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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly
period ended March 31, 2005
OR
[ ] 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
Cadiz Inc.
(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.)
777 S. Figueroa Street, Suite 4250
Los Angeles, California 90017
(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.
Yes X No
--- ---
Indicate by check mark whether the Registrant is an accelerated
filer (as defined in Exchange Act Rule 12b-2).
Yes No X
--- ---
As of May 13, 2005, the Registrant had 10,965,568 shares of
common stock, par value $0.01 per share, outstanding.
FOR THE THREE MONTHS ENDED MARCH 31, 2005 PAGE
======================================================================
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CADIZ INC. CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Statement of Operations for the three months
ended March 31, 2005 and 2004. . . . . . . . . . . . . . . 1
Unaudited Balance Sheet as of March 31, 2005 and
December 31, 2004. . . . . . . . . . . . . . . . . . . . . 2
Unaudited Statement of Cash Flows for the three months
ended March 31, 2005 and 2004. . . . . . . . . . . . . . . 3
Unaudited Statement of Stockholders' Equity for the three
months ended March 31, 2005. . . . . . . . . . . . . . . . 4
Unaudited Notes to the Consolidated Financial Statements. .5
SUN WORLD INTERNATIONAL, INC. CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Statement of Operations for the three months
ended March 31, 2005 and 2004. . . . . . . . . . . . . . .10
Unaudited Balance Sheet as of March 31, 2005 and
December 31, 2004. . . . . . . . . . . . . . . . . . . . .11
Unaudited Statement of Cash Flows for the three months
ended March 31, 2005 and 2004. . . . . . . . . . . . . . .12
Unaudited Statement of Stockholder's Equity for the three
months ended March 31, 2005. . . . . . . . . . . . . . . .13
Unaudited Notes to the Consolidated Financial Statements. 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . .19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ITEM 4. CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . .24
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . .25
Page i
CADIZ INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- -----------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------
(IN THOUSANDS EXCEPT PER SHARE DATA) 2005 2004
- -----------------------------------------------------------------------
Revenues $ 15 $ 11
-------- --------
Costs and expenses:
General and administrative 954 538
Depreciation and amortization 67 131
-------- --------
Total costs and expenses 1,021 669
-------- --------
Operating loss (1,006) (658)
-------- --------
Interest
Interest expense 512 2,166
Interest income (54) (9)
-------- --------
Interest expense, net 458 2,157
-------- --------
Net loss before income taxes (1,464) (2,815)
Income tax expense 105 -
-------- --------
Net loss after income taxes $ (1,569) $ (2,815)
======== ========
Basic and diluted net loss per common share $ (0.15) $ (0.43)
======== ========
Basic and diluted weighted average
shares outstanding 10,335 6,548
======== ========
See accompanying notes to the consolidated financial statements.
Page 1
CADIZ INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
- -----------------------------------------------------------------------
MARCH 31, DECEMBER 31,
($ IN THOUSANDS) 2005 2004
- -----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,292 $ 9,031
Prepaid interest expense 1,038 1,106
Prepaid expenses and other 195 116
-------- --------
Total current assets 9,525 10,253
Property, plant, equipment and water
programs, net 35,485 35,552
Goodwill 3,813 3,813
Other assets 1,189 1,453
-------- --------
$ 50,012 $ 51,071
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 553 $ 470
Accrued liabilities 504 743
-------- --------
Total current liabilities 1,057 1,213
Long-term debt 25,339 25,000
Commitments and contingencies
Stockholders' equity:
Series F convertible preferred stock -
$.01 par value:
100,000 shares authorized; shares issued
and outstanding - 1,000 at March 31,
2005 and December 31, 2004 - -
Common stock - $.01 par value; 70,000,000
shares authorized; shares issued and
outstanding - 10,351,539 at March 31,
2005 and 10,324,339 at December 31, 2004 104 103
Additional paid-in capital 209,941 209,615
Accumulated deficit (186,429) (184,860)
-------- --------
Total stockholders' equity 23,616 24,858
-------- --------
$ 50,012 $ 51,071
======== ========
See accompanying notes to the consolidated financial statements.
Page 2
CADIZ INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------
($ IN THOUSANDS) 2005 2004
- -----------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (1,569) $(2,815)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 74 1,158
Interest expense added to loan principal 339 707
Changes in operating assets and liabilities:
Increase in prepaid expenses and other (79) (146)
Decrease in prepaid borrowing expense 407 -
Increase (decrease) in accounts payable 82 (73)
Increase (decrease) in accrued liabilities 88 (395)
-------- --------
Net cash used for operating activities (658) (1,564)
-------- --------
Cash flows from investing activities:
Decrease in restricted cash - 709
Increase in other assets (81) -
-------- --------
Net cash (used by) provided by investing
activities (81) 709
-------- --------
Net decrease in cash and cash equivalents (739) (855)
Cash and cash equivalents, beginning of period 9,031 3,422
-------- --------
Cash and cash equivalents, end of period $ 8,292 $ 2,567
======== ========
See accompanying notes to the consolidated financial statements.
Page 3
CADIZ INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2005
($ IN THOUSANDS)
- --------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
--------------- ------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------ ------ ------- ------- ------
Balance as
of December
31, 2004 1,000 $ - 10,324,339 $ 103 $ 209,615 $(184,860) $ 24,858
Issuance
of common
stock for
services - - 27,200 1 326 - 327
Net loss - - - - - (1,569) (1,569)
------- ---- ---------- ------ --------- --------- ---------
Balance as
of March
31, 2005 1,000 $ - 10,351,539 $ 104 $ 209,941 $(186,429) $ 23,616
======= ==== ========== ====== ========= ========= =========
See accompanying notes to the consolidated financial statements.
Page 4
CADIZ INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
GENERAL
The Consolidated Financial Statements have been prepared by
Cadiz Inc., sometimes 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, 2004.
The foregoing Consolidated Financial Statements include the
accounts of the Company and contain all adjustments, consisting
only of normal recurring adjustments, which the Company considers
necessary for a fair presentation 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.
The preparation of financial statements in conformity
with generally accepted accounting principles 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. This
quarterly report on Form 10-Q should be read in conjunction with
the Company's Form 10-K for the year ended December 31, 2004. The
results of operations for the three months ended March 31, 2005
are not necessarily indicative of results for the entire fiscal
year ending December 31, 2005.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 $1.6 million for the three months ended March
31, 2005 and $16 million for the year ended December 31, 2004.
The Company had working capital of $8.5 million at March 31, 2005
and used cash in operations of $0.7 million for the three months
ended March 31, 2005 and $7.6 million for the year ended December
31, 2004. Currently, the Company's sole focus is the development
of its water resources program.
During the year ended December 31, 2004, the Company raised
$21.3 million in cash through a private sale of common stock.
Based on current forecasts, the Company believes it has
sufficient resources to fund operations beyond March 2006. The
Company's current resources do not provide the capital necessary
to fund the water development project should the Company be
required to do so. There is no assurance that additional
financing (public or private) will be available on acceptable
terms or at all. If the Company issues additional equity
securities to raise funds, the ownership percentage of the
Company's existing stockholders would be reduced. New investors
may demand rights, preferences or privileges senior to those of
existing holders of common stock. If the Company cannot raise
needed funds, it might be forced to make further 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.
Page 5
These financial statements do not include any adjustments that
might result from these uncertainties.
PRINCIPLES OF CONSOLIDATION
In December 2003, the Company transferred substantially all
of its assets (with the exception of our office sublease, certain
office furniture and equipment and any Sun World related assets)
to Cadiz Real Estate LLC, a Delaware limited liability company
("Cadiz Real Estate"). The Company holds 100% of the equity
interests of Cadiz Real Estate, and therefore continues to hold
100% beneficial ownership of the properties that it transferred
to Cadiz Real Estate. Because the transfer of the Company's
properties to Cadiz Real Estate has no effect on its ultimate
beneficial ownership of these properties, the properties owned of
record either by Cadiz Real Estate or by the Company are treated
as belonging to the Company.
GOODWILL
The Company has $3.8 million of goodwill which resulted from
a merger in May 1988 between two companies, which eventually
became known as Cadiz Inc. Goodwill is not amortized but is
tested for impairment annually in the first quarter, or earlier
if events occur which require an impairment analysis be
performed. The Company performed an impairment test of its
goodwill in the first quarter of 2005 and determined that its
goodwill was not impaired as its market capitalization at March
31, 2005 of $159.4 million was in excess of the Company's net
book value of $23.8 million at that date.
INTANGIBLE AND OTHER LONG-LIVED ASSETS
Property, plant and equipment, intangible and certain other
long-lived assets are amortized over their useful lives. Useful
lives are based on management's estimates of the period that the
assets will generate revenue. Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board
issued SFAS no. 123(R) (revised 2004), "Share-Based Payment"
which amends SFAS Statement 123 and will be effective for public
companies for annual periods beginning after June 15, 2005. The
new standard will require the Company to recognize compensation
costs in its financial statements in an amount equal to the fair
value of share-based payments granted to employees and directors.
The Company is currently evaluating how it will adopt the
standard and evaluating the effect that the adoption of SFAS
123(R) will have on its financial position and results of
operations.
STOCK-BASED COMPENSATION
As permitted under Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", the Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" in accounting for
Page 6
its stock options and other stock-based employee awards. Pro
forma information regarding net loss and loss per share, as
calculated under the provisions of SFAS 123, as amended by SFAS
148, are disclosed in the table below. The Company accounts for
equity securities issued to non-employees in accordance with the
provision of SFAS 123 and Emerging Issues Task Force 96-18.
Had compensation cost for these plans been determined using
fair value the Company's net loss and net loss per common share
would have increased to the following pro forma amounts (dollars
in thousands):
THREE MONTHS ENDED MARCH 31,
2005 2004
---- ----
Net loss applicable to
common stock:
As reported $ (1,569) $ (2,815)
Included in
Net loss - -
Expense under
SFAS 123 - -
-------- --------
Pro forma $ (1,569) $ (2,815)
======== ========
Net loss per common share:
As reported $ (0.15) $ (0.43)
Expense under
SFAS 123 - -
-------- --------
Pro forma $ (0.15) $ (0.43)
======== ========
See Note 2 to the Consolidated Financial Statements included
in the Company's Form 10-K for a discussion of the Company's
accounting policies.
NOTE 2 - PROPERTY, PLANT EQUIPMENT AND WATER PROGRAMS
- -----------------------------------------------------
Property, plant, equipment and water programs consist of the
following (in thousands):
MARCH 31, DECEMBER 31,
2005 2004
---- ----
Land and land improvements $ 22,010 $ 22,010
Water programs 14,274 14,274
Buildings 1,408 1,408
Machinery and equipment 3,599 3,599
-------- --------
41,291 41,291
Less accumulated depreciation (5,806) (5,739)
-------- --------
$ 35,485 $ 35,552
======== ========
Depreciation expense totaled $67 thousand and $131
thousand during the three months ended March 31, 2005 and 2004.
Page 7
NOTE 3 - LONG-TERM DEBT
- -----------------------
On November 30, 2004 the Company entered into an amendment
of its senior term loan agreement with ING whereby it repaid in
full the senior term loan portion of the facility with ING of $10
million and reduced to $25 million the outstanding principal
balance under the existing revolving portion of the loan. The
terms and conditions of the loan facility with ING were amended
in order to extend the maturity date of the debt until March 31,
2010, conditioned upon a further principal reduction of $10
million on or before March 31, 2008, with an interest rate
through March 31, 2008 of 4% cash plus 4% paid in kind ("PIK")
increasing to 4% cash plus 6% PIK for interest periods commencing
on and after April 1, 2008.
Interest is payable semiannually on March 31 and September
30 each year. The PIK portion will be added to the outstanding
principal balance.
On March 31, 2005, the 4% cash interest from November 30,
2004 in the amount of $0.3 million was paid by applying it to a
$2.4 million credit against loan obligations created by ING as
consideration for units purchased by ING as part of a $24 million
private placement completed by the Company in November 2004,
leaving a credit balance of $2.1 million. On the same date, the
accrued 4% PIK portion in the amount of $0.3 million was added to
the principal balance of the loan.
The terms of the loan facilities require certain mandatory
prepayments from the cash proceeds of future equity issuances by
the Company and prohibit the payment of dividends.
The senior term loan is secured by substantially all of the
assets of the Company.
NOTE 4 - INCOME TAXES
- ---------------------
In February 2005, our wholly owned subsidiary Sun World
International Inc.("Sun World") completed the sale of
substantially all of its assets.
The sale will generate a total gain at Sun World of
approximately $11.3 million and $45.2 million for federal and
state income tax purposes, respectively. For regular income tax
purposes this gain is not expected to generate a tax liability,
in that Sun World and Cadiz file a consolidated tax return and
the companies have sufficient tax attributes to offset the gain
from Sun World. However, because of state apportionment factors
and the Alternative Minimum Tax (AMT) rules, Cadiz is expected to
have a tax liability of approximately $105 thousand, which amount
has been accrued as of March 31, 2005. The actual tax liability
will vary from this estimate based upon taxable income generated
during 2005.
NOTE 5 - NET LOSS PER COMMON SHARE
- ----------------------------------
Basic earnings per share (EPS) is computed by dividing the
net loss, after deduction for preferred dividends either accrued
or imputed, if any, by the weighted-average common shares
outstanding. Options, deferred stock units, warrants,
convertible debt, and preferred stock that
Page 8
are convertible into 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 421,000 and
1,751,000 shares (including Series F preferred stock convertible
into 17,290 and 1,729,000 shares of common stock and warrants
convertible into 400,000 and 0 shares of common stock) at March
31, 2005 and 2004, respectively.
NOTE 6 - PREFERRED AND COMMON STOCK
- -----------------------------------
During the quarter ended March 31, 2005, we issued 27,200
shares of common stock in consideration for services valued at
$326,400. The shares were issued at $12 per share, the price of
the November 2004 private placement at which time the issue of
the shares was authorized, the services rendered and the amounts
accrued.
Page 9
SUN WORLD INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- ------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
($ IN THOUSANDS) 2005 2004
- ------------------------------------------------------------------------
Revenues $ 6,809 $ 12,277
-------- --------
Costs and expenses:
Cost of sales 6,372 11,255
General and administrative 1,306 2,403
Depreciation and amortization 337 474
-------- --------
Total costs and expenses 8,015 14,132
-------- --------
Operating loss (1,206) (1,855)
Loss (gain) on sale of assets 18 (152)
Interest (income) expense, net (contractual
interest for 2005 and 2004, respectively
was $3,462 and $3,915) (60) 393
-------- --------
Loss before reorganization items and
income taxes (1,164) (2,096)
Reorganization items:
Employee incentive payments 1,655 -
Professional fees 628 418
Gain on sale of assets (594) -
-------- --------
Total reorganization items 1,689 418
-------- --------
Loss before income taxes (2,853) (2,514)
Income tax (benefit) expense (5,047) 62
-------- --------
Net income (loss) $ 2,194 $ (2,576)
======== ========
See accompanying notes to the consolidated financial statements.
Page 10
SUN WORLD INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)
CONSOLIDATED BALANCE SHEET (Unaudited)
- -----------------------------------------------------------------------
MARCH 31, DECEMBER 31,
($ IN THOUSANDS) 2005 2004
- -----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 48,636 $ 5,311
Restricted cash 1,660 3,344
Accounts receivable, net - 6,243
Inventories - 12,078
Prepaid expenses and other 86 1,745
-------- --------
Total current assets 50,382 28,721
Property, plant, equipment, net - 104,647
Intangible assets - 1,909
Other assets - 6,424
-------- --------
Total assets $ 50,382 $141,701
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 239 $ 4,944
Accrued liabilities 1,386 2,993
Income tax payable 365 -
Revolving credit facility - -
Long-term debt, current portion - 722
-------- --------
Total current liabilities 1,990 8,659
Long-term debt - 9
Deferred income taxes - 5,447
Other liabilities - 17
-------- --------
Total liabilities not subject to compromise 1,990 14,132
-------- --------
Liabilities subject to compromise under
reorganization proceedings 60,016 141,387
Contingencies
Stockholder's deficit:
Common stock, $0.01 par value, 300,000 shares
authorized; 42,000 shares issued and
outstanding - -
Additional paid-in capital 39,479 39,479
Accumulated deficit (51,103) (53,297)
-------- --------
Total stockholder's deficit (11,624) (13,818)
-------- --------
Total liabilities and stockholder's deficit $ 50,382 $141,701
======== ========
See accompanying notes to the consolidated financial statements.
Page 11
SUN WORLD INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
($ IN THOUSANDS) 2005 2004
- -----------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ 2,194 $ (2,576)
Adjustments to reconcile net income (loss) to
net cash used for operating activities:
Depreciation and amortization 337 481
Deferred income taxes (5,447) -
Gain on disposal of assets (576) (152)
Compensation charge for deferred stock units - 20
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (248) 702
Increase in inventories (3,655) (7,159)
Decrease in prepaid expenses and other 167 101
(Decrease) increase in accounts payable (803) 894
Decrease in accrued liabilities (1,487) (524)
Increase in income tax payable 365 -
-------- --------
Net cash used before reorganization items (9,153) (8,213)
-------- --------
Decrease in liabilities subject to compromise
under reorganization proceedings (38,282) -
-------- --------
Net cash used for operating activities (47,435) (8,213)
-------- --------
Cash flows from investing activities:
Additions to property, plant, and equipment (299) (663)
Additions to developing crops (745) (1,257)
Proceeds from sale of assets 90,854 157
Decrease in restricted cash 1,684 -
Increase in other assets (55) (64)
-------- --------
Net cash provided by (used for)
investing activities 91,439 (1,827)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt (679) (30)
Proceeds from short-term borrowings - 8,675
-------- --------
Net cash provided by (used for)
financing activities (679) 8,645
-------- --------
Net increase (decrease) in cash and
cash equivalents 43,325 (1,395)
Cash and cash equivalents at beginning
of period 5,311 1,548
-------- --------
Cash and cash equivalents at end of period $ 48,636 $ 153
======== ========
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities
Credit against purchase price on sale of
assets in partial satisfaction of First
Mortgage Notes $ 40,048 $ -
======== ========
See accompanying notes to the consolidated financial statements.
Page 12
SUN WORLD INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT (UNAUDITED)
- --------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2005
($ IN THOUSANDS)
- --------------------------------------------------------------------------------
ADDITIONAL TOTAL
COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
------ ------ ------- ------- -------
Balance as of
December 31, 2004 42,000 $ - $ 39,479 $ (53,297) $ (13,818)
Net income - - - 2,194 2,194
--------- ------ -------- --------- ---------
Balance as of
March 31, 2005 42,000 $ - $ 39,479 $ (51,103) $ (11,624)
========= ====== ======== ========= =========
See accompanying notes to the consolidated financial statements.
Page 13
SUN WORLD INTERNATIONAL, INC.
DEBTOR-IN-POSSESSION
(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND REORGANIZATION UNDER CHAPTER 11
- -----------------------------------------------------------------
Founded in 1975, Sun World International, Inc. ("SWII" or
"Sun World") and its subsidiaries (collectively, the "Company")
operated as the wholly-owned agricultural segment of Cadiz Inc.
("Cadiz"). Prior to the sale discussed below, the Company was an
integrated agricultural operation that owned approximately 17,000
acres of land, primarily located in two major growing areas of
California: the San Joaquin Valley and the Coachella Valley.
Fresh produce, including table grapes, stonefruit, citrus,
peppers and watermelons was marketed, packed and shipped to food
wholesalers and retailers located throughout the United States
and to more than 30 foreign countries. The Company owned and
operated two cold storage and packing facilities located in
California.
On January 30, 2003 (the "Petition Date"), SWII and certain
of its subsidiaries (Sun Desert Inc., Coachella Growers, and Sun
World/Rayo) filed voluntary petitions for relief under Chapter 11
of the Bankruptcy Code. The filing was made in the United States
Bankruptcy Court, Central District of California, Riverside
Division ("Bankruptcy Court"). Included in the Consolidated
Financial Statements are subsidiaries operated outside the United
States, which have not commenced Chapter 11 cases or other
similar proceedings elsewhere, and are not debtors. The assets
and liabilities of such non-filing subsidiaries are not
considered material to the Consolidated Financial Statements.
SWII sought bankruptcy protection in order to access a seasonal
financing package of up to $40 million to provide working capital
through the 2003-2004 growing seasons.
As a debtor-in-possession, Sun World is authorized to
continue to operate as an ongoing business, but may not engage in
transactions outside the ordinary course of business without the
approval of the Bankruptcy Court. Under the Bankruptcy Code,
actions to collect pre-petition indebtedness, as well as most
other pending litigation, are stayed and other contractual
obligations against Sun World may not be enforced. In addition,
under the Bankruptcy Code, Sun World may assume or reject
executory contracts, including lease obligations. Parties
affected by these rejections may file claims with the Court in
accordance with the reorganization process. Absent an order of
the Court, substantially all pre-petition liabilities are subject
to settlement under a plan of reorganization to be voted upon by
creditors and equity holders and approved by the Bankruptcy
Court.
The four Sun World entities referred to above are the joint
proponents of the Debtors' Joint Plan of Reorganization Dated
November 24, 2003 (the "Plan"). The Plan provided for the
restructuring of Sun World's balance sheet by providing for Sun
World to issue equity interests in the Reorganized Company to the
holders of its First Mortgage Notes in full satisfaction of their
mortgage note claims; for the payment in full of convenience
claims and trade claims; and for Sun World to issue equity
interests in the Reorganized Company to entities holding certain
other unsecured claims in full satisfaction of those claims. The
holders of Sun World's secured First Mortgage Notes were unable
to reach agreement on various Plan issues, and the Plan as
presented was not confirmable. Thereafter, following an extensive
marketing process, Sun World entered into, subject to Court
approval, an asset purchase agreement ("APA") in December 2004
with BDCM Opportunity Fund, L.P. ("BDCM""), a major holder of the
First Mortgage Notes, under which BDCM would acquire
substantially all of the Company's assets subject to overbids at
a Court authorized auction. Following the auction on January 13,
2005,
Page 14
BDCM was declared the winning bidder and the Court approved
on January 14, 2005, an amended APA under which BDCM agreed to
acquire substantially all of the Company's assets in exchange for
cash and credit consideration of $127.8 million, plus payment and
assumption of certain liabilities totaling an estimated $14
million, including the trade claims, which resulted in a gain on
sale of assets of approximately $0.6 million. Thereafter, BDCM
assigned its rights under the APA to Sun World International LLC
("SW LLC"), a subsidiary of BDCM. The agreement with SW LLC
closed on February 25, 2005. The Company has filed in May 2005 an
amended Plan to distribute the remaining consideration left in
the Company (approximately $50 million after interim
distributions/credits to the holders of First Mortgage Notes of
approximately $78 million upon closing as authorized by the
Court).
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 and in accordance with Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code". Accordingly, all pre-petition
liabilities subject to compromise have been segregated in the
Consolidated Balance Sheet and classified as "Liabilities subject
to compromise under reorganization proceedings", at the estimated
amount of allowable claims. The financial statements of the
Company do not purport to reflect or to provide for all of the
consequences of an ongoing Chapter 11 reorganization.
Specifically, but not all-inclusive, the financial statements of
the Company do not present: (a) the amount which will ultimately
be paid to settle liabilities and contingencies which may be
allowed in the Chapter 11 reorganization, or (b) the effect of
changes which may be made resulting from a Plan of
Reorganization.
NOTE 2 - BASIS OF PRESENTATION
- ------------------------------
The Consolidated Financial Statements have been prepared by
Sun World International, Inc. and its subsidiaries, collectively
referred to as "Sun World" without audit and should be read in
conjunction with the Sun World Consolidated Financial Statements
and notes thereto included in the Cadiz Inc. Form 10-K for the
year ended December 31, 2004. The foregoing Consolidated
Financial Statements include all adjustments, consisting only of
normal recurring adjustments, which Sun World considers necessary
for a fair presentation.
Since the Chapter 11 bankruptcy filing, the Company has
applied the provisions of SOP 90-7, which does not significantly
change the application of accounting principles generally
accepted in the United States of America; however, it does
require that the financial statements for periods including and
subsequent to filing the Chapter 11 petition distinguish
transactions and events that are directly associated with the
reorganization from the ongoing operations of the business. As
disclosed in the Consolidated Statements of Operations,
reorganization items for the quarter ended March 31, 2005,
consist of professional fees directly associated with the
reorganization of $628,000, Court-approved bonuses paid to
certain employees related to the successful sale of Sun World's
assets of $1,655,000, and the gain on sale of Sun World's assets
of $594,000. For the quarter ended March 31, 2004,
reorganization items consist of professional fees directly
associated with the reorganization of $418,000.
Page 15
See Note 2 to the Sun World Consolidated Financial
Statements included in the Cadiz Inc. latest Form 10-K for a
discussion of Sun World's accounting policies.
NOTE 3 - INVENTORIES
- --------------------
Inventories consist of the following (dollars in thousands):
MARCH 31, DECEMBER 31,
2005 2004
---- ----
Growing crops $ - $ 9,892
Harvested product - 194
Materials and supplies - 1,992
-------- --------
$ - $ 12,078
======== ========
NOTE 4 - LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION
PROCEEDINGS
- ---------------------------------------------------------------
Under bankruptcy law, actions by creditors to collect
indebtedness Sun World owed prior to the Petition Date are stayed
and certain other pre-petition contractual obligations may not be
enforced against the Company. We have received approval from the
Bankruptcy Court to pay certain pre-petition liabilities
including employee salaries and wages, benefits, other employee
obligations, and certain grower liabilities entitled to trust
protection under the Perishable Agricultural Commodities Act
(PACA). Except for certain secured debt obligations, all pre-
petition liabilities have been classified as "Liabilities subject
to compromise under reorganization proceedings" in the
Consolidated Balance Sheet. Adjustments to the claims may result
from negotiations, payments authorized by Bankruptcy Court order,
rejection of executory contracts including leases, or other
events.
Pursuant to an order of the Bankruptcy Court, Sun World
mailed notices to all known creditors that the deadline for
filing proofs of claim with the Court was August 29, 2003. An
estimated 340 claims were filed as of August 29, 2003. Amounts
that Sun World has recorded are in many instances different from
amounts filed by our creditors. Differences between amounts
scheduled by Sun World and claims by creditors are being
investigated and resolved in connection with our claims
resolution process. Until the process is complete, the ultimate
number and amount of allowable claims cannot be ascertained. The
ultimate resolution of these claims will be based upon the final
plan of reorganization.
Pursuant to the APA (see Note 1), holders of trade claims
totaling an estimated $3.0 million entered into a trade vendor
agreement with SW LLC and SW LLC assumed those claims upon
closing of the asset purchase. In addition, as further
described in Note 5 approximately $78 million in interim
distributions/credits to the holders of First Mortgage Notes was
made upon closing of the sale of Sun World's assets as authorized
by the Court.
Page 16
Liabilities subject to compromise under reorganization
proceedings are summarized as follows (dollars in thousands):
MARCH 31, DECEMBER 31,
2005 2004
---- ----
Accounts payable $ 787 $ 4,092
Due to parent company 13,500 13,500
Long-term debt and accrued interest 45,729 123,795
-------- --------
Total $ 60,016 $141,387
======== ========
NOTE 5 - SALE OF ASSETS
- -----------------------
On February 25, 2005, The Company completed the sale of
substantially all of its assets to SW LLC (see Note 1). The sale
resulted in a gain of $594,000 calculated as follows (in 000s):
Cash proceeds to Sun World $ 49,684
Credit/interim distribution to
First Mortgage Notes 78,066
--------
127,750
Liabilities paid by buyer at closing 5,745
Liabilities assumed by buyer 8,572
--------
Total purchase price 142,067
Assets sold:
Cash (833)
Restricted cash (3,344)
Accounts receivable, net (6,545)
Inventory (16,345)
Prepaid expenses and other (1,492)
Property, plant, and equipment, net (104,631)
Intangible assets (1,912)
Other assets (6,371)
--------
Gain on sale of assets $ 594
========
As discussed in Note 4, in connection with the sale of
assets, the Court authorized an interim distribution of a portion
of the sales proceeds to the First Mortgage Note holders. The
interim distribution was made in the form of (i) a credit to the
buyer of $40,048,000 in partial satisfaction of the Notes held by
the buyer and (ii) a prorata distribution of $38,018,000 at
closing to the remaining Note holders
As a result, the outstanding principal balance and accrued
interest of the First Mortgage Notes, as included in Liabilities
Subject to Compromise, consist of the following (dollars in
thousands):
Page 17
MARCH 31, DECEMBER 31,
2005 2004
---- ----
Balance outstanding $ 40,707 $ 118,773
NOTE 6 - INCOME TAXES
- ---------------------
The income tax benefit at March 31, 2005 relates principally
to the tax gain on the sale of assets and consists of estimated
federal and state alternative minimum taxes of $375,000 and a
deferred tax benefit of $5,447,000 due to the reduction in the
deferred tax valuation allowance for the utilization of net
operating loss carryforwards.
Page 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 Cadiz, 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 "Certain Trends and Uncertainties"
in Item 7 of our Annual Report on Form 10-K for the year ended
December 31, 2004.
OVERVIEW
Our primary asset consists of three separate properties,
each of which consists of largely contiguous land in eastern San
Bernardino County, California. This land position totals
approximately 45,000 acres. Virtually all of this land is
underlain by high-quality groundwater resources with demonstrated
potential for various applications, including water storage and
supply programs and agricultural, municipal, recreational, and
industrial development. Two of the three properties are located
in proximity to the Colorado River Aqueduct, the major source of
imported water for southern California. The third property is
located near the Colorado River.
The value of these assets derives from a combination of
population increases and limited water supplies throughout
southern California. In addition, most of the major population
centers in southern California are not located where significant
precipitation occurs, requiring the importation of water from
other parts of the state. We therefore believe that a
competitive advantage exists for those companies that possess or
can provide high quality, reliable, and affordable water to major
population centers.
To this end in 1997 we commenced discussions with the
Metropolitan Water District of Southern California
("Metropolitan") in order to develop a long-term agreement for a
joint venture groundwater storage and supply program on our land
in the Cadiz and Fenner valleys of eastern San Bernardino County
(the "Cadiz Program"). Under the Cadiz Program, surplus water
from the Colorado River would be stored in the aquifer system
underlying our land during wet years. When needed, the stored
water, together with indigenous groundwater, would be returned to
the Colorado River Aqueduct for distribution to Metropolitan's
member agencies throughout six southern California counties.
During the next several years, we engaged in extensive
negotiations with Metropolitan concerning the Cadiz Program and
actively pursued and received substantially all of the various
permits required to construct and operate the project. However,
in October 2002, Metropolitan's Board voted to not proceed with
the Cadiz Program.
Page 19
Notwithstanding Metropolitan's actions in 2002, we expect to
be able to use our land assets and related water resources to
participate in a broad variety of water storage and supply,
exchange, and conservation programs with public agencies and
other parties. Southern California's need for water storage and
supply programs has not abated. We believe there are many
different scenarios to maximize the value of this water resource,
all of which are under current evaluation.
We expect that these alternative scenarios will have
different capital requirements and implementation periods than
those previously established for the Cadiz Program. Therefore,
following Metropolitan's actions in 2002, we have entered into a
series of agreements with our senior secured lender, ING Capital
LLC ("ING") pursuant to which we reduced our debt to ING to $25
million and extended the maturity date of the ING debt until
March 31, 2010, conditioned upon a further principal reduction of
$10 million on or before March 31, 2008. In addition, we have
raised approximately $35 million in equity through private
placements completed in 2003 and 2004.
Further, in February 2005, our wholly owned subsidiary Sun
World International, Inc. ("Sun World") completed the sale of
substantially all of its assets. Sun World had entered bankruptcy
proceedings in January 30, 2003, following which the financial
statements of Sun World are no longer consolidated with ours.
With the implementation of these steps, we have been able to
retain ownership of all of our assets relating to our water
programs and to obtain working capital needed to continue our
efforts to develop our water programs, albeit with the
divestiture of our interests in Sun World's assets. Because many
of our pre-existing common stockholders have participated in the
2003 and 2004 private placements, our base of common stockholders
remains largely the same as before these placements.
We remain committed to our water programs and we continue to
explore all opportunities for development of these assets. We
cannot predict with certainty which of these various
opportunities will ultimately be utilized.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THREE MONTHS ENDED
MARCH 31, 2004
- -----------------------------------------------------------------
We have not received significant revenues from our water
resource activity to date. As a result, we have historically
incurred a net loss from operations. We had revenues of $15
thousand for the three months ended March 31, 2005 and $11
thousand for the three months ended March 31, 2004. Our net loss
totaled $1.6 million for the three months ended March 31, 2005
compared to $2.8 million for the three months ended March 31,
2004.
Our primary expenses are our ongoing overhead costs (i.e.
general and administrative expense) and our interest expense.
Page 20
REVENUES We had revenues of $15 thousand for the three
months ended March 31, 2005 and $11 thousand for the three months
ended March 31, 2004 with the increase attributable to the lease
of additional Cadiz Ranch farming acreage to a third party.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses during the three months ended March 31,
2005 totaled $1.0 million compared to $0.5 million for the three
months ended March 31, 2004. The increase in general and
administrative expenses is primarily due to higher legal, audit
and consulting expenses in the three months ended March 31, 2005.
DEPRECIATION AND AMORTIZATION. Depreciation and
amortization expense for the three months ended March 31, 2005
and 2004 totaled $67 thousand and $131 thousand, respectively..
We incurred depreciation expense for permanent and developing
crops in the 2004 period. These permanent and developing crops
were written off in the last quarter of 2004 and were not subject
to further depreciation in 2005, thereby resulting in a decrease
in depreciation and amortization expense for the 2005 period.
INTEREST EXPENSE, NET. Net interest expense totaled $0.5
million during the three months ended March 31, 2005, compared to
$2.2 million during the same period in 2004. The following table
summarizes the components of net interest expense for the two
periods (in thousands):
THREE MONTHS ENDED
MARCH 31,
2005 2004
---- ----
Interest on outstanding debt $ 505 $ 1,139
Amortization of financing costs 7 1,027
Interest income (54) (9)
-------- --------
$ 458 $ 2,157
======== ========
The decrease in net interest expense is due to a combination
of a reduction in the outstanding balance of the ING loan and
lower interest rates on that loan. In addition, during 2005
there was reduced amortization of financing costs, that included
both debt discount and borrowing fees, as the prior balance was
written off at the time of the November 30, 2004 amendment to the
terms and conditions of the ING loan. The financing costs of the
November 30, 2004 amended terms and conditions of the ING loan
are lower and are being amortized over a longer period.
The financing costs for the November 30, 2004 amended terms
and conditions of the ING loan were $150 thousand.
INCOME TAXES. In February 2005, our wholly owned subsidiary
Sun World International Inc.("Sun World") completed the sale of
substantially all of its assets.
Page 21
The sale will generate a total gain at Sun World of
approximately $11.3 million and $45.2 million for federal and
state income tax purposes, respectively. For regular income tax
purposes this gain is not expected to generate a tax liability,
in that Sun World and Cadiz file a consolidated tax return and
the companies have sufficient tax attributes to offset the gain
from Sun World. However, because of state apportionment factors
and the Alternative Minimum Tax (AMT) rules, Cadiz is expected to
have a tax liability of approximately $105 thousand that has been
accrued as of March 31, 2005. The actual tax liability will vary
from this estimate based upon taxable income generated during
2005.
LIQUIDITY AND CAPITAL RESOURCES
(A) CURRENT FINANCING ARRANGEMENTS
------------------------------
As we have not received significant revenues from our water
resource activity to date, we have been required to obtain
financing to bridge the gap between the time water resource
development expenses are incurred and the time that revenue will
commence. Historically, we have addressed these needs primarily
through secured debt financing arrangements with our lenders,
private equity placements and the exercise of outstanding stock
options.
Subsequent to the vote of Metropolitan's Board in October
2002 to not proceed with the Cadiz Program and Sun World's
January 2003 bankruptcy filing, we have worked with our primary
secured lender, ING Capital LLC, to structure our debt in a way
which would allow us to continue our development of the Cadiz
Program. We believe that we have accomplished this goal with a
series of agreements with ING, the most recent of which concluded
in November 2004.
In November 2004 we entered into our most recent series of
agreements with ING which provided for the repayment in full of
our senior term loan facility with ING, the reduction to $25
million of the outstanding principal balance under our existing
revolving credit facility; and amendments to the terms and
conditions of our revolving credit facility with ING in order to
extend the maturity date of the debt until March 31, 2010,
conditioned upon a further principal reduction of $10 million on
or before March 31, 2008, and reduce the interest rate through
March 31, 2008 on the new outstanding balance to 4% cash plus 4%
PIK (increasing to 4% cash plus 6% PIK for interest periods
commencing on and after April 1, 2008). Additional details
concerning the terms of this November 2004 restructuring are
included in our Form 10-K for the year ended December 31, 2004.
As we continue to actively pursue our business strategy,
additional financing specifically in connection with our water
programs will be required. As the parties anticipated this need
at the time of our credit restructuring, the restrictive
covenants in our credit facility were crafted in a way that, in
our view, should not materially limit our ability to undertake
debt or equity financing in order to finance our water
development activities.
We have no outstanding credit facilities or preferred stock
other than the Series F preferred stock held by ING as described
in our 10-K for the year ended December 31, 2004.
Page 22
CASH USED FOR OPERATING ACTIVITIES. Cash used for operating
activities was $0.7 million for the three months ended March 31,
2005, as compared to $1.6 million for the three months ended
March 31, 2004. The decreased cash usage is primarily due to a
smaller net loss and the reduction in prepaid borrowing expense
for the payment of interest in the 2005 period. The $1.4 million
reduction in net loss from $2.8 million in the 2004 period to
$1.4 million in the 2005 was partly offset by a $1.1 million
reduction in non-cash depreciation and amortization. The non-cash
depreciation and amortization was $0.1 million in the 2005 period
and $1.2 million in the 2004 period which included $1.0 million
of amortization of financing costs, as explained above.
CASH USED FOR INVESTING ACTIVITIES. During the three months
ended March 31, 2005, $0.1 million was invested in assets.
During the three months ended March 31, 2004, $0.7 million was
paid from the restricted cash account for the cash portion of
interest due on the ING loan at March 31, 2004.
OUTLOOK
SHORT TERM OUTLOOK. The proceeds of our 2003 and 2004
private placements in which we raised approximately $35 million
have provided us with sufficient cash to meet our expected
working capital needs for current operations until the Company
will need to raise additional capital in order to fund the $10
million repayment of its borrowing from ING required to be made
by March 2008 in order to obtain a further two year extension of
the maturity date of the ING loan. See "Long Term Outlook",
below. Approximately $12.7 million of the proceeds of our
November 2004 private placement were used to reduce the
principal balance, which included approximately $2.7 million in
interest payable in kind ("PIK"), owed to ING under our ING
credit facilities to $25 million. 40 Units in the 2004 private
placement were issued to ING in consideration of a $2.4 million
credit to be applied against obligations under the Company's $25
million borrowing from the lender. The remainder of the
proceeds from the placements will be used to meet our ongoing
working capital needs.
LONG TERM OUTLOOK. In the longer term, the current maturity
date of our loan with ING is March 2008, although we may obtain a
further extension of this loan by making a $10 million repayment.
Otherwise, our working capital needs will be determined based
upon the specific measures we pursue in the development of our
water resources. 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 such future cash requirements through a
variety of means to be determined at the appropriate time. Such
means may include equity or debt placements, or 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board
issued SFAS no. 123(R) (revised 2004), "Share-Based Payment"
which amends SFAS Statement 123 and will be effective for public
companies for annual periods beginning after June 15, 2005. The
new standard will require the Company to recognize compensation
costs in its financial statements in an amount equal to the fair
value of share-based payments granted to employees and directors.
Page 23
The Company is currently evaluating how it will adopt the
standard and evaluating the effect that the adoption of SFAS
123(R) will have on its financial position and results of
operations.
CERTAIN KNOWN CONTRACTUAL OBLIGATIONS
PAYMENTS DUE BY PERIOD
CONTRACTUAL LESS THAN
OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS AFTER 5 YEARS
- ----------- ----- --------- --------- --------- -------------
Long term
debt
obligations $ 25,339 $ - $ 10,000 $ 15,339 $ -
Operating
leases 119 119 - - -
-------- -------- -------- -------- --------
$ 25,458 $ 119 $ 10,000 $ 15,339 $ -
======== ======== ======== ======== ========
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information about market risks for the three months ended
March 31, 2005 does not differ materially from that discussed
under Item 7A of Cadiz' Annual Report on Form 10-K for the year
ended December 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with
the participation of our management, including our Chairman,
Chief Executive Officer and Chief Financial Officer (Principal
Executive and Financial Officer), of the effectiveness of the
design and operation of our disclosure controls and procedures as
of March 31, 2005. Based upon, and as of the date of that
evaluation, our Chairman, Chief Executive Officer and Chief
Financial Officer concluded that these disclosure controls and
procedures are effective in timely alerting him to material
information relating to Cadiz (including our consolidated
subsidiaries) required to be included in our periodic Securities
and Exchange Commission filings. There was no significant change
in our internal control over financial reporting that occurred
during the most recent fiscal quarter that materially affected,
or is reasonably likely to affect, our internal control over
financial reporting, and no corrective actions with regard to
significant deficiencies or weaknesses.
Page 24
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See "Legal Proceedings" included in the Company's latest
Form 10-K for a complete discussion.
There are no other material pending legal proceedings to
which we are a party or of which any of our property is the
subject.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
PURCHASES OF EQUITY SECURITIES
During the quarter ended March 31, 2005, the Company issued
27,200 shares of the Company's common stock in consideration for
services valued at $326,400, or $12.00 per share.
The issuances were not registered under the Securities Act
of 1933, as amended (the "Securities Act"), but were exempt from
the registration requirements of the Securities Act by virtue of
Section 4(2) of the Securities Act as the transactions did not
involve public offerings, the number of investors was limited,
the investors were provided with information about us, and we
placed restrictions on the resale of the securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
The following exhibits are filed or incorporated by
reference as part of this Quarterly Report on Form 10-Q.
31.1 Certification of Keith Brackpool, Chairman,
Chief Executive Officer and Chief Financial Officer
of Cadiz Inc. pursuant to Section 302 of the
Page 25
Sarbanes-Oxley Act of 2002
32.1 Certification of Keith Brackpool, Chairman,
Chief Executive Officer and Chief Financial 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
Page 26
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/ Keith Brackpool May 16, 2005
--------------------------------- ----------------
Keith Brackpool, Chairman of Date
the Board and Chief Executive
Officer
Page 27