CADIZ INC - Annual Report: 2019 (Form 10-K)

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

550 S. Hope Street, Suite 2850
Los Angeles, CA	90071
(Address of principal executive offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CDZI	The NASDAQ Global Market

Part I
Item 1.	Business	1
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities	21
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	37
Item 9A.	Controls and Procedures	37
Item 9B.	Other Information	38
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	39
Item 11.	Executive Compensation	39
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39
Item 13.	Certain Relationships and Related Transactions, and Director Independence	39
Item 14.	Principal Accounting Fees and Services	39
Part IV
Item 15.	Exhibits, Financial Statement Schedules	40
Item 16.	Form 10-K Summary	43
SIGNATURES		44

  This Form 10-K contains forward-looking statements with regard to financial projections, proposed transactions such as those concerning the further development of our land and water assets, information or expectations about our business strategies, results of operations, products or markets, or otherwise makes statements about future events.  Such 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, the cautionary statements under the caption “Risk Factors”, as well as other cautionary language contained in this Form 10-K.  These cautionary statements identify important factors that could cause actual results to differ materially from those described in the forward-looking statements.  When considering forward-looking statements in this Form 10-K, you should keep in mind the cautionary statements described above.   We are a natural resources development company dedicated to creating sustainable water and agricultural opportunities in California.  We own approximately 45,000 acres of land with high-quality, naturally recharging groundwater resources in three areas of Southern California’s Mojave Desert.  These properties are located in eastern San Bernardino County situated in close proximity to major highway, rail, energy and water infrastructure, including the Colorado River Aqueduct (“CRA”), which is the primary transportation route for water imported into Southern California from the Colorado River.   Our properties offer opportunities for a wide array of sustainable activities including water supply projects, groundwater storage, large-scale agricultural development and land conservation and stewardship programs.  In addition to our land and water assets, we also own pipeline and well infrastructure able to irrigate existing agriculture and to convey water to and from other communities and agricultural ventures that may be short of supply and/or storage.   Our main objective is to realize the highest and best use of our land, water and infrastructure assets in an environmentally responsible way.  We believe that the highest and best use of our assets will be realized through the development of a combination of water supply, water storage and agricultural projects in accordance with a holistic land management strategy.  Our present activities are focused on developing our assets in ways that meet growing long-term demand for access to sustainable water supplies and agricultural products.   Upon our founding in 1983 as Cadiz Land Company, we began an agricultural development on a portion of our primary property in Cadiz, California, which is a 34,500-acre property at the base of the Fenner and Orange Blossom Wash watersheds in eastern San Bernardino County (the “Cadiz/Fenner Property”).  These watersheds span an area of more than 1,300 square miles and have 17 to 34 million acre-feet of fresh, high-quality groundwater in storage – an amount comparable to Lake Mead, America’s largest surface reservoir.   We have sustainably farmed portions of the Cadiz/Fenner Property since the late 1980s in accordance with permits from the County of San Bernardino, the public agency responsible for groundwater use at the Cadiz/Fenner Property. The permits authorize the development of up to 9,600 acres of the Cadiz/Fenner Property for farming and the associated use of underlying groundwater for irrigation.   The Cadiz/Fenner Property is well-suited for various permanent and seasonal crops, and we have successfully grown citrus, organic table grapes and raisins, and seasonal vegetables such as melons, squash and asparagus. Today, we are engaged in agricultural joint ventures at the Cadiz/Fenner Property and are the largest private agricultural operation in San Bernardino County.  Presently, the property has 2,100 acres leased to third parties for cultivation of citrus and 242 acres leased to our joint venture, SoCal Hemp JV LLC, for the cultivation of industrial hemp (see “Agricultural Development”, below).   In addition to our agricultural ventures, we are presently developing the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project” or “Project”), which is approved to capture and conserve millions of acre-feet of native groundwater currently being lost to evaporation from the aquifer system beneath our Cadiz/Fenner Property, and provide 50,000 acre-feet of water per year, enough water for 400,000 people, to water providers throughout Southern California (see “Water Resource Development”, below).  A second phase of the Water Project would offer storage in the aquifer system for up to one million acre-feet of imported water.  Following a multi-year California Environmental Quality Act (“CEQA”) review and permitting process, the Water Project received permits that allow the capture and conservation of 2.5 million acre-feet of groundwater over 50 years in accordance with the terms of a groundwater management plan approved by San Bernardino County.  We believe that the ultimate implementation of the Cadiz Water Project would provide a significant return on our investment and future cash flow.   By making new water supply and storage available in Southern California, we believe we can be part of the solution to the State’s persistent water challenge.  Available water supply in Southern California is constrained every year by regulatory restrictions on each of the State’s three main water sources:  (1) the CRA; (2) the State Water Project, which provides water supplies from Northern California to the central and southern parts of the state;  and (3) the Los Angeles Aqueduct, which delivers water from the eastern Sierra Nevada mountains to Los Angeles.  Southern California’s water providers and farmers rely on imports from these systems to meet demand, but deliveries from all three into the region are consistently below capacity, even in wet years.   Further, the availability of supplies in California differs greatly from year to year due to natural hydrological variability.  Over the last decade, California experienced an historic drought featuring record-low winter precipitation, followed by record wet years.  The 2018-2019 winter was a wet year, with snowpack and rainfall well above average through the summer of 2019, however 2020 is on track to be another dry year, with snowpack at 45% of normal through February. The rapid swings between wet and dry years challenges California’s traditional supply system and supports the need for reliable storage and local supply.   Given the variety of challenges and limitations presented by the State’s existing infrastructure, Southern California water providers and farmers are presently pursuing investments in storage, supply and infrastructure to meet long-term demand and pursuing sustainable water and agriculture sources.  We have a record of sustainable agricultural development and groundwater management to support our continued integration into California’s water and agriculture portfolio.  Our current working capital requirements relate largely to the final development activities associated with the Water Project and those activities consistent with the Water Project related to further development of our land and agricultural assets.  While we continue to believe that the ultimate implementation of the Water Project will provide a significant source of future cash flow, we also believe there is substantial value in our underlying agricultural assets and our current agricultural ventures and lease arrangements.   We also continue to explore additional sustainable beneficial uses of our land and water resource assets, including the marketing of our approved desert tortoise land conservation bank, which is located on our properties outside the Water Project area, and other long-term legacy uses of our properties, such as land stewardship and conservation programs.   Our business strategy has focused on strategic land acquisition, water development activities, agricultural operations, and other holistic land development initiatives to maximize the long-term value of our assets and future prospects (see “Narrative Description of Business”, below).   In the early 1980s, relying on NASA imagery, our founders first identified a unique desert land position at the base of a vast Southern California watershed that offered potential for agricultural development and water supply and storage projects. Our initial focus was on the acquisition of land and the assembly of contiguous land holdings through property exchanges to create a position that could support such projects and development.   We subsequently established limited agricultural operations on our properties in the Cadiz/Fenner Valley relying on ground water resources underlying that site to evaluate the suitability of these properties for sustainable development.  In 1993, we secured permits to develop up to 9,600 acres of agriculture at the Cadiz/Fenner Property and use more than one million acre-feet of groundwater from the underlying aquifer system.  The agricultural operations initially began on 1,900 acres and featured vineyards, citrus orchards and seasonal vegetables.   The agricultural development demonstrated that the geology and hydrology of the property is also uniquely suited and able to support a project that could offer additional water supplies and water storage opportunities in Southern California.  Water supply reliability in California has been challenged by shifting regulatory restrictions on traditional water sources and historic drought and supply cycles.   Following Metropolitan’s decision, we began to pursue new partnerships and redesigned the 2002 Project to meet the changing needs of Southern California’s water providers.  We refocused on the safe and sustainable management of the aquifer system beneath our Cadiz/Fenner Property with the goal of providing a reliable, annual water supply and storage for the region.  Sustainable agricultural development and groundwater use also continued over this period of refocused project development.   In September 2008 we entered into a lease agreement with the Arizona & California Railroad Company (“ARZC”) to utilize its existing right-of-way between the Cadiz property and the CRA to construct a pipeline able to deliver water from the property into the existing Southern California water transportation system. Although the federal government had approved a right-of-way for the 2002 Project’s conveyance pipeline over open federal land, the Water Project proposed co-locating the conveyance pipeline within this existing railroad right-of-way from Cadiz to the CRA near Rice, CA. This route avoided impacts to desert habitats that would have occurred with the 2002 route. In 2009, the United States Department of the Interior evaluated the Water Project’s proposed use of an existing railroad right-of-way for a water conveyance pipeline and summarized that the proposed pipeline was within the scope of the right-of-way and required no federal Bureau of Land Management (“BLM”) permitting.   In 2009, we also commissioned environmental consulting firm CH2M HILL to complete a comprehensive study of the water resources at the Project area.  Following more than one 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 U.S.’s largest surface reservoir.  The study also confirmed that a renewable annual supply of native groundwater in the aquifer system is 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 a water supply and storage project that would capture and conserve groundwater lost to evaporation in an initial phase and import and store water in the aquifer system in a second phase (see “The Water Project” below).   In 2010, following these findings, we announced plans for the permitting and development of the Cadiz Valley Water Conservation, Recovery and Storage Project, a public-private partnership with Southern California water providers (see “The Water Project”, below) to address California’s persistent water supply challenge. The Cadiz Water Project has achieved significant milestones in its development since 2010:   We remain focused on continuing to support our organic and sustainable diversified agricultural operations, and completing remaining milestones required to implement the Water Project.  See “Narrative Description of Business” below for more detail.   Our primary business is to acquire and develop land with water resources for various uses, including groundwater supply, groundwater storage and agriculture.  As a result, our financial results are reported in a single segment.  See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data”.   Our business strategy is to pursue the development of our landholdings for their highest and best uses.  At present, our development activities are focused on water resource and agricultural development.   Our portfolio of land and water resource assets is located in proximity to the Colorado River and the Colorado River Aqueduct (“CRA”), the principal source of imported water for Southern California, and provides us with the opportunity to participate in a variety of water supply, water storage, and conservation programs with public water agencies and other partners to address California’s persistent structural and hydrological water supply challenges.  The Cadiz Water Project   The Water Project is designed to capture and conserve renewable native groundwater currently being lost to evaporation from the aquifer system underlying our Cadiz/Fenner Property, and provide a new reliable water supply for approximately 400,000 people in Southern California.  In this first phase, Phase I, the total quantity of groundwater to be recovered and conveyed to Water Project participants will not exceed a long-term annual average of 50,000 acre-feet per year for 50 years.  The Water Project also offers participants in Phase I the ability to carry-over their annual supply and store it in the groundwater basin from year to year.  Up to 150,000 acre-feet can be stored as part of Phase I.  A second phase of the Water Project, Phase II, will offer an additional 850,000 acre-feet of capacity that can store imported water supplies at the project area for future dry years.   Water Project facilities required for Phase I primarily include, among other things:   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:  Phase I   Phase I has been fully reviewed and permitted in accordance with the California Environmental Quality Act (“CEQA”).  The Project was also separately reviewed and approved by the County of San Bernardino in accordance with its local ordinances regulating groundwater.  The Project presently is permitted to provide an average of 50,000 acre-feet of water for 50 years at Cadiz to meet municipal and industrial (M&I) water needs in Southern California.  The permits also authorize up to 150,000 acre-feet of carry-over groundwater storage, allowing water agencies to hold conserved water in the aquifer system for future dry years.   Construction of the Water Project facilities that would allow for conservation, carry-over storage and delivery of groundwater to public water providers is expected to cost approximately $310 million and will require capital financing that we expect will be secured by definitive Purchase and Sale Agreements with Project participants and the new facility assets.   Prior to construction, the Water Project must (1) finalize contracts with Project participating agencies, (2) finalize arrangements and secure necessary permits and approvals to transport water conserved at Cadiz via water transportation infrastructure and into each participant’s service area, and (3) complete final design and permitting.  Below is a discussion of present activities to advance these objectives.   (1)  Contracts with Public Water Agencies or Private Water Utilities   We have executed Letters of Intent (“LOIs”), option agreements and purchase agreements, or contracts (collectively, “Agreements”) with public water agencies and private water utilities in California during the Project’s development.  These participating agencies serve more than one million customers in cities throughout California’s San Bernardino, Riverside, Los Angeles, Orange, Imperial and Ventura Counties. Twenty percent of Water Project supplies have been reserved for San Bernardino County-based agencies.   Santa Margarita Water District (“SMWD”), Orange County’s second largest water provider, was the first participant to convert its option agreement and adopt resolutions approving a Water Purchase and Sale Agreement for 5,000 acre-feet of water.  The structure of the SMWD purchase agreement calls for an annually adjusted water supply payment, plus a 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.   LOIs that have been entered into since completion of the CEQA review process reserve supplies from the Water Project at $960 per acre-foot (2014 dollars, subject to adjustment).  These LOIs also include the option to reserve carry-over storage capacity for $1,500 per acre-foot prior to construction.   Prior to construction of the Water Project, we expect to convert existing option agreements and LOIs to purchase agreements.  We will work  collaboratively with the participating water agencies to allow for inclusive participation across Southern California.   (2)  Transportation Infrastructure and Conveyance Arrangements   Prior to construction of the Water Project, and in coordination with final participation contracts described in (1) above, we must obtain approvals from government agencies for conveyance of water from our property in Cadiz to water users via the Colorado River Aqueduct (“CRA”).  These approvals include:   In October 2017, the BLM provided a letter finding that the Project’s proposed use of a portion of the ARZC right-of-way from our Cadiz Valley property to Freda, California to construct and operate the Water Project’s water conveyance pipeline and related railroad improvements is within the scope of the original right-of-way grant and not subject to additional permitting.  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. The letter was challenged in Los Angeles Central District Federal Court in 2018 by national environmental organizations, which claimed it violated the law. In a June 2019 procedural ruling, the Court remanded the letter back to BLM, concluding that the agency needed to explain more explicitly why it withdrew and reversed specific findings previously made in 2015 on the same issue. However, the Court did not find that the conclusions of the 2017 evaluation were in error.  On February 7, 2020 we received from the BLM a revised evaluation responsive to the Court’s remand (“2020 Evaluation”). The 2020 Evaluation reaffirmed that the Project’s proposed use of the ARZC right-of-way for the Southern Pipeline and related railroad improvements furthers a railroad purpose and is within the scope of the right-of-way, consistent with BLM’s conclusion in October 2017.  The 2020 Evaluation references an extensive record and sets forth the factual basis for its conclusions in detail while reaffirming the agency’s 2017 finding. We expect the Court will review the 2020 Evaluation this year per its remand order.  Water supplies conserved by the Project would enter the CRA at the termination of the project’s conveyance pipeline near Rice, CA. The CEQA process considered a variety of options to enter the CRA and assumed final entry into the CRA would be determined by MWD in consultation with the Project’s participating agencies. Once arrangements are reached, the Metropolitan Board would take action as a responsible agency under CEQA regarding the terms and conditions of the Water Project’s use of the CRA to transport water to its participating agencies.  There is no application yet before Metropolitan related to entry and transportation of Project supplies, but we expect such a formal application will be filed by SMWD, the Project’s lead agency, when the Project’s contractual arrangements with participants are finalized.  Any agreement as to the terms and conditions of the Water Project's use of the CRA will be negotiated between and entered into by Metropolitan and the Project participating agencies, not the Company.   Water Project supplies entering the CRA will comply with Metropolitan’s published engineering, design and water quality standards and will be subject to all applicable fees and charges routinely established by Metropolitan for the conveyance of water within its service territory.  Groundwater at Cadiz presently meets all state and federal water quality requirements without treatment and total dissolved solids or salts in the Cadiz water supply are substantially lower than the water in the CRA, offering a water quality benefit.  Cadiz water also has no PFAS, a recently added constituent of concern by California water regulators, improving its attractiveness for the service area. Some naturally occurring constituents are lower than State and Federal standards but potentially higher than the water in the CRA; however, based on extensive pilot testing, they can be lowered via treatment to ambient levels or removed entirely. This year-long pilot testing of treatment options at the Project area confirmed the capability of cost-effective treatment technologies.  We believe there are multiple benefits that can be realized by MWD and water users throughout its service area, such as water quality improvements, upon making space reasonably available for Cadiz water supplies and providing the region the flexibility of relying on the Water Project in both wet and dry years.  On July 31, 2019, California Governor Gavin Newsom signed into law Senate Bill 307 (“SB 307”), which added terms to the section of the California Water Code known as the “wheeling statutes” that regulate the conveyance of water by third parties in facilities such as the CRA.  Effective January 1, 2020, the wheeling statutes now include Water Code Section 1815 which requires water projects in a section of the Mojave Desert where our Cadiz Valley property is located to apply for a review by the California State Lands Commission (“SLC”) prior to transporting water in public conveyance facilities. Upon receiving an application, this review will determine whether such projects would have “unreasonable effects on the environment and water dependent ecosystems in the surrounding watersheds.” The review by SLC must be conducted within 15 months of any filed application, with an option to extend an additional 9 months upon public notice and explanation.  Any application to the SLC for review of the Water Project’s plans to convey water in the CRA from the Cadiz/Fenner Property will be accompanied by evidence of the Project’s extensive record of environmental sustainability as well as data and reports that can withstand critical scrutiny.
  In addition to the conveyance arrangements described above, we currently own a 96-mile long, 30-inch wide existing idle natural gas pipeline that extends northwest from the Cadiz/Fenner Property terminating in Barstow, California, and have entered into a purchase agreement for a further 124-mile segment connecting this line from Barstow to Wheeler Ridge, California.  The pipeline crosses San Bernardino, Los Angeles and Kern counties, including the Barstow and Bakersfield areas, which serve as hubs for water delivered from northern and central California to communities in Southern California.

  We do not currently have the cash resources on hand to satisfy the Deferred Payment.  If we do not complete the purchase of the additional 124-mile pipeline, then our Northern Pipeline opportunities will be limited to the 96-mile segment that we own.   Prior to final construction of the Water Project facilities, we must also finalize facility design and acquire relevant construction permits with state and local agencies. Together with SMWD we have engaged engineering and environmental consultants to complete design plans for a water conveyance pipeline, Project wellfield, any necessary water treatment facilities, and facilities required to connect to the Metropolitan system at and near the CRA. This work is ongoing and expected to proceed in coordination with the negotiation of contracts and conveyance arrangements.   In coordination with facility design and layout, we may need to obtain additional permits and approvals from state or local entities prior to construction. This may include, but is not limited to, confirmation of existing access rights, easements and rights-of-way, for areas that may be crossed by Project facilities in the Project area subject to final pipeline configuration.  Phase II     

  Phase II has already been the subject of programmatic environmental review in accordance with CEQA, but still requires project-level environmental review and permitting once participating agencies are identified. Phase II may also require federal permits subject to the National Environmental Policy Act, or NEPA.   Farming is a main driver of the California economy.  According to the California Department of Food and Agriculture, more than one-third of the U.S.’s vegetable crops and two-thirds of its fruits and nuts are grown in California. Additionally, California is the leading U.S. state for cash farm receipts, accounting for over 13% of national agricultural value.   Our Cadiz/Fenner Property, consisting of approximately 34,500 acres of desert land is zoned for agricultural development.  In 1993, we secured conditional use permits to develop agricultural facilities on up to 9,600 acres of the property and withdraw groundwater from the underlying aquifer system for irrigation.  We have since maintained various levels of crops on the Property as we developed the Water Project.  In 2013, we entered into a lease agreement with a third party to develop up to 1,480 acres of lemons at the site, 640 acres of which have been planted to date.   In February 2016, we entered into a lease agreement with Fenner Valley Farms LLC ("FVF"), a subsidiary of Water Asset Management LLC (at the time a related party), pursuant to which FVF leased, for a 99-year term, 2,100 acres at the Cadiz/Fenner property to be used to plant, grow and harvest agricultural crops ("FVF Lease").  As consideration for the lease, FVF paid us a one-time payment of $12,000,000 in February 2016.  Acreage that has been historically farmed and includes infrastructure for farming and the acreage that is leased to a third party to develop lemons was included within the acreage leased to FVF.   As part of the agricultural development to be conducted under the lease arrangements, the groundwater production capacity of the property’s existing well-field will be enhanced through infrastructure improvements that are complementary to the Water Project.  All agricultural production is fully compatible with the Cadiz Water Project. Overlying farming demands will be coordinated with project operations and existing Court-validated permits.   In addition to the Cadiz/Fenner Property, we also own approximately 11,000 acres in two additional locations within the Mojave Desert in eastern San Bernardino County.   Our primary landholding outside of the Cadiz/Fenner 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.  These private properties are proximate to or border areas designated by the federal government as National Monument, Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and are suitable candidates for preservation and conservation (see “Land Conservation Bank”, below).   Additionally, we own approximately 2,000 acres located near Danby Dry Lake in Ward Valley, 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. Certain of the properties in this area may also be suitable for agricultural development and/or preservation and conservation. Approximately 7,500 acres of our properties outside of the Cadiz/Fenner Valley area in the Piute Valley are located within terrain designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and offer limited development opportunities.  In February 2015, the California Department of Fish and Wildlife approved our establishment of the Fenner Valley Desert Tortoise Conservation Bank (“Fenner Bank”), a land conservation bank that makes available these properties for mitigation of impacts to tortoise and other sensitive species that would be caused by development across the Southern California desert.  Under its enabling documents, the Fenner Bank offers credits that can be acquired by entities that must mitigate or offset impacts linked to planned development.  For example, this bank can service the mitigation requirements of renewable energy, military, residential and commercial development projects being considered throughout the desert. Credits sold by the Fenner Bank will fund the permanent preservation of the land as well as research by outside entities, including San Diego Zoo Global, into desert tortoise health and species protection.   The Northern Pipeline asset, described above, also represents new opportunities for the Company independent of the Water Project to offer water transportation to locations along the 220-mile pipeline route that are not presently interconnected by existing water infrastructure.  The existing pipeline crosses California's major water infrastructure as well as urban and agricultural centers and can be re-purposed to transport water, independent of the Water Project, between users who presently lack direct interconnections along the pipeline route. We are presently engaged in discussions with parties that may be interested in such transportation.  The ability to serve points along the 124-mile portion of the pipeline from Barstow to Wheeler Ridge is dependent upon completion of certain conditions precedent under our purchase agreement with EPNG, described above.  If the acquisition of the 124-mile segment is not completed, then our Northern Pipeline opportunities will be limited to the 96-mile segment that we own.   Professional water quality and structural testing of a five-mile segment of the pipeline has been conducted.   The testing resulted in a determination that there were no residual petroleum products in the tested segment and that the pipeline is structurally sound to transport water between Cadiz and Barstow.   Other opportunities in the water and agricultural or related infrastructure business complementary to our current objectives could provide new opportunities for our Company.   We remain committed to the sustainable use of our land, water and infrastructure assets and will continue to explore all opportunities for sustainable development in an environmentally responsible way.  We cannot estimate which of these opportunities will ultimately be realized.   Our water resource development activities are not seasonal in nature.   Our farming operations have been limited to the cultivation of lemons and grapes/raisins and spring and fall plantings of vegetables on the Cadiz Valley properties.  These operations have been subject to the general seasonal trends that are characteristic of the agricultural industry.   We face competition for the acquisition, development and sale of our properties from a number of competitors.  We may also face competition in the development of water resources and agriculture associated with our properties.  Since California has scarce water resources and an increasing demand for available water, we believe that location, price and reliability of delivery are the principal competitive factors affecting transfers of water in California.   As of December 31, 2019, we employed 9 full-time employees (i.e. those individuals working more than 1,000 hours per year).  We believe that our employee relations are good.  The average tenure of our full-time employees is more than 10 years.   Our operations are subject to varying degrees of federal, state and local laws and regulations.  As we proceed with the development of our properties, including the Water Project, we will be required to satisfy various regulatory authorities that we are in compliance with the laws, regulations and policies enforced by such authorities.  Groundwater development, and the export of conserved groundwater for sale to entities such as public water agencies, is subject to regulation by specific existing statutes, in addition to general environmental statutes applicable to all development projects.  Additionally, we must obtain a variety of approvals and permits from state and federal governments with respect to issues that may include environmental issues, issues related to special status species, issues related to the public trust, and others.  Because of the discretionary nature of these approvals and concerns, which may be raised by various governmental officials, public interest groups and other interested parties during both the development and the approval process, our ability to develop properties and realize income from our projects, including the Water Project, could be delayed, reduced or eliminated. Access to Our Information   Our annual, quarterly and current reports, proxy statements and other information are filed with the Securities and Exchange Commission (“SEC”) and are available free of charge through our web site, www.cadizinc.com, as soon as reasonably practical after electronic filing of such material with the SEC.  Our website address provided in this Annual Report on Form 10-K is not intended to function as a hyperlink and the information on our website is not, nor should it be considered, part of this report or incorporated by reference into this report.   Our SEC filings are also available to the public at the SEC website at www.sec.gov.   Our business is subject to a number of risks, including those described below.   At present, our development activities include water resource and agricultural development at our San Bernardino County properties.  We have not received significant revenues from our development activities to date and we do not know when, if ever, we will receive operating revenues sufficient to offset the costs of our development activities.  As a result, we continue to incur a net loss from operations.   We do not know the terms, if any, upon which we may be able to proceed with our water and other development programs or successfully implement our agricultural plans.  Regardless of the form of our development programs, the circumstances under which supplies or storage of water and agriculture can be developed and the profitability of any such project are subject to significant uncertainties, including the risk of variable water supplies and changing water allocation priorities.  Additional risks include our ability to obtain all necessary regulatory approvals and permits, litigation by environmental or other groups, unforeseen technical difficulties, general market conditions for agricultural and water supplies, and the time needed to generate significant operating revenues from such programs after operations commence. The Development of Our Properties Is Heavily Regulated, Requires Governmental Approvals and Permits That Could Be Denied, and May Have Competing Governmental Interests and Objectives   In developing our land assets and related water resources, we are subject to local, state, and federal statutes, ordinances, rules and regulations concerning zoning, resource protection, environmental impacts, infrastructure design, subdivision of land, construction and similar matters.  Our development activities are subject to the risk of adverse interpretations or changes to U.S. federal, state and local laws, regulations and policies.  Further, our development activities require governmental approvals and permits.  If such permits were to be denied or granted subject to unfavorable conditions or restrictions, our ability to successfully implement our development programs would be adversely impacted.     Prior to construction of the Water Project, terms for moving water supplies in the Colorado River Aqueduct must be negotiated with Metropolitan Water District of Southern California (“Metropolitan”), which owns and controls the CRA.  Water Project supplies entering the CRA will comply with Metropolitan’s published engineering, design and water quality standards and will be subject to all applicable fees and charges routinely established by Metropolitan for the conveyance of water within its service territory.  The Metropolitan Board must consider and approve the terms and conditions of the Water Project’s use of the CRA to transport water to its participating agencies.     Finally, the statutes, regulations and ordinances governing the approval processes provide third parties the opportunity to challenge proposed plans and approvals.  Opposition from third parties will cause delays and increase the costs of our development efforts or preclude such development entirely.  While we have worked with representatives of various environmental and third-party interests and agencies to minimize and mitigate the impacts of our planned projects, certain groups may remain opposed to our development plans and pursue legal action.  Our Failure to Make Timely Payments of Principal and Interest on Our Indebtedness or  To Obtain Additional Financing Will Impact our Ability to Implement Our Asset Development Programs   As of December 31, 2019, we had total indebtedness outstanding to our lenders of approximately $137.8 million.  Approximately $72.3 million of our indebtedness is secured by our assets and is due in May 2021 (see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”).  To the extent that we do not make principal and interest payments on the indebtedness when due, or if we otherwise fail to comply with the terms of agreements governing our indebtedness, we may default on our obligations.  Additionally, the completion of the acquisition of the 124-mile extension of our Northern Pipeline will require an $19 million payment within thirty days of satisfaction of certain conditions precedent under our purchase agreement with EPNG.  We do not currently have the cash resources on hand to make this payment in full.   We will continue to require additional working capital to meet our cash resource needs until such time as our asset development programs, including the Water Project, produce revenues sufficient to fund operations.  If we cannot raise funds if and when needed, we might be forced to make substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company.  We cannot assure you that our current lenders, or any other lenders, will give us additional credit should we seek it.  If we are unable to obtain additional credit, we may engage in further financings.  Our ability to obtain financing will depend, among other things, on the status of our asset development programs and general conditions in the capital markets at the time funding is sought.  Any further equity or convertible debt financings would result in the dilution of ownership interests of our current stockholders.   The market price of our common stock is volatile and fluctuates in response to various factors which are beyond our control.  Such fluctuations are particularly common in companies such as ours, which have not generated significant revenues.  The following factors, in addition to other risk factors described in this section, could cause the market price of our common stock to fluctuate substantially:   In addition, the stock markets, from time to time, experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies.  These broad fluctuations may adversely affect the market price of our common stock.  Price volatility could be worse if the trading volume of our common stock is low.   Not applicable at this time.   Following is a description of our significant properties.   We own approximately 35,000 acres of largely contiguous land in the Cadiz and Fenner valleys of eastern San Bernardino County, California (the “Cadiz/Fenner Property”).  This area is located approximately 30 miles north of the Colorado River Aqueduct (“CRA”).  We first began acquiring this land in 1983 and shortly thereafter conducted investigations into the feasibility of agricultural development at these lands and overall access to groundwater.  These investigations confirmed the availability of high-quality groundwater in quantities appropriate for agricultural development.   Additional independent geotechnical and engineering studies conducted since 1985 have confirmed that the Cadiz/Fenner Property overlies a significant aquifer system that would not only support agricultural development, but also is ideally suited for the conservation and recovery of indigenous groundwater, as well as the storage of conserved or imported water, as contemplated by the Water Project.  See Item 1, “Business – Narrative Description of Business – Water Resource Development”.   In addition to the Cadiz/Fenner Valley property, we also own approximately 11,000 additional acres in the eastern Mojave Desert portion of San Bernardino County, California at two separate properties.   The first property consists of 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 proximate to or border areas designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and are suitable candidates for preservation and conservation.  In February 2015, the California Department of Fish and Wildlife approved our establishment of the Fenner Valley Desert Tortoise Conservation Bank on approximately 7,500 acres of our Piute Valley properties.  The Fenner Bank, which is the largest land bank in California dedicated to protecting the desert tortoise, offers credits that can be acquired by public and private entities required to mitigate or offset impacts to the desert tortoise linked to planned development. We are presently marketing these credits to a variety of planned developments in the region.   Additionally, we own nearly 2,000 acres near Danby Dry Lake in Ward Valley, approximately 30 miles southeast of our Cadiz/Fenner landholdings.  Our Danby Dry Lake property is located approximately 10 miles north of the Colorado River Aqueduct.  Initial hydrological studies indicate that it has excellent potential for a water supply project.  Certain of the properties in this area may also be suitable for agricultural development and/or preservation and conservation.   We lease approximately 7,200 square feet of office space in Los Angeles, California for our executive offices.  The lease terminates in August 2020.  Current base rent under the lease is approximately $18,500 per month.   The title of all of our real estate assets are held by Cadiz Real Estate LLC (“Cadiz Real Estate”), a wholly owned subsidiary of Cadiz Inc.  The Board of Managers of Cadiz Real Estate currently consists of two managers appointed by us.  As the ownership of the real estate held by Cadiz Real Estate has no effect on our ultimate beneficial ownership of these assets, we refer throughout this Report to assets owned of record either by Cadiz Real Estate or by us as “our” properties.   Cadiz Real Estate is a co-obligor under our senior secured term loan, for which assets of Cadiz Real Estate have been pledged as security.   Our assets have been pledged as collateral for $72.3 million of senior secured debt outstanding as of December 31, 2019.  Information regarding interest rates and principal maturities is provided in Note 6 to the Consolidated Financial Statements, “Long-Term Debt”.   There are no material legal proceedings pending to which we are a party or of which any of our property is the subject.   Our common stock is currently traded on The NASDAQ Global Market ("NASDAQ") under the symbol "CDZI."  The following table reflects actual sales transactions for the dates that we were trading on NASDAQ, as reported by NASDAQ.

		High				Low
Quarter Ended		Sales Price				Sales Price
2018:
March 31		$	13.70			$	13.05
June 30		$	13.25			$	12.95
September 30		$	11.15			$	10.50
December 31		$	10.45			$	10.11
2019:
March 31		$	9.77			$	9.53
June 30		$	11.39			$	10.88
September 30		$	12.70			$	12.17
December 31		$	11.07			$	10.94

  On March 6, 2020, the high, low and last sales prices for the shares were $10.23, $9.63, and $10.22, respectively.   As of March 6, 2020, the number of stockholders of record of our common stock was 64.   To date, we have not paid a cash dividend on our common stock and do not anticipate paying any cash dividends in the foreseeable future.  Our senior secured term loan has covenants that prohibit the payment of dividends.   All securities sold by us during the three years ended December 31, 2019, which were not registered under the Securities Act of 1933, as amended, have been previously reported in accordance with the requirements of Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

  We are a smaller reporting company as defined by Reg. 240.12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item. ITEM 7.  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 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” above.  Our forward-looking statements are made only as of the date hereof.  We assume no duty to update these forward-looking statements to reflect new, changed or unanticipated events or circumstances, other than as may be required by law.   We are a natural resources development company dedicated to creating sustainable water and agricultural opportunities in California.  We own approximately 45,000 acres of land with high-quality, naturally recharging groundwater resources in three areas of Southern California’s Mojave Desert.  These properties are located in eastern San Bernardino County situated in close proximity to major highway, rail, energy and water infrastructure, including the Colorado River Aqueduct (“CRA”), which is the primary transportation route for water imported into Southern California from the Colorado River.   Our properties offer opportunities for a wide array of sustainable activities including water supply projects, groundwater storage, large-scale agricultural development and land conservation and stewardship programs.  In addition to our land and water assets, we also own pipeline and well infrastructure able to irrigate existing agriculture and to convey water to and from other communities and agricultural ventures that may be short of supply and/or storage.   Our main objective is to realize the highest and best use of our land, water and infrastructure assets in an environmentally responsible way.  We believe that the highest and best use of our assets will be realized through the development of a combination of water supply, water storage and agricultural projects in accordance with a holistic land management strategy.  Our present activities are focused on developing our assets in ways that meet growing long-term demand for access to sustainable water supplies and agricultural products.   Upon our founding in 1983 as Cadiz Land Company, we began an agricultural development on a portion of our primary property in Cadiz, California, which is a 34,500-acre property at the base of the Fenner and Orange Blossom Wash watersheds in eastern San Bernardino County (the “Cadiz/Fenner Property”).  These watersheds span an area of more than 1,300 square miles and have 17 to 34 million acre-feet of fresh, high-quality groundwater in storage – an amount comparable to Lake Mead, America’s largest surface reservoir.   We have sustainably farmed portions of the Cadiz/Fenner Property since the late 1980s in accordance with permits from the County of San Bernardino, the public agency responsible for groundwater use at the Cadiz/Fenner Property. The permits authorize the development of upto 9,600 acres of the Cadiz/Fenner Property for farming and the associated use of underlying groundwater for irrigation.   In addition to our agricultural ventures, we are presently developing the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project” or “Project”), which is approved to capture and conserve millions of acre-feet of native groundwater currently being lost to evaporation from the aquifer system beneath our Cadiz/Fenner Property, and provide 50,000 acre-feet of water per year, enough water for 400,000 people, to water providers throughout Southern California (see “Water Resource Development”, below).  A second phase of the Water Project would offer storage in the aquifer system for up to one million acre-feet of imported water.  Following a multi-year California Environmental Quality Act (“CEQA”) review and permitting process, the Water Project received permits that allow the capture and conservation of 2.5 million acre-feet of groundwater over 50 years in accordance with the terms of a groundwater management plan approved by San Bernardino County.  We believe that the ultimate implementation of the Cadiz Water Project would provide a significant return on our investment and future cash flow.

 

  Our current working capital requirements relate largely to the final development activities associated with the Water Project and those activities consistent with the Water Project related to further development of our land and agricultural assets.  While we continue to believe that the ultimate implementation of the Water Project will provide a significant source of future cash flow, we also believe there is substantial value in our underlying agricultural assets and in our current agricultural ventures and lease arrangements.   We also continue to explore additional sustainable beneficial uses of our land and water resource assets, including the marketing of our approved desert tortoise land conservation bank, which is located on our properties outside the Water Project area, and other long-term legacy uses of our properties, such as land stewardship and conservation programs.   The Water Project is designed to capture and conserve renewable native groundwater currently being lost to evaporation from the aquifer system underlying our Cadiz/Fenner Property and provide a new reliable water supply for approximately 400,000 people in Southern California.  In this first phase, Phase I, the total quantity of groundwater to be recovered and conveyed to Water Project participants will not exceed a long-term annual average of 50,000 acre-feet per year for 50 years.  The Water Project also offers participants in Phase I the ability to carry-over their annual supply and store it in the groundwater basin from year to year.  Up to 150,000 acre-feet can be stored as part of Phase I.  A second phase of the Water Project, Phase II, will offer up to one million acre-feet of storage capacity that can be used to hold water supplies imported to the project area.   Water Project facilities required for Phase I primarily include, among other things:   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:  Phase I   Phase I has been fully reviewed and permitted in accordance with the California Environmental Quality Act (“CEQA”).  The Project was also separately reviewed and approved by the County of San Bernardino in accordance with its local ordinances regulating groundwater.  The Project presently is permitted to provide an average of 50,000 acre-feet of water for 50 years at Cadiz to meet municipal and industrial (M&I) water needs in Southern California.  The permits also authorize up to 150,000 acre-feet of carry-over groundwater storage, allowing water agencies to hold conserved water in the aquifer system for future dry years.   Construction of the Water Project facilities that would allow for conservation, carry-over storage and delivery of groundwater to public water providers is expected to cost approximately $310 million and will require capital financing that we expect will be secured by definitive Purchase and Sale Agreements with Project participants and the new facility assets.   Prior to construction, the Water Project must (1) finalize contracts with Project participating agencies, (2) finalize arrangements and secure necessary permits and approvals to transport water conserved at Cadiz via water transportation infrastructure and into each participant’s service area, and (3) complete final design and permitting.  Below is a discussion of present activities to advance these objectives.   (1)  Contracts with Public Water Agencies or Private Water Utilities   We have executed Letters of Intent (“LOIs”), option agreements and purchase agreements, or contracts (collectively, “Agreements”) with public water agencies and private water utilities in California during the Project’s development.  These participating agencies serve more than one million customers in cities throughout California’s San Bernardino, Riverside, Los Angeles, Orange, Imperial and Ventura Counties. Twenty percent of Water Project supplies have been reserved for San Bernardino County-based agencies.   (2)  Transportation Infrastructure and Conveyance Arrangements

  In addition to the conveyance arrangements described above, we currently own a 96-mile long, 30-inch wide existing idle natural gas pipeline that extends northwest from the Cadiz/Fenner Property terminating in Barstow, California, and have entered into a purchase agreement to a further 124-mile segment connecting this line from Barstow to Wheeler Ridge, California.  The pipeline crosses San Bernardino, Los Angeles and Kern counties, including the Barstow and Bakersfield areas, which serve as a hubs for water delivered from northern and central California to communities in Southern California.   We do not currently have the cash resources on hand to satisfy the Deferred Payment.  If we do not complete the purchase of the additional 124-mile pipeline, then our Northern Pipeline opportunities will be limited to the 96-mile segment that we own.   Our Cadiz/Fenner Property, consisting of approximately 34,500 acres of desert land is zoned for agricultural development.  In 1993, we secured conditional use permits to develop agricultural facilities on up to 9,600 acres of the property and withdraw groundwater from the underlying aquifer system for irrigation.  We have since maintained various levels of crops on the Property as we developed the Water Project.  In 2013, we entered into a lease agreement with a third party to develop up to 1,480 acres of lemons at the site, 640 acres of which have been planted to date.

  In February 2016, we entered into a lease agreement with Fenner Valley Farms LLC ("FVF"), a subsidiary of Water Asset Management LLC (at the time a related party), pursuant to which FVF leased, for a 99-year term, 2,100 acres at the Cadiz/Fenner property to be used to plant, grow and harvest agricultural crops ("FVF Lease").  As consideration for the lease, FVF paid us a one-time payment of $12,000,000 in February 2016.  Acreage that has been historically farmed and includes infrastructure for farming and the acreage that is leased to a third party to develop lemons was included within the acreage leased to FVF.   As part of the agricultural development to be conducted under the lease arrangements, the groundwater production capacity of the property’s existing well-field will be enhanced through infrastructure improvements that are complementary to the Water Project.  All agricultural production is fully compatible with the Cadiz Water Project. Overlying farming demands will be coordinated with project operations and existing Court-validated permits.   In addition to the Cadiz/Fenner Property, we also own approximately 11,000 acres in two additional locations within the Mojave Desert in eastern San Bernardino County.   Our primary landholding outside of the Cadiz/Fenner 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.  These private properties are proximate to or border areas designated by the federal government as National Monument, Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and are suitable candidates for preservation and conservation (see “Land Conservation Bank”, below).   Additionally, we own approximately 2,000 acres located near Danby Dry Lake in Ward Valley, 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. Certain of the properties in this area may also be suitable for agricultural development and/or preservation and conservation.

Land Conservation Bank   Approximately 7,500 acres of our properties outside of the Cadiz/Fenner Valley area in the Piute Valley are located within terrain designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and offer limited development opportunities.  In February 2015, the California Department of Fish and Wildlife approved our establishment of the Fenner Valley Desert Tortoise Conservation Bank (“Fenner Bank”), a land conservation bank that makes available these properties for mitigation of impacts to tortoise and other sensitive species that would be caused by development across the Southern California desert.  Under its enabling documents, the Fenner Bank offers credits that can be acquired by entities that must mitigate or offset impacts linked to planned development.  For example, this bank can service the mitigation requirements of renewable energy, military, residential and commercial development projects being considered throughout the desert. Credits sold by the Fenner Bank will fund the permanent preservation of the land as well as research by outside entities, including San Diego Zoo Global, into desert tortoise health and species protection.   The Northern Pipeline asset, described above, also represents new opportunities for the Company independent of the Water Project to offer water transportation to locations along the 220-mile pipeline route that are not presently interconnected by existing water infrastructure.  The existing pipeline crosses California's major water infrastructure as well as urban and agricultural centers and can be re-purposed to transport water, independent of the Water Project, between users who presently lack direct interconnections along the pipeline route. We are presently engaged in discussions with parties that may be interested in such transportation.  The ability to serve points along the 124-mile portion of the pipeline from Barstow to Wheeler Ridge is dependent upon completion of certain conditions precedent under our purchase agreement with EPNG, described above.  If the acquisition of the 124-mile segment is not completed, then our Northern Pipeline opportunities will be limited to the 96-mile segment that we own.   Professional water quality and structural testing of a five-mile segment of the pipeline has been conducted.   The testing resulted in a determination that there were no residual petroleum products in the tested segment and that the pipeline is structurally sound to transport water between Cadiz and Barstow.   Other opportunities in the water and agricultural or related infrastructure business complementary to our current objectives could provide new opportunities for our Company.   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 at our properties may become attractive.   We remain committed to the sustainable use of our land, water and infrastructure assets and will continue to explore all opportunities for sustainable development in an environmentally responsible way. We cannot estimate which of these opportunities will ultimately be realized.

  We have not received significant revenues from our water resource and real estate development activities to date.  Our revenues have been limited to rental income from the FVF Lease (see “Agricultural Development”, above).  As a result, we have historically incurred a net loss from operations.  The net loss totaled $29.5 million for the year ended December 31, 2019, compared with a net loss of $26.3 million for the year ended December 31, 2018.  The higher loss in 2019 was primarily related to higher general and administrative expenses related to our water development efforts, higher proxy costs, higher interest expense and a recorded loss on investment related to a new joint venture (see “Agricultural Development”, above), partially offset by $1.5 million in unrealized gains recorded for warrant liabilities in 2018.  The underlying warrants were reclassified to equity on January 1, 2019 upon adoption of the related accounting standard (see Note 2 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies”).   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 expense in connection with our management and director equity incentive compensation plans.  Revenues.  Revenue totaled $441 thousand during the year ended December 31, 2019, compared to $440 thousand during the year ended December 31, 2018.  The revenue is primarily related to rental income from the FVF Lease (see “Agricultural Development”, above).  General and Administrative Expenses.  General and administrative expenses during the year ended December 31, 2019, totaled $12.2 million compared with $11.4 million for the year ended December 31, 2018.  Non-cash compensation costs related to stock and option awards are included in general and administrative expenses.   Compensation costs from stock and option awards for the year ended December 31, 2019, totaled $0.6 million compared with $0.5 million for the year ended December 31, 2018.  Depreciation.  Depreciation expense totaled $265 thousand for the year ended December 31, 2019, and $258 thousand for the year ended December 31, 2018.  Interest Expense.  Interest expense totaled $17.1 million during the year ended December 31, 2019, compared to $15.3 million during the year ended December 31, 2018.  The following table summarizes the components of net interest expense for the two periods (in thousands):

 

		Year Ended December 31,
		2019				2018
Interest on outstanding debt		$	13,097			$	12,594
Unrealized gains on warrants			-				(1,522	)
Amortization of debt discount			3,894				4,095
Amortization of deferred loan costs			81				103
		$	17,072			$	15,270

  The interest on outstanding debt increased from $12.6 million to $13.1 million due to  compounded interest on a larger credit facility associated with our May 2017 debt refinancing.   Additionally, during the year ended December 31, 2018, the Company recorded net unrealized gains on warrants of $1.5 million (see Note 6 to the Consolidated Financial Statements, “Long-Term Debt)”.  The underlying warrants were reclassified to equity on January 1, 2019 upon adoption of the related accounting standard (see Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies”).  Interest Income.  Interest income totaled $226 thousand during the year ended December 31, 2019, and $223 thousand for the year ended December 31, 2018.   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 and private equity placements.   In November 2018, we entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $25 million from time to time in an “at-the-market” offering (the “November 2018 ATM Offering”).  As of December 31, 2019, the Company issued 1,960,178 shares of common stock in the November 2018 ATM Offering for gross proceeds of $21.0 million and aggregate net proceeds of approximately $20.3 million.  The November 2018 ATM offering was completed in March 2020 (see Note 14 to the Consolidated Financial Statements, “Subsequent Events”).

  In May 2017, we entered into a new $60 million credit agreement with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced our then existing $45 million senior secured mortgage debt and provided $15 million of new senior debt to fund immediate construction related expenditures (“Senior Secured Debt”).  The Senior Secured Debt and the 7.00% Convertible Senior Notes due March 2020 (“Convertible Senior Notes”) 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 Senior Secured Debt 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 December 31, 2019, we were in compliance with our debt covenants.  In March 2020, all Convertible Senior Notes were either converted into common stock pursuant to the terms of the existing Indenture or exchanged for a new Preferred Stock.  Additionally, we entered into an agreement with Apollo that allows us to extend the maturity of the Apollo debt for an additional year from its current maturity of May 2021 to May 2022 at our option (see Note 14 to the Consolidated Financial Statements, “Subsequent Events”).   Limitations on our liquidity and ability to raise capital may adversely affect us.  Sufficient liquidity is critical to meet our resource development activities.  As discussed further in “Outlook” below, we do not have adequate resources on hand to complete the acquisition of the 124-mile extension of our Northern Pipeline, which will require a $19 million payment within one hundred and eighty days of satisfaction of certain conditions precedent under our purchase agreement with EPNG.  To the extent additional capital is required, we may increase liquidity through a variety of means, including equity or debt placements, through the lease, sale or other disposition of assets or reductions in operating costs.  If additional capital is required, no assurances can be given as to the availability and terms of any new financing.   At December 31, 2019, we had no outstanding credit facilities other than the Senior Secured Debt and the Convertible Senior Notes.  Cash Used for Operating Activities.  Cash used for operating activities totaled $13.7  million for the year ended December 31, 2019, and $12.2 million for the year ended December 31, 2018.  The cash was primarily used to fund general and administrative expenses related to our water development efforts.  Cash Used For Investing Activities.  Cash used for investing activities in the year ended December 31, 2019, was $2.5 million, compared with $3.7 million for the year ended December 31, 2018.  The costs consisted of engineering and design related to the development of the Water Project.  In addition, the 2019 period included additions to our interest in SoCal Hemp JV LLC (see “Agricultural Development”, above) and the 2018 period included investments in the Northern Pipeline (see “Water Resource Development”, above).  Cash Provided by Financing Activities.  Cash provided by financing activities totaled $19.3 million for the year ended December 31, 2019, compared with cash provided by financing activities of $15.4 million for the year ended December 31, 2018.  Proceeds from financing activities for both periods reported are related to the issuance of shares under at-the-market offerings.

 Short-Term Outlook.  Principal and interest payments aggregating approximately $65.5 million at December 31, 2019 that were due in March 2020 were either converted into common stock pursuant to the terms of the existing Indenture or exchanged for a new Preferred Stock (see Note 14 to the Consolidated Financial Statements, “Subsequent Events”).  Additionally, we entered into an agreement that allows us to extend the contractual May 2021 maturity of our Senior Secured Debt of approximately $72.3 million as of December 31, 2019 until May 2022 at our option (see Note 14 to the Consolidated Financial Statements, “Subsequent Events”).  As such, we currently have no near-term debt maturity obligations.  However, in order to complete our acquisition of an additional 124-mile extension of our Northern Pipeline, we will require a further $19 million payment that will be due within 180 days upon completion of certain conditions precedent under our purchase agreement with EPNG (see “Water Resource Development”, above).  If the acquisition of the 124-mile segment is not completed, then our Northern Pipeline opportunities will be limited to the 96-mile segment we already own.  As 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”, below).  No assurances can be given, however, as to the availability or terms of any new financing.   We are evaluating the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis.  We may meet any future cash requirements through a variety of means, including equity or debt placements, or through the sale or other disposition of assets.  Equity placements would be undertaken only to the extent necessary, so as to minimize the dilution effect of any such placements upon our existing stockholders.  No assurances can be given, however, as to the availability or terms of any new financing.  Limitations on our liquidity and ability to raise capital may adversely affect us.  Sufficient liquidity is critical to meet our resource development activities.   As discussed in Note 2 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies”, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements and related footnotes.  In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements based on all relevant information available at the time and giving due consideration to materiality.  However, application of these policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.  Management has concluded that the following critical accounting policies described below affect the most significant judgments and estimates used in the preparation of the consolidated financial statements.

  (1)  Intangible and Other Long-Lived Assets.  Property, plant and equipment, intangible and certain other long-lived assets are depreciated or amortized over their useful lives.  Useful lives are based on management’s estimates of the period over which the assets will generate revenue.  (2) Valuation of Goodwill and Long-Lived Assets.  The Company assesses long-lived assets, excluding goodwill, for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable through the estimated undiscounted future cash flows resulting from the use of the assets. If it is determined that the carrying value of long-lived assets may not be recoverable, the impairment is measured by using the projected discounted cash-flow method.   The Company performs an annual impairment test to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any) for the Company.  This quantitative assessment is performed at least annually and compares a reporting unit’s fair value to its carrying amount to determine if there is a potential impairment.  An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.  No impairment charge was recorded during the current fiscal year.  (3)  Deferred Tax Assets and Valuation Allowances.  To date, the Company has not generated significant revenue from its water development programs, and it has a history of net operating losses.  As such, the Company has generated significant deferred tax assets, including large net operating loss carryforwards for federal and state income taxes for which it has recorded a full valuation allowance.  Management is currently working on water storage, water supply, and agricultural projects, including the Water Project, that are designed to generate future taxable income, although there can be no guarantee that this will occur.  If taxable income is generated in future years, some portion or all of the valuation allowance will be reversed, and an increase in net income would consequently be reported.   As of December 31, 2019, all options outstanding are fully vested; therefore, there is no potential impact of forfeitures.   See Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies”.

(e)     Off Balance Sheet Arrangements   The Company does not have any off-balance sheet arrangements at this time.

  Not applicable.   Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the criteria in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2019.  The effectiveness of our internal control over financial reporting as of December 31, 2019, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

  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 control over financial reporting that occurred during the last fiscal quarter ended December 31, 2019, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2019.   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2019.   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2019.   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2019.   The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2019.

PART IV

ITEM 15.  Exhibits, Financial Statement Schedules

The following exhibits are filed or incorporated by reference as part of this Form 10-K.

ITEM 16.  Form 10-K Summary

None.

SIGNATURES

CADIZ INC.
By:	/s/ Scott S. Slater
	Scott S. Slater,
	Chief Executive Officer
Date:	March 13, 2020

Name and Position	Date
/s/ Keith Brackpool	March 13, 2020
Keith Brackpool, Chairman
/s/ Scott S. Slater	March 13, 2020
Scott S. Slater, Chief Executive Officer, President and Director (Principal Executive Officer)
/s/ Timothy J. Shaheen	March 13, 2020
Timothy J. Shaheen, Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Maria Echaveste	March 13, 2020
Maria Echaveste, Director
/s/ Geoffrey T. Grant	March 13, 2020
Geoffrey T. Grant, Director
/s/ Winston H. Hickox	March 13, 2020
Winston H. Hickox, Director
/s/ Murray H. Hutchison	March 13, 2020
Murray H. Hutchison, Director
/s/ Stephen E. Courter	March 13, 2020
Stephen E. Courter, Director
/s/ Richard Nevins	March 13, 2020
Richard Nevins, Director
/s/ Carolyn Webb de Macias	March 13, 2020
Carolyn Webb de Macias, Director

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations and Comprehensive Loss for each of the two years in the period ended December 31, 2019	F-4
Consolidated Balance Sheets as of December 31, 2019 and 2018	F-5
Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2019	F-6
Consolidated Statements of Stockholders’ Deficit for each of the two years in the period ended December 31, 2019	F-7
Notes to the Consolidated Financial Statements	F-8

		December 31,
(In thousands, except per share data)		2019				2018
Total revenues (rental income)		$	441			$	440
Costs and expenses:
General and administrative			12,165				11,402
Depreciation			265				258
Total costs and expenses			12,430				11,660
Operating loss			(11,989	)			(11,220	)
Interest expense			(17,072	)			(15,270	)
Interest income			226				223
Debt conversion expense			(197	)			-
Loss before income taxes			(29,032	)			(26,267	)
Income tax expense			(6	)			(6	)
Loss from equity-method investments			(490	)			-
Net loss and comprehensive loss		$	(29,528	)		$	(26,273	)
Basic and diluted net loss per share		$	(1.11	)		$	(1.09	)
Weighted-average shares outstanding			26,549				23,998

		December 31,
($ in thousands, except per share data)		2019				2018
ASSETS
Current assets:
Cash and cash equivalents		$	15,682			$	12,558
Accounts receivable			49				38
Prepaid expenses and other			386				408
Total current assets			16,117				13,004
Property, plant, equipment and water programs, net			49,947				46,619
Long-term deposit/prepaid expenses			2,000				2,000
Equity-method investments			729				-
Goodwill			3,813				3,813
Other assets			4,118				3,873
Total assets		$	76,724			$	69,309
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable		$	194			$	225
Accrued liabilities			4,536				2,070
Current portion of long-term debt			31				59
Warrant liabilities			-				865
Other liabilities			44				923
Total current liabilities			4,805				4,142
Long-term debt			137,565				136,246
Long-term lease obligations with related party, net			15,707				14,411
Deferred revenue			750				750
Other long-term liabilities			15				-
Total liabilities			158,842				155,549
Commitments and contingencies (Note 11)
Stockholders' deficit:
Common stock - $0.01 par value; 70,000,000 shares authorized; shares issued and outstanding: 28,480,567 at December 31, 2019, and 24,654,911 at December 31, 2018			285				247
Additional paid-in capital			419,194				383,521
Accumulated deficit			(501,597	)			(470,008	)
Total stockholders' deficit			(82,118	)			(86,240	)
Total liabilities and stockholders' deficit		$	76,724			$	69,309

		Year Ended December 31,
($ in thousands)		2019				2018
Cash flows from operating activities:
Net loss		$	(29,528	)		$	(26,273	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation			265				258
Unrealized gain on warrant derivative liabilities			-				(1,522	)
Amortization of deferred loan costs			81				103
Amortization of debt discount			3,856				3,920
Interest expense added to loan principal			10,031				9,767
Interest expense added to lease liability			1,272				1,111
Loss on equity method investments			490				-
Loss on debt conversions			38				175
Debt conversion expense			197				-
Compensation charge for stock awards and share options			562				473
Changes in operating assets and liabilities:
Accounts receivable			(11	)			(2	)
Prepaid expenses and other current assets			22				3
Other assets			(186	)			73
Accounts payable			(68	)			(98	)
Accrued and other liabilities			(729	)			(181	)
Net cash used for operating activities			(13,708	)			(12,193	)
Cash flows from investing activities:
Additions to long-term deposit			-				(2,000	)
Contributions and advances to equity-method investments			(904	)			-
Additions to property, plant and equipment			(1,599	)			(1,726	)
Net cash used for investing activities			(2,503	)			(3,726	)
Cash flows from financing activities:
Net proceeds from issuance of common stock			19,395				15,503
Principal payments on long-term debt			(59	)			(56	)
Net cash provided by financing activities			19,336				15,447
Net increase (decrease) in cash and cash equivalents and restricted cash			3,125				(472	)
Cash and cash equivalents and restricted cash, beginning of period			12,691				13,163
Cash and cash equivalents and restricted cash, end of period		$	15,816			$	12,691

										Additional								Total
		Common Stock								Paid-in				Accumulated				Stockholders’
($ in thousands)		Shares				Amount				Capital				Deficit				Deficit
Balance as of December 31, 2017			22,987,434			$	230			$	364,806			$	(443,735	)		$	(78,699	)
Issuance of shares pursuant to ATM offerings			1,256,824				13				15,490				-				15,503
Issuance of shares pursuant to bond conversions			376,463				4				2,752				-				2,756
Stock compensation expense			34,190				-				473				-				473
Net loss			-				-				-				(26,273	)			(26,273	)
Balance as of December 31, 2018			24,654,911				247				383,521				(470,008	)			(86,240	)
Issuance of shares pursuant to ATM offerings			1,863,072				19				19,376				-				19,395
Issuance of shares pursuant to bond conversions			1,918,444				19				12,809				-				12,828
Reclassification of warrant liability to additional paid-in capital(1)			-				-				2,896				(2,031	)			865
Impact of warrant down-round feature			-				-				30				(30	)			-
Stock compensation expense			44,140				-				562				-				562
Net loss			-				-				-				(29,528	)			(29,528	)
Balance as of December 31, 2019			28,480,567			$	285			$	419,194			$	(501,597	)		$	(82,118	)

Reclassifications Property, Plant, Equipment and Water Programs Income Taxes

Cash, Cash Equivalents and Restricted Cash		December 31, 2019				December 31, 2018
(in thousands)
Cash and Cash Equivalents		$	15,682			$	12,558
Restricted Cash included in Other Assets			134				133
Cash, Cash Equivalents and Restricted Cash in the Consolidated Statement of Cash Flows		$	15,816			$	12,691

  In December 2019, FASB issued an accounting standards update which reduces complexity in accounting standards by removing certain exceptions to the general principles in Topic 740.  This update is effective for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years, with early adoption permitted.  The Company is currently assessing this new guidance and expects this new standard will not have a material impact on the consolidated financial statements.   In July 2017, the FASB issued an accounting standards update to provide new guidance for the classification analysis of certain equity-linked financial instruments, or embedded features, with down round features, as well as clarify existing disclosure requirements for equity-classified instruments. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The Company adopted this guidance on January 1, 2019.  As a result, the Company reclassified a warrant liability in the amount of $865 thousand to additional paid-in capital, as the Company’s Warrant no longer met the definition of a derivative.  In addition, during the years ended December 31, 2018 and 2017, the Company recognized annual gains of $1.5 million and $0.5 million, respectively, related to the historical remeasurement of the warrant derivative liability at fair value.  Upon adoption of this guidance as of January 1, 2019, the Company recorded $2.0 million in additional paid-in capital with a corresponding adjustment to the opening balance of accumulated deficit related to these previously recorded gains.

		December 31,
		2019				2018
Land and land improvements		$	25,064			$	25,064
Water programs			27,127				23,812
Buildings			1,576				1,572
Leasehold improvements			570				570
Furniture and fixtures			461				461
Machinery and equipment			1,543				1,422
Construction in progress			299				146
			56,640				53,047
Less accumulated depreciation			(6,693	)			(6,428	)
		$	49,947			$	46,619

	December 31,
	2019				2018
Prepaid rent		$	3,925			$	3,740
Right-of-use asset			59				-
Security deposits			134				133
		$	4,118			$	3,873

NOTE 5 – ACCRUED LIABILITIES

		December 31,
		2019				2018
Payroll, bonus, and benefits		$	628			$	1,163
Legal and consulting			510				405
Stock-based compensation			71				71
Well Development			1,038				-
Northern Pipeline Quality Test			1,868				-
Other accrued expenses			421				431
		$	4,536			$	2,070

		December 31,
		2019				2018
Senior secured debt due May 25, 2021    Interest accrues at 8% per annum		$	72,341			$	67,401
Convertible note instrument due March 5, 2020     Interest accrues at 7% per annum			65,514				73,158
Other loans			45				104
Debt discount and debt issuance costs, net of accumulated accretion			(304	)			(4,358	)
Total outstanding long-term debt			137,596				136,305
Less current portion			31				59
Total outstanding debt		$	137,565			$	136,246

  Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2019, are as follows:

Year Ending December 31		($ in thousands)
2020		$	65,545
2021			72,355
2022			-
2023			-
2024+			-
Total		$	137,900

  In conjunction with the closing of the Senior Secured Debt in May 2017, the Company issued to its lender a warrant to purchase an aggregate 362,500 shares of its common stock (“Warrant”).  The warrant has a five-year term and had an initial exercise price of $14.94 per share, subject to adjustment.  The warrant exercise price was further modified in connection with the Extension Option described above (see Note 14, “Subsequent Events”). NOTE 7 – INCOME TAXES

		December 31,
		2019				2018
Deferred tax assets:
Net operating losses		$	70,202			$	65,852
Fixed asset basis difference			4,547				4,551
Contributions carryover			30				32
Deferred compensation			1,098				1,073
Accrued liabilities			271				492
Total deferred tax assets			76,148				72,000
Valuation allowance for deferred tax assets			(76,148	)			(72,000	)
Net deferred tax asset		$	-			$	-

  The valuation allowance increased $4,148,000 and $5,563,000 in 2019 and 2018, respectively.  The change in deferred tax assets resulted from current year net operating losses and changes to future tax deductions resulting from expiring net operating losses, terms of stock compensation plans, fixed assets, and accrued liabilities.   One of the tax law changes in the 2017 Tax Reform Act was to reduce the effective federal corporate tax rate to 21%, effective January 1, 2018.

		Year Ended December 31,
		2019				2018				2017
Expected federal income tax benefit:     (2019 & 2018 at 21%; 2017 at 34%)		$	(6,200	)		$	(5,516	)		$	(11,477	)
Loss with no tax benefit provided			2,508				4,175				8,156
State income tax			6				6				4
Expiring carryforwards			2,427				-				-
Non-deductible expenses and other			1,265				1,341				3,321
Income tax expense		$	6			$	6			$	4

  For consultants of the Company, the fair value of each option granted under the 2009 Equity Incentive Plan is estimated at each reporting period using the Black-Scholes option pricing model and recorded as a liability until the award is settled.

										Average				Aggregate
						Weighted-				Remaining				Intrinsic
						Average				Contractual				Value
		Shares				Exercise Price				Term				($000’s)
Outstanding at January 1, 2018			507,500			$	11.66				2.3			$	3,934
Granted			-			$	-
Forfeited, Expired or canceled			15,000			$	11.75							$	100
Exercised			-			$	-
Outstanding at December 31, 2018			492,500			$	11.66				1.3			$	3,834
Granted			-			$	-
Forfeited, Expired or canceled			-			$	-							$	-
Exercised			-			$	-
Outstanding at December 31, 2019			492,500	(a)		$	11.66				0.3			$	3,834
Options exercisable at December 31, 2019			492,500			$	11.66				0.3			$	3,834
Weighted-average years of remaining contractual life of options outstanding at December 31, 2019			0.3

					Weighted-
					Average
					Grant-date
	Shares				Fair Value
Nonvested at December 31, 2017			8,694			$	13.81
Granted			35,720			$	12.67
Forfeited or canceled			-			$	-
Vested			(34,190	)		$	12.94
Nonvested at December 31, 2018			10,224			$	12.71
Granted			49,228			$	10.76
Forfeited or canceled			-			$	-
Vested			(44,140	)		$	11.33
Nonvested at December 31, 2019			15,312			$	10.45

Activity	Balance Sheet Location		Balance
ROU assets	Other assets		$	59
Short-term lease liability	Other liabilities		$	44
Long-term lease liability	Other long-term liabilities		$	15

2020			46
2021			15
Total lease payments			61
Less:  Imputed interest			(2	)
Present value of lease payments			59
Less:  current maturities of lease obligations			(44	)
Long-term lease obligations		$	15

Weighted Average Remaining Lease Term
Operating leases		1 year
Weighted Average Discount Rate
Operating leases			6	%

  Under the FVF Lease Agreement, the Company has a repurchase option to terminate the lease at any time during the twenty (20) year period following the effective date of the lease (“Termination Option Period”) upon (1) repayment of the one-time $12 million lease payment plus a ten percent (10%) compounded annual return (provided that the amount of such payment shall be not less than $14,400,000), (2) reimbursement of water-related infrastructure on the leased property plus 8% per annum as well as the actual costs of any farming-related infrastructure installed on the leased property and (3) reimbursement of certain pipeline-related development expenses, working in coordination with Cadiz, not to exceed $3,000,000 (such payments, the “ Termination Payments “).  If (x) Cadiz does not exercise its termination right within such 20-year period or (y) the Agent under Cadiz’s credit agreement declares an event of default under Cadiz’s Senior Secured Debt and accelerates the indebtedness due and owing thereunder by Cadiz (or such indebtedness automatically accelerates under the terms of Cadiz’s Senior Secured Debt), then the lessee may purchase the leased property for $1.00.  The Company has recorded the one-time payment of $12 million, before legal fees, paid by FVF as a long-term lease liability.  The Company’s consolidated statement of operations reflects a net charge equal to a 10% finance charge compounding annually over the 20-year Termination Option Period.  The net charge to the consolidated statement of operations reflects (1) rental income associated with the use of the land by FVF over the 20-year termination option period and (2) interest expense at a market rate reflective of a 20-year secured loan transaction. As a result of this transaction, the Company incurred approximately $490 thousand of legal fees which was recorded as a debt discount and is being amortized over the 20-year Termination Option Period.

	Derivatives at Fair Value as of December 31, 2018
(in thousands)	Level 1				Level 2					Level 3				Total
Warrant liabilities			-				-				(865	)			(865	)
Total warrant liabilities		$	-			$	-			$	(865	)		$	(865	)

		Level 3 Liabilities
(in thousands)		Warrant Liabilities
Balance at January 1, 2018		$	2,387
Unrealized gains, net			(1,522	)
Balance at December 31, 2018		$	865
Reclassification of warrant liability to additional paid-in capital upon adoption of ASU 2017-11			(865	)
Balance at December 31 ,2019		$	-

NOTE 15 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(in thousands, except per share data)
	Quarter Ended
	March 31,			June 30,			September 30,			December 31,
	2019			2019			2019			2019
Revenues	$	109		$	111		$	110		$	111
Gross profit		109			111			110			111
Operating loss		(2,881	)		(3,240	)		(2,956	)		(2,912	)
Net loss		(7,260	)		(7,476	)		(7,444	)		(7,348	)
Basic and diluted net loss per common share	$	(0.29	)	$	(0.28	)	$	(0.28	)	$	(0.27	)
	Quarter Ended
	March 31,			June 30,			September 30,			December 31,
	2018			2018			2018			2018
Revenues	$	108		$	109		$	112		$	111
Gross profit (loss)		108			109			112			111
Operating loss		(2,486	)		(2,255	)		(2,488	)		(3,992	)
Net loss		(5,971	)		(6,032	)		(6,240	)		(8,030	)
Basic and diluted net loss per common share	$	(0.26	)		(0.25	)	$	(0.26	)	$	(0.33	)