (in thousands):

	September 30,		December 31,
	2013		2012

Zero coupon secured convertible term loan	$	-	$	65,262
Senior secured debt due March 5, 2016 Interest accrues at 8% per annum		31,412		-
Convertible bond instrument due March 5, 2018 Interest accrues at 7% per annum		55,647		-
Other loans		42		50
Debt discount, net of accumulated accretion		-		(2,051	)
		87,101		63,261

Less current portion		11		11

	$	87,090	$	63,250

The carrying value of the Company’s debt approximates fair value. The fair value of the Company’s debt (Level 2) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company for similar debt instruments of comparable maturities by its lenders.

Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on September 30, 2013, are as follows:

12 Months Ending September 30	(in thousands)

2014		11
2015		11
2016		31,424
2017		8
2018		55,647
	$	87,101

In June 2006, the Company raised $36.4 million through the private placement of a five-year zero coupon convertible term loan with Peloton Partners LLP (“Peloton”), as administrative agent, and an affiliate of Peloton and another investor, as lenders (the “Term Loan”). In April 2008, the Company was advised that Peloton’s interest in the Term Loan had been assigned to an affiliate of Lampe, Conway & Company LLC (“Lampe Conway”), and Lampe Conway subsequently replaced Peloton as administrative agent of the loan. In June 2009, the Company completed arrangements to amend the Term Loan and extend its maturity to June 2013. This facility was further modified as to certain of its conversion features in October 2010, in connection with a new $10 million working capital facility with its existing lenders. In October 2012, the Company increased the capacity of its existing Term Loan facility with an additional $5 million facility. As a result of this transaction, the Company issued warrants to lenders to purchase shares of common stock. The value of the warrants totaled approximately $533 thousand and was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital.

On March 5, 2013, the Company completed arrangements with its senior lenders to refinance the Company’s existing $66 million corporate term debt. The new arrangements established two separate debt instruments, a $30 million senior secured mortgage loan due in three years, and a new $53.5 million convertible bond due in five years, with no principal or interest payments due on either instrument until maturity. The new debt instruments replaced all existing term debt as of March 5, 2013, and provided $17.5 million in new working capital to fund the Company’s current operations, including pre-construction activities related to the Project.

The major components of the refinancing included:

A $30 million senior term loan secured by the underlying assets of the Company, including landholdings and infrastructure (the “Senior Secured Debt”). The instrument accrues interest at 8% per annum and requires no principal or interest payments before maturity on March 5, 2016. Prepayment would be mandatory following any asset sale or voluntarily at the Company’s option, subject to a premium. The Senior Secured Debt has a senior position to any other Company debt instrument.

A $53.5 million convertible bond (the “Convertible Bond”). The Convertible Bond provides for convertibility into the Company’s common stock at a price of $8.05 per share. Interest accrues at 7% per annum, with no principal or interest payments required before maturity on March 5, 2018. This instrument has a junior position to the Senior Secured Debt.

·	$17.5 million in new working capital provided as part of the Convertible Bond issuance to fund Company operations.

The new credit facility does not constitute a troubled debt restructuring and was accounted for as a debt extinguishment under ASC 470-50. The fair value of the new credit facility was recorded at face value. The Company recorded a loss on extinguishment of debt in the amount of $1.06 million which consisted of the write-off of unamortized debt discount, unamortized debt issuance costs and fees paid to the lenders.

The Company incurred $1.2 million of legal expenses and placement agent fees related to the negotiation and documentation of the refinancing which will be amortized over the life of the Convertible Bond.

In July 2013, the majority interest of the Senior Secured Debt was acquired in a private transaction by MSD Credit Opportunity Master Fund, L.P. (“MSD Credit”). In October 2013, the Company completed arrangements with MSD Credit to increase the Senior Secured Debt facility by $10 million to fund additional working capital. See Note 8, “Subsequent Events”.

Both the Senior Secured Debt and the Convertible Bond contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit the Company’s ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person. However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on the Company’s ability to issue additional common stock to fund future working capital needs. The debt covenants were negotiated by the parties with a view towards the Company’s operating and financial condition as it existed at the time the agreements were executed. At September 30, 2013, the Company was in compliance with its debt covenants.

NOTE 3 – COMMON STOCK

On January 9, 2013, Cadiz revised its existing agreement with the law firm of Brownstein Hyatt Farber Schreck LLP (“Brownstein”). Under this agreement, Brownstein provides certain legal and advisory services to the Company, including the services of Mr. Scott Slater, the Company’s Chief Executive Officer. As previously disclosed, the Company had agreed to pay to Brownstein an amount of up to 1% of the net present value of the Water Project as incentive compensation in consideration of the services provided by Brownstein under the original agreement.

The revised agreement replaced the net present-value-based incentive compensation provisions of the original agreement with an agreement to issue up to a total of 400,000 shares of the Company’s common stock, with 100,000 shares earned upon the achievement of each of four enumerated milestones as follows:

i.	100,000 shares earned upon the execution of the revised agreement;

ii.	100,000 shares earned upon receipt by the Company of a final judicial order dismissing all legal challenges to the Final Environmental Impact Report for the Project;

iii.	100,000 shares earned upon the signing of binding agreements for more than 51% of the Project’s annual capacity; and

iv.	100,000 shares earned upon the commencement of construction of all of the major facilities contemplated in the Final Environmental Impact Report necessary for the completion and delivery of the Project.

All shares earned upon achievement of any of the four milestones will be payable three years from the date earned. The agreement also provides for base cash compensation payments to Brownstein of $25,000 per month.

In accordance with ASC 505, the Company recognized stock compensation in the amount of $373,000 for the first of the four milestones which was satisfied on January 9, 2013. Because the shares are payable three years from the date earned, the fair value of these shares was estimated by discounting the current market price of the Company’s common stock by the fair value of a protective put using the Black-Scholes model.

NOTE 4 – STOCK-BASED COMPENSATION PLANS AND WARRANTS

The Company has issued options pursuant to its 2003 Management Equity Incentive Plan, 2007 Management Equity Incentive Plan, and 2009 Equity Incentive Plan. The Company has also granted stock awards pursuant to its 2007 Equity Incentive Plan, 2009 Equity Incentive Plan and Outside Director Compensation Plan, as described below.

2003 Management Equity Incentive Plan

In December 2003, concurrently with the completion of the Company’s then current financing arrangements with ING, the Company’s board of directors authorized the adoption of a Management Equity Incentive Plan. As of September 30, 2013, a total of 315,000 common stock options remain outstanding under this plan.

Outside Director Compensation Plan

The Cadiz Inc. Outside Director Compensation Plan was approved by Cadiz stockholders in November 2006. Under the plan, each outside director receives $30,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $20,000 on June 30 of each year. The award accrues on a quarterly basis, with $7,500 of cash compensation and $5,000 of stock earned for each fiscal quarter in which a director serves. The deferred stock award vests automatically on the January 31 which first follows the award date.

2007 Management Equity Incentive Plan

The 2007 Management Equity Incentive Plan was approved by stockholders at the 2007 Annual Meeting. As of September 30, 2013, a total of 10,000 common stock options remain outstanding under this plan.

2009 Equity Incentive Plan

The 2009 Equity Incentive Plan was approved by stockholders at the 2009 Annual Meeting. The plan provides for the grant and issuance of up to 850,000 shares and options to the Company’s employees and consultants. The plan became effective when the Company filed a registration statement on Form S-8 on December 18, 2009. All options issued under the 2009 Equity Incentive Plan have a ten-year term with vesting periods ranging from issuance date to 24 months. To date, 537,500 common stock options have been issued under this plan and all remained outstanding as of September 30, 2013.

All options that have been issued under the above plans have been issued to officers, employees and consultants of the Company. In total, options to purchase 862,500 shares were unexercised and outstanding on September 30, 2013, under the three equity incentive plans.

The Company recognized stock-option-related compensation costs of $39,000 and $239,000 in the nine months ended September 30, 2013 and 2012, respectively. No options were exercised during the nine months ended September 30, 2013.

Stock Awards to Directors, Officers, and Consultants

The Company has granted stock awards pursuant to its 2007 Management Equity Incentive Plan, 2009 Equity Incentive Plan and Outside Director Compensation Plan.

Awards of 240,000 common shares were issued under the 2007 Management Equity Incentive Plan. A 150,000-share award was issued that vested in three equal installments on January 1, 2008, January 1, 2009, and January 1, 2010. The remaining award of 90,000 shares was issued as shares that vested in May 2009 consistent with the terms of the agreements pursuant to which those executives provide services to the Company.

Of the total 850,000 shares reserved under the 2009 Equity Incentive Plan, a grant of 115,000 restricted shares of common stock became effective on January 14, 2010, and a grant of 140,000 restricted shares of common stock became effective on January 10, 2011, consistent with the terms of the agreements pursuant to which those executives provide services to the Company and which contemplate that such executives will participate in the Company’s long-term incentive plans. The recipients of these restricted shares have a contractual agreement not to sell any of these shares for a period of three years following the effective date. Of the remaining 595,000 shares reserved under the 2009 Equity Incentive Plan, 42,265 shares of common stock were awarded to directors, 537,500 were issued as options as described above and 15,235 are available for future grants as of September 30, 2013.

Under the Outside Director Compensation Plan, 92,265 shares have been awarded for the plan years ended June 30, 2003, through June 30, 2013. Of the 92,265 shares awarded, 72,782 shares have vested and been issued. The remaining 19,483 shares will vest on January 31, 2014.

Stock Purchase Warrants Issued to Non-Employees

The Company accounts for equity securities issued to non-employees in accordance with the provisions of ASC 505.

On November 30, 2011, the Company raised $6 million with a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, the Company issued one (1) Common Stock purchase warrant entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share.

On October 30, 2012, the Company increased the capacity of its then existing Term Loan facility with an additional $5 million facility. Concurrently with the funding of the facility, the Company issued warrants to the lenders to purchase an aggregate of 250,000 shares of its common stock. These warrants have an exercise price of $10 per share and must be exercised not later than two years from the date of issuance.

As of September 30, 2013, 472,222 warrants remain outstanding.

NOTE 5 – INCOME TAXES

As of September 30, 2013, the Company had net operating loss (“NOL”) carryforwards of approximately $197 million for federal income tax purposes and $107 million for California state income tax purposes. Such carryforwards expire in varying amounts through the year 2033. Use of the carryforward amounts is subject to an annual limitation as a result of ownership changes.

As of September 30, 2013, the Company possessed unrecognized tax benefits totaling approximately $2.8 million. None of these, if recognized, would affect the Company's effective tax rate because the Company has recorded a full valuation allowance against these assets.

The Company's tax years 2010 through 2012 remain subject to examination by the Internal Revenue Service, and tax years 2009 through 2012 remain subject to examination by California tax jurisdictions. In addition, the Company's loss carryforward amounts are generally subject to examination and adjustment for a period of three years for federal tax purposes and four years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.

Because it is more likely than not that the Company will not realize its net deferred tax assets, it has recorded a full valuation allowance against these assets. Accordingly, no deferred tax asset has been reflected in the accompanying consolidated balance sheets.

NOTE 6 – NET LOSS PER COMMON SHARE

Basic earnings per share (“EPS”) is computed by dividing the net loss by the weighted-average common shares outstanding. Options, deferred stock units, warrants and the zero coupon term loan convertible into or exercisable for certain shares of the Company’s common stock were not considered in the computation of diluted EPS because their inclusion would have been antidilutive. Had these instruments been included, the fully diluted weighted average shares outstanding would have increased by approximately 6,485,000 and 3,194,000 for the three months ended September 30, 2013 and 2012, respectively, and 8,142,000 and 3,170,000 for the nine months ended September 30, 2013 and 2012, respectively.

NOTE 7 - CONTINGENCIES

In California, third parties have the ability to file litigation challenging the approval of a water project. As a result, the Company is and expects to continue to be party to various legal proceedings arising in the general course of its business, including, in particular, the development of the Water Project.

The Company is currently named as a real party in interest in six (6) lawsuits related to the Water Project approvals granted last year by the Santa Margarita Water District and County of San Bernardino in accordance with the California Environmental Quality Act (“CEQA”). The six lawsuits have been brought by two plaintiffs and have been coordinated in Orange County Superior Court. The cases seek various forms of relief, but are primarily focused on causing a reconsideration of the environmental documents and limitation of the Project approvals. The cases are scheduled to proceed to administrative trial in December 2013. The Company cannot predict the outcome of any of the proceedings. Three (3) additional cases filed last year have been dismissed and are no longer pending, including one case dismissed in October 2013.

There are no other material legal proceedings pending to which the Company is a party or of which any of the Company’s property is the subject.

NOTE 8 – SUBSEQUENT EVENTS

On October 30, 2013, the Company entered into an agreement (“Credit Agreement”) with its new majority senior lender, MSD Credit Opportunity Master Fund, L.P. (“MSD Credit”), to increase its existing $30 million senior secured mortgage loan by $10 million to fund additional working capital. MSD Credit previously acquired the majority interest of the $30 million portion of the debt in a private transaction. The new $10 million tranche accrues interest at 8% and requires no principal or interest payments prior to maturity on June 30, 2017. The new $10 million and the original $30 million (“Senior Secured Debt”) are both secured by the underlying assets of the Company, including all landholdings and infrastructure. The Credit Agreement also now provides that in the case of certain asset sales unrelated to the Water Project, the Company would retain for working capital purposes up to 50% of the first $10 million of sales, with the remainder requiring mandatory prepayment of the Senior Secured Debt. In addition, as part of this transaction, the Company issued 700,000 shares of Cadiz Inc. common stock to MSD Credit subject to certain restrictions on resale.

In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the following discussion contains trend analysis and other forward-looking statements. Forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. These include, among others, our ability to maximize value from our California land and water resources; and our ability to obtain new financings as needed to meet our ongoing working capital needs. See additional discussion under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012.

Overview

We are a land and water resource development company with 45,000 acres of land in three separate areas of eastern San Bernardino County, California. Virtually all of this land is underlain by high-quality, naturally recharging groundwater resources, and is situated in proximity to the Colorado River and the Colorado River Aqueduct (“CRA”), a major source of imported water for Southern California. Our main objective is to realize the highest and best use of these land and water resources in an environmentally responsible way.

For more than 20 years, we have maintained an agricultural development at our 34,000-acre property in the Cadiz Valley, relying upon groundwater from the underlying aquifer system for irrigation. In 1993, we secured permits to develop agriculture on up to 9,600 acres of the Cadiz Valley property and withdraw more than one million acre-feet of groundwater from the underlying aquifer system. Since that time, we have maintained various levels of agriculture at the property and this operation has provided our principal source of revenue.

In addition to our sustainable agricultural operations, we believe that the long-term value of our land assets can best be derived through the development of a combination of water supply and storage projects at our properties. The primary factor driving the value of such projects is continuing pressure on water supplies throughout California, including environmental and regulatory restrictions on each of the State’s three main water sources: the State Water Project, the CRA and the Los Angeles Aqueduct. Southern California’s water providers rely on imports from these systems for a majority of their water supplies, but deliveries from all three into the region have been below capacity over the last several years. Availability of supplies in California also differs greatly from year to year due to natural hydrological variability. For example, State Water Project deliveries were limited to just 35% of capacity for 2013 due to ongoing environmental restrictions and below average snowpack in Northern California. Southern California water providers are seeking new, reliable supply solutions to address ongoing limitations of traditional water supplies and to plan for long-term water needs, but cost-effective alternatives and solutions are limited.

At present, our water development efforts are primarily focused on the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project” or “Project”), which will capture and conserve millions of acre-feet of native groundwater currently being lost to evaporation from the aquifer system beneath our Cadiz Valley property and deliver it to water providers throughout Southern California (see “Water Resource Development”) . We believe that the ultimate implementation of this Water Project will create the primary source of our future cash flow and, accordingly, our working capital requirements relate largely to the development activities associated with this Water Project.

We also continue to explore additional uses of our land and water resource assets, including additional agricultural opportunities and the development of a land conservation bank on our properties outside the Water Project area.

In addition to these development efforts, we will also pursue strategic investments in complementary business or infrastructure to meet our objectives. We cannot predict with certainty when or if these objectives will be realized.

W ater Resource Development

The Water Project is designed to capture and conserve billions of gallons of renewable native groundwater currently being lost annually to evaporation from the aquifer system underlying our Cadiz/Fenner Property, and provide a new, reliable water supply in Southern California. By implementing established groundwater management practices, the Water Project will create a sustainable water supply for Project participants without adversely impacting the aquifer system or the desert environment. The total quantity of groundwater to be recovered and conveyed to Project participants will not exceed a long-term annual average of 50,000 acre-feet per year for 50 years. The Project also offers participants the ability to carry-over their annual supply and store it in the groundwater basin from year to year. A second phase of the Project, Phase II, will offer approximately one million acre-feet of storage capacity that can be used to store imported water supplies at the Water Project area.

Facilities required for Phase I of the Project primarily include, among other things:

·	High yield wells designed to efficiently recover available native groundwater from beneath the Water Project area;

·	A water conveyance pipeline to deliver water from the well field to the CRA; and

·	An energy source to provide power to the well field, pipeline and pumping plant.

If an imported water storage component of the project is ultimately implemented in Phase II, the following additional facilities would be required, among other things:

·	A pumping plant to pump water through the conveyance pipeline from the CRA to the Project well field; and

·	Spreading basins, which are shallow settling ponds that will be configured to efficiently percolate water from the ground surface down to the water table using subsurface storage capacity for the storage of water.

In general, several elements are needed to implement such a project: (1) a water conveyance pipeline right-of-way from the Water Project area to a delivery system; (2) storage and supply purchase agreements with one or more public water agencies or private water utilities; (3) environmental/regulatory permits; and (4) construction and working capital. As described below, the first three elements have been progressed on a concurrent basis. The fourth is dependent on actions arising from the completion of the first three.

(1)	A Water Conveyance Pipeline Right-of-Way from the Water Project Area to a Delivery System

In September 2008, we secured a right-of-way for the Water Project’s water conveyance pipeline by entering into a lease agreement with the Arizona & California Railroad Company (“ARZC”) which operates an active shortline railroad extending from Cadiz to Matthie, Arizona. The agreement allows for the use of a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline for a period up to 99 years. The buried pipeline would be constructed parallel to the railroad tracks and be used to convey water between our Cadiz Valley property and the CRA in Rice, California. The ARZC is also a Project participant and would receive water from the Project to serve a variety of railroad purposes, including fire suppression and other safety and maintenance uses. In addition, in September 2013, we entered into a trackage rights agreement with the ARZC that would enable the operation of steam-powered, passenger excursion trains on the line powered by water made available from the pipeline.

The ARZC route was fully analyzed in the Water Project’s Final Environmental Impact Report (“FEIR”) as part of the California Environmental Quality Act (“CEQA”) environmental review process completed in 2012. Pursuant to our lease agreement with ARZC, we made a payment in the amount of $3.3 million on March 6, 2013, marking the completion of the environmental review period and the commencement of the construction and operation term of the agreement.

We are also exploring the potential to utilize an unused natural gas pipeline (as described in “Existing Pipeline Asset” below), which exists in the Project area and to which we hold an ownership right, as a means to access additional distribution systems. Initial feasibility studies indicate that this pipeline could be used as a component of the Project to distribute water to Project participants or import water for storage at the Project area in Phase II. The potential use of this pipeline by the Project was preliminarily analyzed as part of the Project’s FEIR. Additional environmental review would be required prior to converting this line for water distribution.

(2)	Storage and Supply Purchase Agreements with One or More Public Water Agencies or Private Water Utilities

In 2010 and 2011, we entered into option and environmental cost-sharing agreements with six water providers seeking water supplies and storage from the Project: Santa Margarita Water District (“SMWD”), Golden State Water Company (a wholly owned subsidiary of American States Water [NYSE: AWR]), Three Valleys Municipal Water District, Suburban Water Systems (a wholly owned subsidiary of SouthWest Water Company), Jurupa Community Services District and California Water Service Company, the third largest investor-owned American water utility. The six water providers serve more than one million customers in cities throughout California’s San Bernardino, Riverside, Los Angeles, Orange, Ventura and Imperial Counties.

Under the terms of the agreements with the six water providers, upon completion of the Water Project’s California Environmental Quality Act (“CEQA”) review and certification of the FEIR, which occurred on July 31, 2012, each agency has the right to acquire an annual supply of 5,000 acre-feet of water at a pre-determined formula competitive with their incremental cost of new water. In addition, the agencies have options to acquire storage rights in the Water Project to allow them to manage their supplies to complement their other water resources.

Following CEQA certification, SMWD was the first participant to approve a Water Purchase and Sale Agreement for 5,000 acre-fee of water effectively converting its earlier option agreement. The structure of the SMWD purchase agreement calls for an annually adjusted water supply payment of up to $500/AF, including identified income streams, plus its pro rata portion of the capital recovery charge and operating and maintenance costs. The capital recovery charge is calculated by amortizing the total capital investment by the Company over a 30-year term.

Approximately 80% of the water to be conserved annually by the Project is now either under a Water Purchase and Sale Agreement or remains under option. We are currently working with other participating agencies to convert their option agreements to definitive economic agreements.

We are also in discussions with additional water providers interested in acquiring rights to the remaining available Project supplies, as well as with third parties regarding the imported storage aspect of this Project.

(3)	Environmental/Regulatory Permits

In order to properly develop and quantify the sustainability of the Water Project, and prior to initiating the formal permitting process for the Water Project, we commissioned consulting firm CH2M HILL to complete a comprehensive study of the water resources at the Project area. Following a year of analysis, CH2M HILL released its study of the aquifer system in February 2010. Utilizing new models produced by the U.S. Geological Survey in 2006 and 2008, the study estimated the total groundwater in storage in the aquifer system to be between 17 and 34 million acre-feet, a quantity on par with Lake Mead, the nation’s largest surface reservoir. The study also identified a renewable annual supply of native groundwater in the aquifer system currently being lost to evaporation. CH2M HILL’s findings, which were peer reviewed by leading groundwater experts, confirmed that the aquifer system could sustainably support the Water Project.

Further, and also prior to beginning the formal environmental permitting process, we entered into a Memorandum of Understanding with the Natural Heritage Institute (“NHI”), a leading global environmental organization committed to protecting aquatic ecosystems, to assist with our efforts to sustainably manage the development of our Cadiz/Fenner property. As part of this “Green Compact”, we will follow stringent plans for groundwater management and habitat conservation, and create a groundwater management plan for the Water Project.

Following release of CH2M Hill’s analysis, the Project began a public environmental review process according to CEQA. SMWD served as the Lead Agency for the CEQA review. San Bernardino County, the public agency participating water providers and Metropolitan Water District of Southern California (“Metropolitan”) were considered responsible agencies, because they are public agencies that will have a discretionary approval power over the Project. ESA Associates, a leading environmental consulting firm, prepared the environmental review documentation. As discussed in (2), above, we entered into environmental cost-sharing agreements with all participating water providers to create a framework for funding the costs associated with the review.

SMWD released the FEIR in July 2012 following a 17-month public review and comment process. The FEIR summarized that, with the exception of unavoidable short-term construction emissions, by implementing the measures developed in the Project’s Groundwater Management, Monitoring and Mitigation Plan (“GMMMP”), the Project will avoid significant impacts to desert resources. On July 31, 2012, the SMWD Board of Directors voted unanimously to certify the FEIR and approve the Project.

Following SMWD’s action, the San Bernardino County Board of Supervisors voted on October 1, 2012 to approve the GMMMP for the Project and adopted certain findings under CEQA, becoming the first responsible agency to take an approving action pursuant to the certified EIR. San Bernardino County served as a responsible agency in the CEQA review process as the local government entity responsible for oversight over groundwater resources in the Project area.

Metropolitan will take action as a responsible agency under CEQA prior to construction regarding the terms and conditions of the Project’s use of the CRA. Project water supplies will enter Metropolitan’s CRA in accordance with its published engineering and design standards and subject to all applicable fees and charges routinely established by Metropolitan for the conveyance of water within its service territory.

(4)	Construction and Working Capital

As part of the Water Purchase and Sale Agreement with SMWD referred to in (2), above, the SMWD Board also authorized continued Project implementation efforts with the Company, including final permitting, design and construction.

As described above, construction of Phase I of the Project would primarily consist of well field facilities at the Water Project site, a conveyance pipeline along the right-of-way described in (1), above, from the well field to the CRA, and an energy source to pump water through the conveyance pipeline between the Project well field and the CRA. Existing wells at the Cadiz Valley property currently in use for our agricultural operations will be integrated into the Water Project well field, reducing the number of wells that must be constructed prior to Project implementation.

The construction of these facilities will require capital financing, which is expected to be entirely provided with lower-cost senior debt, secured by the new facility assets. Our existing Convertible Bond provides us the flexibility to incorporate Water Project construction financing by allowing Project financing to be placed ahead of it in terms of priority.

Existing Pipeline Asset

We currently hold ownership rights to a 96-mile existing idle natural gas pipeline from the Cadiz Valley to Barstow, California, which we intend to convert for the transportation of water.

In September 2011, we entered into an option agreement with El Paso Natural Gas (“EPNG”), a subsidiary of Kinder Morgan Inc., which granted the Company rights to purchase a 220-mile idle pipeline between Bakersfield and Cadiz, California for $40 million. Initial feasibility studies indicated that, upon conversion, the 30-inch line could transport 20,000 - 30,000 acre-feet of water per year between the Water Project area and various points along the Central and Northern California water transportation network. In February 2012, we made a $1 million payment to EPNG to extend our option to purchase the 220-mile line until April 2013.

In December 2012, we entered into a new agreement with EPNG dividing the 220-mile pipeline in Barstow, California, with the Company gaining ownership rights to the 96-mile eastern segment between Barstow and the Cadiz Valley and returning to EPNG rights to the 124-mile western segment for its own use. The 96-mile eastern portion from the Cadiz Valley to Barstow was identified as the most critical segment of the line for accessing the state’s water transportation infrastructure. The Barstow area serves as a hub for water delivered from northern and central California to communities in Southern California’s High Desert.

In consideration of the new agreement, EPNG reduced the purchase price of the 96-mile eastern segment to a nominal amount of $1 (one dollar), plus previous option payments totaling $1.07 million already made by the Company. The remaining purchase price of $1 (one dollar) is payable before expiration of the option period in April 2014. In addition, if EPNG files for regulatory approval of any new use of the 124-mile western segment prior to December 2015, EPNG will make an additional payment to the Company of $10 million, payable on the date the application for regulatory approval is filed.

The 96-mile Cadiz-Barstow route creates significant opportunities for our water resource development efforts. Once converted to water use, the pipeline can be used to directly connect the Water Project area to northern and central California water sources, serving a growing need for additional locations for storage of water south of the Sacramento/San Joaquin Bay Delta region. In addition, the 96-mile pipeline creates new opportunities to deliver water, either directly or via exchange, to potential customers in the High Desert region of San Bernardino and southern Kern County, areas which do not currently have an interconnection point with the Project. When both the 96-mile line and the 43-mile pipeline to the CRA become operational, the Water Project area would create a new link between the CRA and the State Water Project, the two major water delivery systems in California providing flexible opportunities for both supply and storage.

The entire EPNG pipeline was evaluated in the Water Project’s EIR during the CEQA process at a programmatic level. Any use of the line would be conducted in conformity with the Project’s GMMMP and is subject to further CEQA evaluation (see “Water Resource Development” above).

Agricultural Development

Within the Cadiz/Fenner Property, 9,600 acres have been zoned for agriculture and the Company has developed a total of 1,920 acres of the property for agricultural operations. The infrastructure currently includes seven wells that are interconnected within a portion of this acreage, with total annual production capacity of approximately 13,000 acre-feet of water. Additionally, there are housing and kitchen facilities that support up to 300 employees. If the entire 9,600 acres were developed and irrigated, total water usage would be approximately 40,000 – 50,000 acre-feet per year depending on the crop mix. The underlying groundwater, fertile soil, and desert temperatures are well suited for a wide variety of fruits and vegetables.

Permanent crops currently include 160 acres of vineyard used to produce dried-on-the-vine raisins and 440 acres of lemon orchards. All crops are farmed using sustainable agricultural practices.

We currently derive our agricultural revenues through direct farming and sale of our products into the market or through the lease of our agricultural properties to third parties for farming. The entire organic raisin crop grown at the property is farmed by the Company and we incur all of the costs required to produce and harvest the crop. The harvested raisins are then sold in bulk to a raisin processing facility. Approximately 260 acres of lemons in production are farmed by the Company. We incur all of the costs required to produce this lemon crop. Once harvested, the lemons are shipped in bulk to an independent packing and sales facility.

The remaining 180 acres of lemons are farmed by LA Fresh Foods under a 2009 lease agreement to develop up to 500 acres of lemon orchards. We expect to receive lease income once the lemon orchards reach commercial production through a profit-sharing agreement component of the lease.

In July 2013, we also entered into a lease agreement with Limoneira Company (NASDAQ: LMR) to plant up to 1,280 acres of new lemons at the property over the next five years. In consideration for the lease arrangement, Limoneira will provide an annual base rent and will also provide a profit-sharing payment once the new lemon orchards reach commercial production.

Agricultural revenues will vary from year to year based on the number of acres in development, crop yields, and prices. We do not expect that our agricultural revenues will be material to our overall results of operations once the Water Project is fully operational. However, our agricultural operations are expected to be maintained in complement with the Water Project to provide added value to Project operations.

Additional Eastern Mojave Properties

We also own approximately 11,000 acres outside of the Cadiz/Fenner Valley area in other parts of the Mojave Desert in eastern San Bernardino County.

Our primary landholding outside of the Cadiz area is approximately 9,000 acres in the Piute Valley. This landholding is located approximately 15 miles from the resort community of Laughlin, Nevada, and about 12 miles from the Colorado River town of Needles, California. Extensive hydrological studies, including the drilling and testing of a full-scale production well, have demonstrated that this landholding is underlain by high-quality groundwater. The aquifer system underlying this property is naturally recharged by precipitation (both rain and snow) within a watershed of approximately 975 square miles and could be suitable for a water supply project, agricultural development or solar energy production. Certain of these properties are located in or adjacent to areas designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and are suitable candidates for preservation and conservation.

Additionally, we own acreage located near Danby Dry Lake, approximately 30 miles southeast of our Cadiz/Fenner Valley properties. The Danby Dry Lake property is located approximately 10 miles north of the CRA. Initial hydrological studies indicate that the area has excellent potential for a water supply project and could site certain facilities for the Water Project. Certain of the properties in this area may also be suitable for agricultural development and/or preservation and conservation.

Land Conservation Bank

As stated above, some of our properties not currently being developed are located within areas designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas. We are currently in a permitting process with the California Department of Fish and Wildlife to permit approximately 7,500 acres of these properties for inclusion in a land mitigation or conservation bank, which would provide credits that can be acquired by entities that must mitigate or offset planned development in other areas. For example, this bank could potentially service the mitigation requirements of numerous utility-scale solar development projects being considered throughout Riverside and San Bernardino Counties, including projects within the recently approved federal Riverside-East Solar Energy Zone.

Other Opportunities

Over the longer-term, we believe the population of Southern California, Nevada and Arizona will continue to grow, and that, in time, the economics of commercial and residential development or solar energy generation at our properties may become attractive. Moreover, other opportunities in business or infrastructure complementary to our current objectives could provide new opportunities for our business.

We remain committed to the sustainable use of our land and water assets, and will continue to explore all opportunities for environmentally responsible development of these assets. We cannot predict with certainty which of these various opportunities will ultimately be utilized.

Results of Operations

Three Months Ended September 30, 2013, Compared to Three Months Ended September 30, 2012

We have not received significant revenues from our water resource and real estate development activity to date. Our revenues have been limited to our agricultural operations. As a result, we have historically incurred a net loss from operations. We had revenues of $182 thousand for the three months ended September 30, 2013, and $287 thousand for the three months ended September 30, 2012. We incurred a net loss of $4.8 million in the three months ended September 30, 2013, compared with a $4.7 million net loss during the three months ended September 30, 2012.

Our primary expenses are our ongoing overhead costs associated with the development of the Water Project (i.e. general and administrative expense) and our interest expense. We will continue to incur non-cash expenses in connection with our management and director equity incentive compensation plans.

Revenues We had revenues of $182 thousand for the three months ended September 30, 2013, and $287 thousand for the three months ended September 30, 2012. The decrease in revenue in 2013 was primarily due to the smaller raisin crop in 2013 in comparison to the 2012 raisin crop.

Cost of Sales Cost of sales was $292 thousand for the three months ended September 30, 2013, and $293 thousand for the three months ended September 30, 2012.

General and Administrative Expenses General and administrative expenses totaled $2.9 million during the three months ended September 30, 2013, and $3.0 million during the three months ended September 30, 2012. Non-cash compensation costs for stock and option awards are included in General and Administrative Expenses.

General and Administrative Expenses, exclusive of stock-based compensation costs, totaled $2.9 million and $2.9 million for the three months ended September 30, 2013 and 2012, respectively.

Compensation costs from stock and option awards for the three months ended September 30, 2013 totaled $29 thousand, compared with $82 thousand for the three months ended September 30, 2012. The expense reflects the vesting schedules of the stock and option awards under the 2009 Equity Incentive Plan.

Depreciation Depreciation expense totaled $63 thousand for the three months ended September 30, 2013, and $97 thousand for the three months ended September 30, 2012.

Interest Expense, net Net interest expense for each of the three months ended June 30, 2013 and 2012 was $1.7 million. The following table summarizes the components of net interest expense for the two periods (in thousands):

	Three Months Ended
	September 30,
	2013			2012

Interest on outstanding debt		$	1,633		$	895
Amortization of financing costs			56			23
Amortization of debt discount			-			748
Interest income			-			(1	)

		$	1,689		$	1,665

See Note 2 to the Consolidated Financial Statements – “Long-Term Debt”.

Income Taxes Income tax expense for the three months ended September 30, 2013 was $1 thousand and $3 thousand for the three months ended September 30, 2012. See Note 5 to the Consolidated Financial Statements - “Income Taxes”.

Nine Months Ended September 30, 2013, Compared to Nine Months Ended September 30, 2012

We had revenues of $190 thousand for the nine months ended September 30, 2013, and $324 thousand for the nine months ended September 30, 2012. We incurred a net loss of $16.7 million in the nine months ended September 30, 2013, compared with a $13.8 million net loss during the nine months ended September 30, 2012. The higher 2013 loss was primarily due to litigation costs, higher stock-based non-cash compensation costs and the loss on extinguishment of debt and debt refinancing.

Revenues We had revenues of $190 thousand for the nine months ended September 30, 2013, and $324 thousand for the nine months ended September 30, 2012. The decrease in revenue in 2013 was primarily due to a smaller raisin crop in 2013 in comparison to the 2012 raisin crop.

Cost of Sales Cost of sales was $292 thousand during the nine months ended September 30, 2013, and $295 thousand during the nine months ended September 30, 2012.

General and Administrative Expenses General and administrative expenses during the nine months ended September 30, 2013 totaled $9.6 million compared to $8.7 million for the nine months ended September 30, 2012. Non-cash compensation costs for stock and option awards are included in General and Administrative Expenses.

Compensation costs from stock and option awards for the nine months ended September 30, 2013, totaled $482 thousand compared with $314 thousand for the nine months ended September 30, 2012. The expense reflects the vesting schedules of the stock and option awards under the 2009 equity incentive plan. The higher 2013 expense was primarily due to higher stock non-cash compensation costs related to shares awarded to the Brownstein law firm for certain legal and advisory services to the Company (see Note 3 to the Consolidated Financial Statements – “Common Stock”), partially offset by a decrease in stock based non-cash compensation costs related to stock and options issued in 2011 under the 2009 Equity Incentive Plan.

Other general and administrative expenses, exclusive of stock-based compensation costs, totaled $9.1 million in the nine months ended September 30, 2013, compared with $8.4 million for the nine months ended September 30, 2012. The increase in general and administrative expenses in 2013 was primarily due to litigation costs related to the Water Project.

Depreciation Depreciation expense totaled $191 thousand for the nine months ended September 30, 2013, and $285 thousand for the nine months ended September 30, 2012.

Interest Expense, net Net interest expense totaled $5.7 million during the nine months ended September 30, 2013, compared to $4.8 million during the same period in 2012. The following table summarizes the components of net interest expense for the two periods (in thousands):

	Nine Months Ended
	September 30,
	2013			2012

Interest on outstanding debt		$	4,297	$	2,628
Amortization of financing costs			169		67
Amortization of debt discount			1,249		2,129
Interest income			-		(3	)

		$	5,715	$	4,821

The interest on outstanding debt increased from $2.6 million to $4.3 million due to the increase in interest rate on a larger credit facility associated with the debt refinancing. See Note 2 to the Consolidated Financial Statements – “Long-Term Debt”.

Income Taxes Income tax expense was $5 thousand for the nine months ended September 30, 2013, and $8 thousand for the nine months ended September 30, 2012. See Note 5 to the Consolidated Financial Statements – “Income Taxes”.

Liquidity and Capital Resources

Current Financing Arrangements

As we have not received significant revenues from our development 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, private equity placements and the exercise of outstanding stock options and warrants. We have also worked with our secured lenders to structure our debt in a way which allows us to continue development of the Water Project and minimize dilution of the ownership interests of common stockholders.

On March 5, 2013, we refinanced our term debt. See Note 2 to the Consolidated Financial Statements – “Long-Term Debt”. The major components of the refinancing included:

I.	A $30 million senior term loan secured by the underlying assets of the Company (the “Senior Secured Debt”) that accrues interest at 8% per annum and requires no principal or interest payments before maturity in March 2016; and

II.	A $53.5 million convertible bond (the “Convertible Bond”) that accrues interest at 7% per annum with no principal or interest payments required before maturity in March 2018; and

III.	$17.5 million in new working capital provided as part of the Convertible Bond issuance.

We believe that by breaking our debt into two components, we now have the flexibility to incorporate project financing for the Water Project, as necessary, into our current debt structure. While the new $30 million Senior Secured Debt would be required to be repaid by any necessary project financing, the $53.5 million Convertible Bond has been designed to allow project financing to be placed ahead of it in terms of priority. The $17.5 million of new working capital provides us with the resources to continue to move through our pre-construction phase, including resolution of outstanding administrative CEQA litigation and the finalization of water supply purchase agreements with all Water Project participants.

On October 30, 2013, we entered into an agreement (“Credit Agreement”) with our new majority senior lender, MSD Credit Opportunity Master Fund, L.P. (“MSD Credit”), to increase our existing $30 million senior secured mortgage loan by $10 million to fund additional working capital. MSD Credit previously acquired the majority interest of the $30 million portion of the debt in a private transaction. The new $10 million tranche accrues interest at 8% and requires no principal or interest payments prior to maturity on June 30, 2017. The new $10 million and the original $30 million are both secured by the underlying assets of the Company, including all landholdings and infrastructure. The Credit Agreement also now provides that in the case of certain asset sales unrelated to the Water Project, the Company would retain for working capital purposes up to 50% of the first $10 million of sales, with the remainder requiring mandatory prepayment of the Senior Secured Debt. In addition, as part of this transaction, we issued 700,000 shares of Cadiz Inc. common stock to MSD Credit subject to certain restrictions on resale.

Both the Senior Secured Debt and the Convertible Bond contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit our ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person. However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on our ability to issue additional common stock to fund future working capital needs. The debt covenants associated with the new loans were negotiated by the parties with a view towards our operating and financial condition as it existed at the time the agreements were executed. At September 30, 2013, we were in compliance with our debt covenants.

In connection with the October 2012 additional debt facility (See Note 2 to the Consolidated Financial Statements – “Long-Term Debt”), we issued warrants to the lenders to purchase shares of common stock. The value of the warrants totaled approximately $533 thousand and was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital.

In 2011, we raised a total of $15.1 million in working capital through three equity issuances. On July 8, 2011, we sold 363,636 shares of Common Stock at a price of $11 per share for total proceeds of $4 million. On November 30, 2011, we raised $6 million in a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, we issued (1) Common Stock purchase warrant entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share. On December 14, 2011, we sold 570,000 shares of Common Stock at a price of $9 per share for total proceeds of $5.1 million.

As we continue to actively pursue our business strategy, additional financing may continue to be required. See “Outlook”, below. The covenants in the term debt do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any equity financing. We do not expect the loan covenants to materially limit our ability to finance our water development activities.

At September 30, 2013, we had no outstanding credit facilities other than the Senior Secured Debt and the Convertible Bond described above.

Cash Used for Operating Activities . Cash used for operating activities totaled $12.6 million and $8.2 million for the nine months ended September 30, 2013 and 2012, respectively. The cash was primarily used to fund: (i) general and administrative expenses related to our water project development efforts; (ii) litigation costs; and (iii) a $3.3 million cash payment in March 2013 related to the lease agreement with the Arizona & California Railroad Company to use a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline which is reflected in the increase in other assets in the consolidated statement of cash flows.

Cash Used for Investing Activities . Cash used for investing activities during the nine months ended September 30, 2013 was $167 thousand compared with $1.9 million during the same period in 2012. The 2012 period included additional investments in environmental work related to the Water Project.

Cash Provided by Financing Activities . Cash provided by financing activities for the nine months ended September 30, 2013 was $16.3 million compared with $49 thousand during the same period in 2012. The 2013 period included $17.5 million of proceeds as part of the issuance of long-term debt, offset by $1.2 million in debt issuance costs related to the debt refinancing.

Outlook

Short-Term Outlook. The additional $10 million working capital facility which closed on October 30, 2013, together with our existing cash resources, provide us with sufficient funds to meet our expected working capital needs until mid-2015. Should we require additional working capital to fund operations, we expect to continue our historical practice of structuring our financing arrangements to match the anticipated needs of our development activities. See “Long-Term Outlook”. No assurances can be given, however, as to the availability or terms of any new financing.

Long-Term Outlook . In the longer term, we may need to raise additional capital to finance working capital needs, capital expenditures and any payments due under our Senior Secured Debt or our Convertible Bond at maturity (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 resources and other developments. Future capital expenditures will depend primarily on the progress of the Water Project.

We will evaluate 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 dilutive effect of any such placements upon our existing stockholders. Limitations on our liquidity and ability to raise capital may adversely affect us. Sufficient liquidity is critical to meet our resource development activities. Although we currently expect our sources of capital to be sufficient to meet our near-term liquidity needs, there can be no assurance that our liquidity requirements will continue to be satisfied. If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately its viability as a company.

Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements – “Description of Business and Summary of Significant Accounting Policies”.

Certain Known Contractual Obligations

	Payments Due by Period
Contractual Obligations	Total			1 year or less			2-3 years			4-5 years			After 5 years
(in thousands)
Long-term debt obligations		$	87,101		$	11		$	31,435		$	55,655		$	-
Interest Expense			27,137			-			6,767			20,370			-
Operating leases			3,113			493			820			600			1,200
		$	117,351		$	504		$	39,022		$	76,625		$	1,200

* The above table does not reflect unrecognized tax benefits of $2.8 million, the timing of which is uncertain. Refer to Note 7 to our Annual Report on Form 10-K for the year ended December 31, 2012.

Long-term debt included in the table above primarily reflects the Senior Secured Debt and the Convertible Bond, which is described above in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operation; Liquidity and Capital Resources”. Operating leases include the lease agreement with the Arizona & California Railroad Company to use a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline, as described in Item 2, “Water Resource Development”, and the lease of the Company’s executive offices.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

As of September 30, 2013, all of the Company's indebtedness bore interest at fixed rates; therefore, the Company is not exposed to market risk from changes in interest rates on long-term debt obligations.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

The Company established disclosure controls and procedures to ensure that material information related to the Company, including its consolidated entities, is accumulated and communicated to senior management, including the Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”) and to its Board of Directors. Based on their evaluation as of September 30, 2013, the Company's Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and such information is accumulated and communicated to management, including the principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Controls Over Financial Reporting

In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in the Company's internal controls over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

CEQA Claims Challenging Water Project Approvals

As noted in Item 3. Legal Proceedings in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, third parties have the ability in California to file litigation challenging the approval of a project. We are currently named as a real party in interest in six (6) lawsuits related to the Water Project approvals granted last year by the Santa Margarita Water District (“SMWD”) and the County of San Bernardino (“County”) in accordance with the California Environmental Quality Act (“CEQA”). Three (3) additional cases filed last year have been dismissed and are no longer pending, including one case dismissed in October 2013.

The six remaining lawsuits have been brought by two (2) plaintiffs and challenge three (3) separate Project approvals as follows:

(1)	MOU Approval – two cases filed by Tetra Technologies, Inc. (“Tetra”) (NYSE: TTI) challenging the May 2012 approvals of the Memorandum of Understanding between Cadiz, SMWD and the County related to the Project’s Groundwater Management, Monitoring & Mitigation Plan (GMMMP).

(2)	EIR Approval – two cases filed by Tetra and Center for Biological Diversity, et al (“CBD”) challenging the adequacy of the EIR certified by SMWD on July 31, 2012.

(3)	GMMMP Approval – two cases filed by Tetra and CBD challenging the approval of the GMMMP by the County Board of Supervisors on October 1, 2012.

All six remaining lawsuits have been coordinated in Orange County Superior Court and are before one judge. A trial date for the six cases has been scheduled to begin on December 3, 2013. The cases seek various forms of relief, but are primarily focused on causing a reconsideration of the environmental documents and limitation of the Project approvals.

We cannot predict with certainty the outcome of any of the proceedings.

Other Proceedings

There are no other material legal proceedings pending to which we are a party or of which any of our property is the subject.

ITEM 1A. Risk Factors

Not applicable.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

ITEM 6. Exhibits

The following exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

10.1

Track Utilization Agreement dated September 16, 2013, between Arizona & California Railroad Company and Cadiz Real Estate LLC

31.1

Certification of Scott S. Slater, Chief Executive Officer of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Timothy J. Shaheen, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Scott S. Slater, Chief Executive Officer of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Timothy J. Shaheen, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Cadiz Inc.

By:	/s/ Scott S. Slater	November 8, 2013
	Scott S. Slater	Date
	Chief Executive Officer and President
	(Principal Executive Officer)

By:	/s/ Timothy J. Shaheen	November 8, 2013
	Timothy J. Shaheen	Date
	Chief Financial Officer and Secretary
	(Principal Financial Officer)

TRACK UTILIZATION AGREEMENT

This Track Utilization Agreement (this "Agreement") is made and entered into as of September 16, 2013 (the “Effective Date”), by and between Arizona & California Railroad Company , a Delaware corporation ("ARZC"), with its principal office located at 1301 California Ave., Parker, AZ 85344, and Cadiz Real Estate, LLC , a Delaware limited liability company ("Cadiz"), with its principal offices located at 550 South Hope Street, Suite 2850, Los Angeles, California 90071 (collectively "Parties").

WHEREAS, ARZC operates a railroad line between points near Cadiz and Freda, San Bernardino County, California (Mile Posts 144.0 and 189.0, respectively), as described on Exhibit “A” which is attached hereto and incorporated herein by reference (the “Property”); and

WHEREAS, pursuant to a certain Longitudinal Lease Agreement (the “Lease Agreement”) dated September 17, 2008, Cadiz leased from ARZC portions of the Property (defined in the Lease Agreement, as amended, as the “Premises”) and certain appurtenances related to the Premises (defined in the Lease Agreement, as amended, as the “Facilities”); and

WHEREAS, in connection with the use of the Premises and the operation of the Facilities, Cadiz leased from ARZC, and ARZC granted to Cadiz, certain non-exclusive interests in the surface of the Property (defined in the Lease Agreement, as amended, as the “Access Areas”) in consideration for compensation and Cadiz’s agreement to provide water and other benefits to ARZC; and

WHEREAS, consistent with early direction by ARZC and Paragraph 17 of the Lease Agreement whereby Cadiz is to provide ARZC water for railroad purposes, the Lease was previously amended by the Parties in December 2011 (the “Lease Amendment”) to more specifically clarify (i) the Parties’ agreement that ARZC will be entitled to certain identified uses of the Facilities and improvements constructed within the Premises, and (ii) ARZC’s intent to permit Cadiz to operate a steam-powered excursion train using passenger terminals located on the Property, provided that certain assurances could be provided to ARZC and subject to (1) Cadiz conducting due diligence to insure that the Facilities and improvements are suitable for Cadiz’s proposed use; (2) Cadiz applying for approvals, if any, for its intended location of the related facilities wholly on Cadiz Property; and (3) environmental review, if any, that may be required for this purpose; and

WHEREAS, the Santa Margarita Water District (“SMWD”) caused the preparation of an Environmental Impact Report (“EIR”) and the completion of environmental review for the Cadiz Water Conservation, Recovery and Storage Project (“Water Project”) that would use the Property to convey water from Cadiz Property to the Colorado River Aqueduct (“CRA”) and to ARZC specifically for railroad purposes, including but not limited to fire suppression, future transloading and the operation of a steam powered locomotive; and

WHEREAS, SMWD determined that there were no significant environmental impacts attributable to the ongoing operation of the Water Project and the conveyance of water to the CRA and to ARZC; and

WHEREAS, Cadiz intends to evaluate the feasibility of developing additional facilities including a cultural and historical center and will conduct due diligence during this period, including but not limited to reviewing site plans, conducting field studies, and establishing and planning designs for the location of a cultural and historical center wholly on Cadiz’s Fenner Valley property. If as a result of due diligence, developing the facilities will be feasible, Cadiz intends to apply for any required approvals to establish a cultural and historical center at Cadiz’s Fenner Valley property to promote the historical significance of the ARZC rail route and the influence of the railroad on San Bernardino County and the development of the west; and

WHEREAS, consistent with its objectives, Cadiz intends to evaluate the feasibility of the operation of the steam train and related facilities and conducting programs to educate the public and will conduct due diligence during this period. If as a result of due diligence, developing the facilities will be feasible, Cadiz intends to operate year-round facilities and programs to educate the public on the role of steam railroads in the growth of the United States and the development of the mid-Mojave region, which facilities and programs will feature a steam powered excursion train operating under the name “Cadiz Southeastern Railway” (the “Cadiz Railway” or the “Project”);

WHEREAS, ARZC believes that Cadiz’s operation of the Cadiz Railway will be a historically significant attraction and legacy educational benefit that will contribute to the local economies and that will provide patrons with a means to safely experience the desert climate without causing any significant environmental impacts;

WHEREAS, ARZC is the legal owner of the railroad track known as “Cadiz-Parker Mainline” situated on the Property (the “Track”);

WHEREAS, the Parties desire to set forth the principal terms of an agreement with respect to the due diligence, design, construction, maintenance and operation of certain facilities, and financial terms whereby Cadiz would operate the Cadiz Railway on the Track and ARZC will provide to Cadiz certain services and facilities described in this Agreement in furtherance of the Project and to authorize required preparatory investigation prior to applying for required permits for any improvements that will occur wholly on Cadiz’s Fenner Valley property, if any, along with any environmental review if required once operating scenarios have been determined and if and only if the Parties are in mutual agreement as to all material terms;

NOW, THEREFORE, in consideration of the foregoing Recitals, which Recitals are incorporated herein by this reference, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and for the mutual covenants contained herein, the parties hereby agree as follows:

A. "Discretionary Permits" means any and all federal, state and local governmental permits and any governmental or regulatory approvals, other than those permits and approvals that are non-discretionary or ministerial in nature, that may be required or desirable, as determined by the Parties in their reasonable judgment, (i) to develop, implement and/or utilize the Project, (ii) to establish the Facilities, (iii) to effect any provision of or action contemplated under this Agreement, and (iv) to obtain any CEQA documentation, review and/or approvals (including, the final adjudication of any legal challenges thereto) if any is required for the improvements that will occur wholly on Cadiz’s Fenner Valley Property.

1. The Parties’ hereby confirm that the Lease Agreement and the Lease Amendment shall remain in full force and effect and are not amended or otherwise affected by this Agreement except to the extent expressly stated in this Agreement by reference to the Lease Agreement or Lease Amendment.

2. Cadiz hereby agrees as follows:

(a) To evaluate the feasibility of developing a Cadiz Railway and associated facilities and a cultural and historical center by, among other things, conducting due diligence review during the investigatory stages set forth in Paragraph 5 of this Agreement. Due diligence includes, but is not limited to, evaluating the existing facilities and proposed sites for related facilities, conducting testing and monitoring of the steam train, inspecting the Track, reviewing site plans, conducting field studies, and establishing and planning designs. This period will also be used to assess other potential environmental, title, physical and economic aspects of the Project.

(b) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, Cadiz shall develop and maintain the Infrastructure to the extent required to operate, maintain and store the Cadiz Railway and to operate the Project (other than facilities owned by ARZC which the Parties mutually agree are not a part of the Project) at its sole expense. For purposes of the preceding sentence, (i) "Infrastructure" means the Tracks associated with the Project, bridges, roadbed and right-of-way, and station facilities owned, leased or operated by Cadiz, including the signals and other structures and mechanisms that are track-related or are used for the movement or control of the Cadiz Railway (but not including any rolling stock, maintenance, servicing or fueling facilities); and (ii) Cadiz shall only be responsible for the costs incurred to develop and maintain the Infrastructure that would not have been incurred if the Cadiz Railway and the Project did not operate on the Tracks. With the prior written consent of ARZC, Cadiz may make improvements to the Infrastructure as needed to increase the Track speed and to otherwise make the Track suitable for the operation of the Project.

(b) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, Cadiz shall provide safe operating locomotives and passenger cars, qualified train operating crews, ticketing and reservation services, interpretive services, adequate personnel for excursion passenger control on and off the train and during passenger boarding and de-boarding, and to maintain and fuel the locomotives and cars solely associated with the Project. All equipment operated by Cadiz will meet all FRA, NPS, ADA and other applicable laws and regulations concerning operating and safety standards. Equipment to be used in the operation of the Project will include one or two steam locomotives and a maximum of twelve passenger cars (unless additional cars are authorized by mutual agreement of the Parties). All locomotives will be equipped with radio communications with capability of operating on ARZC frequencies. Cadiz will provide to Cadiz crew members radios which are capable of operating on ARZC frequencies. All ARZC and Cadiz on-rail communications will be conducted in strict accordance with applicable FRA standards.

(c) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, Cadiz shall provide the Infrastructure improvements as necessary to load and unload passengers at Parker, Rice, Cadiz, and any other locations at which passenger ingress and egress will occur. Any additional facilities required to operate the Project will be provided or constructed by Cadiz as necessary at mutually agreeable locations.

(d) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, and in the event any federal, state or local agency with jurisdiction over ARZC, the activities or services related to the Cadiz Railway, the Tracks or the Infrastructure passes, issues or imposes any statute, regulation, ordinance or order or ruling that (i) is/are enforceable against Cadiz or (ii) enforceable against ARZC and (iii) has a financial impact on any obligation of ARZC hereunder, then Cadiz shall be responsible for the expenses incurred by ARZC in its compliance with such statute, regulation, ordinance, order or ruling that are due to the presence of the Cadiz Railway. Cadiz and ARZC agree to work cooperatively to determine whether any exemption, exception or defense available to Cadiz applies and, if so, to assert the exemption, exception or defense in a timely manner.

(e) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, Cadiz shall provide all staffing required to carry out the objectives of this Agreement and to operate the Project, including qualified steam locomotive engineers and firemen, qualified train personnel and conductors, and sufficient staff for all public contact, ticketing, reservation, orientation, interpretation, and public safety services. All Cadiz Hour of Service employees and volunteers will be GCOR-qualified. ARZC must approve of the trainer and training methods. Cadiz will provide a supervisor of Locomotive Engineers and Conductors who can qualify Cadiz crews. The designates SLE/STC will be acceptable to ARZC and will work jointly with ARZC to ensure all crews are properly trained and qualified.

(f) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, Cadiz shall assume responsibility for the expense related to all construction, maintenance, repair and inspections of the Track used in connection with the Project, in accordance with 49 CFR, Parts 213.1 through 213.241. Such expense includes equipment re-railing, track repair and cleanup of any associated damage involving Cadiz equipment and operations. Cadiz will agree to reimburse ARZC Cadiz’s proportionate share, based on the relative Track usage by each of the Parties during the immediately preceding calendar year, for the operation of a sperry, geometry or other like equipment to inspect the condition of the Track at mutually agreeable frequencies, but not less than three times a year for the sperry car and once a year for the geometry car. If an inspection discloses that any construction, maintenance or repair of the Track is required, the Parties will agree on the allocation of cost therefor, and if the Parties cannot agree after good faith efforts to do so, the cost therefor will be allocated by the personnel conducting the inspection based on such personnel’s determination of responsibility for the damage or other condition requiring the construction, maintenance or repair, and if such personnel fails to do so, the cost therefor shall be allocated between the Parties based upon their relative Track usage during the five-year period ending on the last day of the most recently ended calendar year. For purposes of this paragraph, Track usage will be based upon ton or car miles travelled, as mutually agreed to by the Parties.

(g) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, Cadiz shall inspect the Track to meet the FRA standards for the operation of the Cadiz Railway at the highest speeds possible for the class of track inspected. Until bridge ratings are verified, the loading produced by steam locomotive axle weight spacing and speed shall not exceed 286 loading at full diesel impact plus 20%.

(h) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, Cadiz shall provide water for the operation of the Steam Engines and for fire suppression at agreed upon locations along the Track at its sole expense.

(i) That if the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, no cars containing hazardous waste or hazardous materials may be stored by Cadiz on the Property. Fuel and lubricants, both new and used, required for the operation of the steam train shall not be considered hazardous for purposes of this paragraph.

In addition to the covenants and agreements made herein by Cadiz, and as additional consideration for the services and other resources that ARZC has agreed to provide if the Project proceeds, Cadiz agrees to pay to ARZC, not less often than annually, an amount equal to the greater of (A) an amount equal to one and one-half percent (1.5%) of the annual gross revenues (the “Percentage Payment”) attributable to the conveyance of water through the pipeline installed by Cadiz on the Property pursuant to the Lease Agreement, and (B) an amount equal to Two Hundred Fifty Dollars ($250.00) (the “Excursion Payment”) for each roundtrip train excursion event occurring during the year. However, the Percentage Payment or the Excursion Payment provided herein for any calendar year shall not exceed Five Hundred Thousand Dollars ($500,000) in 2015 dollars, and adjusted annually by the consumers price index (“CPI”) for San Bernardino County. To illustrate the application of the preceding sentence, if gross revenues attributable to the conveyance of water is $40,000,000 and the Cadiz Railway runs 78 roundtrip train excursions during a year, the additional payment would be $600,000, but reduced to $500,000 on the basis of the “not to exceed” limitation. The Percentage Payment and the Excursion Payment shall each be calculated on a calendar year basis within thirty (30) days after December 31 each year and the additional payment due pursuant to this Paragraph 5 shall be paid before the end of February. The calculation of any additional payment due after this Agreement terminates shall be prorated for such final year.

3. If the Project proceeds based on the results of the due diligence and after the acquisition of all Discretionary Permits, ARZC hereby agrees as follows:

(a) ARZC will permit access to the Track, the Cadiz wye, the Rice yard and Rice wye, and a mutually agreeable segregated area within the Parker yard right-of-way for Cadiz personnel and the members of the public as is necessary for the operation of the Project. Cadiz will be allowed to operate the Cadiz Railway on a daily or weekly basis, as mutually agreed.

(b) ARZC will allow Cadiz reasonable access to ARZC’s Infrastructure as needed by Cadiz in connection with the Project, including the completion of any due diligence.

(c) ARZC will advise Cadiz of its intention to alter Track conditions, operations or structures as they exist at the execution of this Agreement. ARZC will notify Cadiz of any track work that will adversely affect the operation of the Cadiz Railway, allowing a reasonable amount of time for review and comment. ARZC will make all reasonable attempts to schedule construction and maintenance activities in such a way as to not interfere with or interrupt rail operations.

(d) ARZC will be responsible for the dispatching obligations relating to control and movement of the trains over the Track. Cadiz will pay for all dispatch charges related to the Project. ARZC will comply with all applicable governmental rules and regulations.

4. The Parties’ respective commitments and obligations provided above are subject to the completion of the investigatory stage set forth below, the acquisition of all Discretionary Permits applicable to the operation of the Cadiz Railway and related facilities, and compliance with all laws, including completion of environmental review. To the extent required by law, the anticipated development on Cadiz’s Fenner Valley property may be subject to environmental review, if any, in accordance with the California Environmental Quality Act (CEQA) and any applicable law. The Parties acknowledge that any modifications to that portion of the Cadiz Railway and related facilities existing wholly on Cadiz’s Fenner Valley property and resulting from compliance with CEQA may necessitate amendments to this Agreement in a mutually acceptable manner. In no event shall the Parties be required to implement any part of the Project prior to the acquisition of all permits and compliance with all laws if such compliance is required. Each of the Parties reserves the discretion to approve or disapprove additional or different terms, provided both Parties agree to use their best good faith efforts to change the terms of this Agreement to take into account changed circumstances, changes in operations, and changes in laws or regulations, with the objective of maintaining and continuing the operation of the Cadiz Railway.

5. The Parties hereby agree that prior to commencing operation of the Cadiz Railway, Cadiz, as the Cadiz Railway operator, needs to take steps to determine what activities must be taken to establish, operate and market the Cadiz Railway and its supporting Infrastructure on the Property and that such steps will require multiple visits to the Property by Cadiz’s employees, agents, representatives and contractors. Any entry onto the Property by Cadiz, its employees, agents, representatives or contractors that require inspection or work near or adjacent to any Track shall require not less than 72 hours prior notice to ARZC’s General Manager (or other designee if requested by ARZC) in order to ensure ARZC is aware of Cadiz’s activities on the Property. Any “flagging” services determined at ARZC’s sole discretion to be necessary by ARZC shall be at Cadiz’s sole expense. ARZC will allow Cadiz to train and provide its own flagmen for protection against rail equipment and will allow Cadiz to use the ARZC Roadway Worker Protection program as a basis for any training of employees and contractors that would be subject to the provisions of that plan. ARZC will, as needed to protect the Infrastructure, provide a representative to ensure all flagmen and contractors are properly protecting the Infrastructure. Safety of personnel, property, rail operations and the public is of paramount importance in the entry onto the Property pursuant to this Agreement. As reinforcement and in furtherance of overall safety measures to be observed by Cadiz, its employees, agents, representatives or contractors (and not by way of limitation), the following special safety rules shall be followed:

(a) Cadiz shall keep the Property free from safety and health hazards and ensure that its employees, agents, representatives or contractors are competent and adequately trained in all safety and health aspects before entering the Property. Cadiz shall have proper first aid supplies available so that prompt first aid services can be provided to any person that may be injured. Cadiz shall promptly notify ARZC of any U.S. Occupational Safety and Health Administration reportable injuries occurring to any person that may arise while on the Property.

(b) The employees, agents, representatives or contractors of Cadiz shall be suitably dressed to perform their duties safely and in a manner that will not interfere with their vision, hearing or free use of their hands or feet. Only waist length shirts with sleeves and trousers that cover the entire leg are to be worn. If flare-legged trousers are worn, the trouser bottoms must be tied to prevent catching. The employees should wear sturdy and protective work boots and at least the following protective equipment:

(i) Protective headgear that meets American National Standard-Z89.1-latest revision. It is suggested that all hardhats be affixed with Cadiz’s or its agent’s, representative’s or contractor’s company logo or name;

(ii) Eye protection that meets American National Standard for occupational and educational eye and face protection, Z87.1-latest revision; and

(iii) Hearing protection which affords enough attenuation to give protection from noise levels that will be occurring on the Property.

(c) All motorized construction equipment provided or leased by Cadiz shall be equipped with audible back-up warning devices. If in the opinion of ARZC’s representative, Cadiz or any of its employees’, agents’, representatives’ or contractors’ construction equipment is unsafe for use on the Property, Cadiz, at the request of ARZC’s representative, shall remove such construction equipment from the Property.

(d) Cadiz agrees to perform its inspection and other activities in accordance with the GWI Code of Ethics and Conduct, and the applicable Contractor Safety Rules, each located online at http://www.gwrr.com.

(e) Crossing of any Track by any equipment must be done at approved locations and must be over full depth timbers, rubber, etc. Any equipment with steel wheels, lugs or tracks must not cross steel rails without aid of rubber tires or other approved protection.

(f) Cadiz and ARZC agree that time is of the essence for Cadiz to complete the aforementioned activities in order for Cadiz to commence operation of the Cadiz Railway, as further set forth in this Agreement.

6. (a) For the activities requiring Cadiz’s agents and business invitees entry onto the Property during the term of this Agreement, Cadiz releases ARZC along with its insurers, parents, affiliates and subsidiaries, and their respective officers, directors, employees, invitees, agents and contractors (each, an “ARZC Indemnitee”), and waives any right to ask for, or demand damages, costs or other expenses from such persons, if such damages, costs or expenses would not have occurred but for the activities or presence of Cadiz, its employees, agents, representatives or contractors on the Property, and regardless of whether caused or attributable to the fault, failure, negligence, strict liability, acts or omissions of any ARZC Indemnitee and, Cadiz shall also defend, indemnify and hold harmless each ARZC Indemnitee, irrespective of any negligence or fault of any ARZC Indemnitee, excepting only in the event of gross negligence or willful misconduct on the part of such ARZC Indemnitee, from any and all Losses for injuries to or death of, or property damage to any person on or off the Property and arising, whether caused directly or indirectly, from such presence or activities.

(b) Cadiz acknowledges that the freight operations or other operations of ARZC on the Property, and being present on the Track or Property, and near or aboard excursion trains involves risk, and Cadiz, as part of the consideration for this Agreement, will release ARZC along with its insurers, parents, affiliates and subsidiaries, and their respective officers, directors, employees, invitees, agents and contractors, and will waive any right to ask for, or demand damages, costs or other expenses from such persons, if such damages, costs or expenses would not have occurred but for the operation or presence of the Cadiz Railway, and regardless of whether caused or attributable to the fault, failure, negligence, strict liability, acts or omissions of any ARZC Indemnitee and/or otherwise. Therefore, during the term of this Agreement, Cadiz also shall covenant and agree to protect, defend, indemnify and hold harmless each ARZC Indemnitee, from and against any and all damages, costs or expenses resulting from any and all Losses, that would not have arisen but for the operation or presence of the excursion trains, including but not limited to costs and expenses arising from: (i) any failure by Cadiz to perform any of the agreements, terms, covenants or conditions contained in this Agreement; (ii) any bodily injury, death or property loss or damage to Cadiz’s employees, invitees (including but not limited to ticketed passengers, persons waiting to buy tickets or persons on the Property for the purpose of observation, but expressly excluding trespassers and any other unauthorized visitors) or agents; (iii) any bodily injury, death or property loss to passengers who enter or are preparing to enter Cadiz’s or ARZC’s facilities, property, tracks or trains or any bodily injury, death or property loss or damage sustained by Cadiz; (iv) any bodily injury, death or property loss to third parties adjacent to the Property caused by Cadiz, its employees, invitees or agents; or (v) any bodily injury, death or property loss to any ARZC Indemnitee; in each case whether such damages, costs or expenses be suffered or sustained by any ARZC Indemnitee directly, or suffered or sustained by other persons or corporations, including but not limited to Cadiz, its employees, invitees, agents, or be suffered by passengers who may seek to hold either any ARZC Indemnitee liable therefore; and in each case regardless of whether caused or attributable to the fault, failure, negligence, strict liability, acts or omissions of any ARZC Indemnitee.

(c) The party seeking indemnification hereunder shall promptly notify the indemnifying party in writing of any Loss and cooperate with the indemnifying party at the indemnifying party's sole cost and expense. The indemnifying party shall immediately take control of the defense and investigation of such Loss and shall employ counsel of its choice to handle and defend the same, at the indemnifying party's sole cost and expense. The indemnifying party shall not settle any Loss in a manner that adversely affects the rights of the indemnified party without the indemnified party's prior written consent, which shall not be unreasonably withheld or delayed. The indemnified party's failure to perform any obligations under this Paragraph 6 shall not relieve the indemnifying party of its obligations under this Paragraph 6 except to the extent that the indemnifying party can demonstrate that it has been materially prejudiced as a result of such failure. The indemnified party may participate in and observe the proceedings at its own cost and expense.

(d) For purposes of this Paragraph 6, the term “Losses” shall mean all actions, losses, damages, detriments, fines, penalties, suits, claims, demands, judgments, settlements, expenses, costs and charges of any kind or nature, including reasonable counsel, investigator and expert fees.

(e) For the avoidance of any doubt, the language in subparagraph (b) above is not intended to be exclusive concerning the assumption of risk by Cadiz.

7. The following insurance coverages shall be obtained by Cadiz as indicated:

(a) To secure and maintain in effect continuously during the term of this Agreement (i) Comprehensive General Liability insurance against claims occasioned by actions or omissions of Cadiz, its agents, representatives or contractors and their respective employees, in carrying out the activities and operations authorized hereunder and such insurance shall be in an amount commensurate with the degree of risk and the scope and size of such activities authorized herein, but in any event not less than $5,000,000 per incident, and includes a waiver of subrogation in favor of the entities listed in subparagraph (f)(iii) below, (ii) Workmen's Compensation Insurance with minimum limits of not less than $1,000,000 Bodily Injury by Accident, Each Accident; $1,000,000 Bodily Injury by Disease, Policy Limit; $1,000,000 Bodily Injury by Disease, Each Employee, and includes a waiver of subrogation in favor of the entities listed in subparagraph (f)(iii) below, (iii) Commercial Automobile Insurance for all owned, non-owned and hired vehicles with a combined single limit of not less than $1,000,000 for Bodily Injury and Property Damage Liability and such policy shall be endorsed to provide waiver of subrogation in favor of the entities listed in subparagraph (f)(iii) below, and (iv) Railroad Protective Public Liability and Property Damage Liability Insurance with limits of $2,000,000 per occurrence, $6,000,000 annual aggregate.

(b) To secure and maintain in effect continuously (taking into account renewals), during the term of this Agreement, a policy of Railroad Protective Liability (“RPL”) Insurance in the amount of at least Fifty Million Dollars ($50,000,000.00), single-limit bodily injury and/or property damage combined for any and all injuries or death arising out of all persons in any one occurrence, and/or damages to or destruction of private property, including the loss of use thereof, per occurrence for bodily injury and/or property damage combined. Such RPL policy must include third party property damage coverage for damage to the Property and anything thereon. Such RPL policy may not include a self-insured retention, or deductible, of more than Fifty Thousand Dollars ($50,000). An Umbrella policy may be utilized to satisfy the required limits of liability under this paragraph. In addition, Cadiz shall secure and maintain workers compensation and employers’ liability insurance for any employee or independent contractor it employs along with Commercial Automobile and Commercial Liability coverages in the manner as provided for in subparagraph (a) above or enough coverages and with such limits (including deductibles) as ARZC deems necessary.

(c) All insurance policies required to be obtained hereunder shall be secured from and maintained by companies authorized to issue such policies in the State of Arizona or the State of California, and policies shall fully comply with laws of the State of Arizona and the State of California as such pertain to the scope of the policies.

(d) Promptly following commencement of construction and after the execution of this Agreement by both parties, Cadiz shall furnish ARZC with copies of the complete, original insurance policies and Certificates of Insurance giving evidence of existence of the required insurance policies in subparagraph (a) above, Cadiz shall furnish ARZC with copies of the complete, original insurance policies and Certificates of Insurance giving evidence of existence of the required insurance policies in subparagraph (b) above. All of said policies shall be with insurers having A.M. Best ratings of not less than A-VII. Cadiz shall endeavor to cause such certificates to include a provision that 30 days advance notice to all insureds is required before cancellation or material change (including but not limited to any decrease in the amount of coverage). Under no circumstances shall Cadiz permit anyone to enter upon the Property prior to ARZC having received, reviewed and approved such Certificates of Insurance.

(e) All insurance policies required by this Paragraph 7 shall be in a form acceptable to ARZC, and be in effect with paid-up premiums and documentation of required insurance policies on file with ARZC.

(f) All insurance policies required by this Paragraph 7, shall be specifically endorsed to:

(i) delete any and all exclusions involving Cadiz’s activities or operations on or within fifty (50) feet of railroad property or operations;

(ii) be primary and non-contributory;

(iii) add the following entities and their affiliates (including their respective employees, officers and directors) as named insureds:

ARIZONA & CALIFORNIA RAILROAD COMPANY, and

GENESEE & WYOMING INC.

(iv) include contractual liability coverage whereby Cadiz’s covenants and agreements to indemnify the ARZC Indemnitees are brought within the coverage of said policy; and

(v) Cadiz, on behalf of itself and its insurers, acknowledges and agrees to a Waiver of Subrogation in favor of each of the entities listed under subparagraph 9(f)(iii) on said policies.

(g) Furnishing of insurance by Cadiz shall not limit Cadiz’s liability under this Agreement, but shall be additional security therefor. The fact that insurance is obtained by Cadiz will not be deemed to release or diminish Cadiz’s liability, including, without limitation, liability under the indemnity provisions of this Agreement. Damages recoverable by the ARZC Indemnitees from Cadiz or any third party will not be limited by the amount of the required insurance coverage.

8. This Agreement shall commence as of the Effective Date and shall continue thereafter for a period that is coterminous with the Lease Agreement, as amended, unless sooner terminated by mutual agreement of the Parties.

9. The relationship between the Parties is that of independent contractors. Nothing contained in this Agreement shall be construed as creating any agency, partnership, joint venture or other form of joint enterprise, employment or fiduciary relationship between the Parties, and neither party shall have authority to contract for or bind the other Party in any manner whatsoever.

10. Neither Party shall issue or release any announcement, statement, press release or other publicity or marketing materials relating to this Agreement, or otherwise use the other Party's trademarks, service marks, trade names, logos, symbols or brand names, in each case, without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed.

11. This Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

12. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each Party hereto. No waiver by any Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

13. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

16. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of California. Any legal suit, action or proceeding arising out of or related to this Agreement shall be instituted exclusively in the federal courts of the United States or the courts of the State of California in each case located in the County of San Bernardino, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.

17. In the event that any action, suit, or other legal or administrative proceeding is instituted or commenced by either Party hereto against the other Party arising out of or related to this Agreement, the prevailing Party shall be entitled to recover its reasonable/actual attorneys' fees and court costs from the non-prevailing Party.

18. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

19. Neither Party may assign, transfer or delegate any or all of its rights or obligations under this Agreement, without the prior written consent of the other Party. Any attempted assignment, transfer or other conveyance in violation of the foregoing shall be null and void. The paragraphs of this Agreement that are intended to be binding shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns.

20. This Agreement, together with documents incorporated herein by reference, constitutes the sole and entire agreement of the Parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

21. All notices or other communications required by this Agreement shall be delivered by personal delivery or Certified Mail, return receipt requested, to the intended recipient at the following address:

If to ARZC: Arizona & California Railroad Company

Attn: General Manager

	"ARZC"

	ARIZONA & CALIFORNIA RAILROAD COMPANY, a Delaware corporation

	By:	/s/ J. Bradley Ovitt
	Its:	SVP
	Dated:	September 16, 2013


	"CADIZ"

	CADIZ REAL ESTATE, LLC, a Delaware limited liability company

	By:	/s/ Timothy J. Shaheen
	Its:	CEO
	Dated:	September 16, 2013

For the Nine Months ended September 30, 2013	Page


PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

Cadiz Inc. Consolidated Financial Statements

Unaudited Consolidated Statements of Operations and Comprehensive Loss for the three months ended September 30, 2013 and 2012	1

Unaudited Consolidated Statements of Operations and Comprehensive Loss for the nine months ended September 30, 2013 and 2012	2

Unaudited Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	3

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012	4

Unaudited Consolidated Statement of Stockholders’ Deficit for the nine months ended September 30, 2013	5

Unaudited Notes to the Consolidated Financial Statements	6

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	29

ITEM 4. Controls and Procedures	29

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings	31

ITEM 1A. Risk Factors	31

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	31

ITEM 3. Defaults Upon Senior Securities	32

ITEM 4. Mine Safety Disclosures	32

ITEM 5. Other Information	32

ITEM 6. Exhibits	33