Securities and Exchange Commission Washington, D. C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from..to... Commission File Number 0-12114 ------------------------- Cadiz Inc. (Exact name of registrant specified in its charter) DELAWARE 77-0313235 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Wilshire Boulevard, Suite 1600 Santa Monica, CA 90401-1111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 899-4700 Securities Registered Pursuant to Section 12(b) of the Act: None ------------------------------- Name of Each Exchange Title of Each Class on Which registered ------------------- ----------------- None None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No____ The number of shares outstanding of each of the Registrant's classes of Common Stock at May 10, 2001 was 35,792,872 shares of Common Stock, par value $0.01. CADIZ INC. INDEX For the Three Months Ended March 31, 2001 Page PART I - FINANCIAL INFORMATION 1. CADIZ INC. CONSOLIDATED FINANCIAL STATEMENTS Statement of Operations for the three months ended March 31, 2001 and 2000. . . . . . . . . . . . . . . . . . . . 2 Balance Sheet as of March 31, 2001 and December 31, 2000. . . . . . . . . . . . . . . . . . . . . . . 3 Statement of Cash Flows for the three months ended March 31, 2001 and 2000. . . . . . . . . . . . . . . . . . . . 4 Statement of Stockholders' Equity for the three months ended March 31, 2001. . . . . . . . . . . . . . . 5 Notes to the Consolidated Financial Statements. . . . . . . . . . 6 SUN WORLD INTERNATIONAL, INC. CONSOLIDATED FINANCIAL STATEMENTS Statement of Operations for the three months ended March 31, 2001 and 2000. . . . . . . . . . . . . . . . . 13 Balance Sheet as of March 31, 2001 and December 31, 2000. . . . . . . . . . . . . . . . . . . . . . . 14 Statement of Cash Flows for the three months ended March 31, 2001 and 2000. . . . . . . . . . . . . . . . . 15 Statement of Stockholder's Equity for the three months ended March 31, 2001. . . . . . . . . . . . . . . 16 Notes to the Consolidated Financial Statements. . . . . . . . . . 17 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . .. . . . . . . . . . . . . . . . . . . . . . . 19 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . . . .27 PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . .28 CADIZ INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) For the Three Months Ended March 31, 2001 2000 ---- ---- ($ in thousands except per share data) Revenues $ 7,371 $ 7,936 Special litigation recovery 7,929 - ------- ------- Total Revenues 15,300 7,936 ------- ------- Costs and expenses: Cost of sales 7,941 8,491 General and administrative 3,279 2,912 Special litigation - 173 Non-recurring compensation expense (Note 4) 5,537 - Depreciation and amortization 834 700 ------- ------- Total costs and expenses 17,591 12,276 ------- ------- Operating loss (2,291) (4,340) Interest expense, net 4,688 4,502 ------- ------- Net loss (6,979) (8,842) Less:Preferred stock dividends 113 - Imputed dividend on preferred stock 73 - ------- ------- Net loss applicable to common stock $(7,165) $(8,842) ======= ======= Basic and diluted net loss per common share $ (.20) $(.25) ======== ======= Basic and diluted weighted average shares outstanding 35,691 35,219 ======= ======= See accompanying notes to the consolidated financial statements. CADIZ INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) March 31, December 31 2001 2000 ---- ---- ($ in thousands) ASSETS Current assets: Cash and cash equivalents $ 335 $ 4,768 Accounts receivable, net 5,862 7,884 Inventories 22,212 15,203 Prepaid expenses and other 723 631 -------- -------- Total current assets 29,132 28,486 Property, plant, equipment and water programs, net 166,979 164,824 Other assets 11,554 11,784 ------- -------- $ 207,665 $ 205,094 ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,590 $ 9,377 Accrued liabilities 7,780 5,815 Revolving credit facility 3,625 - Long-term debt, current portion 24,908 859 -------- ------- Total current liabilities 43,903 16,051 Long-term debt 121,568 145,610 Deferred income taxes 5,447 5,447 Other liabilities 458 313 Commitments and contingencies Series D redeemable convertible preferred stock - $0.01 par value: 5,000 shares authorized; shares issued and outstanding - 5,000 at March 31, 2001 and December 31, 2000 4,024 3,950 Stockholders' equity: Common stock - $.01 par value; 70,000,000 shares authorized; shares issued and outstanding 35,709,924 at March 31, 2001 and 35,674,674 at December 31, 2000 357 357 Additional paid-in capital 148,227 142,706 Accumulated deficit (116,319) (109,340) -------- ------- Total stockholders' equity 32,265 33,723 -------- -------- $ 207,665 $ 205,094 ======== ======== See accompanying notes to the consolidated financial statements. CADIZ INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2001 2000 ---- ---- ($ in thousands) Cash flows from operating activities: Net loss $(7,165) $(8,842) Adjustments to reconcile net loss from operations to cash used for operating activities: Depreciation and amortization 1,529 1,303 Gain on sale of assets (6) (20) Land received in litigation recovery (2,000) - Share of partnership operations - (31) Stock earned for services (313) (313) Deferred stock compensation 117 - Non-recurring compensation 5,537 - Changes in operating assets and liabilities: Decrease in accounts receivable 2,022 1,439 Increase in inventories (5,597) (9,051) (Increase) decrease in prepaid expenses and other (92) 17 (Decrease) increase in accounts payable (1,787) 1,702 Increase in accrued liabilities 1,853 1,824 Increase (decrease) in other liabilities 28 (5) --------- --------- Net cash used for operating activities (5,874) (11,977) ------- -------- Cash flows from investing activities: Additions to property, plant and equipment (479) (449) Proceeds from disposal of property, plant and equipment 7 38 Additions to water programs (439) (297) Additions to developing crops (805) (1,278) Increase in other assets (172) (118) ------- ------- Net cash used for investing activities (1,888) (2,104) ------- -------- Cash flows from financing activities: Net proceeds from issuance of stock 170 174 Principal payments on long-term debt (466) (177) Net proceeds from short-term debt 3,625 10,100 ------- ------- Net cash provided by financing activities 3,329 10,097 ------- ------- Net decrease in cash and cash equivalents (4,433) (3,984) Cash and cash equivalents, beginning of period 4,768 4,537 ------- -------- Cash and cash equivalents, end of period $ 335 $ 553 ======= ======= See accompanying notes to the consolidated financial statements. CADIZ INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) For the Three Months Ended March 31, 2001 ($ in thousands) Total Additional Stock- Common Stock Paid-in Accumulated holders' Shares Amount Capital Deficit Equity ----- ----- ------ ------ ----- Balance as of December 31, 2000 35,674,674 $ 357 $ 142,706 $(109,340) $33,723 Exercise of stock options 35,250 - 170 - 170 Non-recurring compensation - - 5,537 - 5,537 Imputed dividend on preferred stock - - (73) - (73) Accrued preferred stock dividends - - (113) - (113) Net loss - - - (6,979) (6,979) --------- ----- ------- -------- ------ Balance as of March 31, 2001 35,709,924 $ 357 $ 148,227 $(116,319) $32,265 ========== ==== ========= ======== ====== See accompanying notes to the consolidated financial statements. CADIZ INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION - ------------------------------ The Consolidated Financial Statements have been prepared by the Company without audit and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's latest Form 10-K for the year ended December 31, 2000. The foregoing Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiary, Sun World International, Inc. and its subsidiaries, collectively referred to as Sun World, and contain all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results to be expected for the full fiscal year. See Note 2 to the Consolidated Financial Statements included in the Company's latest Form 10-K for a discussion of the Company's accounting policies. NOTE 2 - INVENTORIES - -------------------- Inventories consist of the following (dollars in thousands): March 31, December 31, 2001 2000 ---- ---- Growing crops $ 18,155 $ 11,538 Pepper seed 166 257 Harvested product 58 528 Materials and supplies 3,833 2,880 -------- ---------- $ 22,212 $ 15,203 ========= ======== NOTE 3- LONG-TERM DEBT - ---------------------- SUN WORLD OBLIGATIONS In April 1997, Sun World issued $115 million of Series A First Mortgage Notes through a private placement. The notes have subsequently been exchanged for Series B First Mortgage Notes, which are registered under the Securities Act of 1933 and are publicly traded. The First Mortgage Notes are secured by a first lien (subject to certain permitted liens) on substantially all of the assets of Sun World and its subsidiaries other than growing crops, crop inventories and accounts receivable and proceeds thereof, which secure the Revolving Credit Facility. The First Mortgage Notes mature April 15, 2004, but are redeemable at the option of Sun World, in whole or in part, at any time on or after April 15, 2001. The First Mortgage Notes include covenants which restrict the Company's ability to receive distributions from Sun World. The First Mortgage Notes are also secured by the guarantees of Coachella Growers, Inc., Sun Desert, Inc., Sun World Brands, Sun World Management Corporation, Sun World/Rayo, and Sun World International de Mexico S.A. de C.V. (collectively, the "Sun World Subsidiary Guarantors") and by the Company. The Company also pledged all of the stock of Sun World as collateral for its guarantee. Sun World and the Sun World Subsidiary Guarantors are all direct and indirect wholly-owned subsidiaries of the Company. The guarantees by the Sun World Subsidiary Guarantors are full, unconditional, and joint and several. Sun World and the Sun World Subsidiary Guarantors comprise all of the direct and indirect subsidiaries of the Company other than inconsequential subsidiaries. Additionally, management believes that the direct and indirect non-guarantor subsidiaries of Cadiz are inconsequential, both individually and in the aggregate, to the financial statements of the Company for all periods presented. CONDENSED CONSOLIDATING FINANCIAL INFORMATION Condensed consolidating financial information as of and for the three months ended March 31, 2001 and 2000 for the Company is as follows (in thousands): CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION QUARTER ENDED MARCH 31, 2001 Sun Elimi- Consoli- Cadiz World nations dated ----- ----- ------- ----- Revenues $ 478 $ 7,368 $ (475) $ 7,371 Special litigation recovery 7,929 - - 7,929 -------- -------- ------- ------- Total revenues 8,407 7,368 (475) 15,300 -------- -------- ------- ------- Costs and expenses: Cost of sales 30 8,051 (140) 7,941 General and administrative 1,514 2,140 (375) 3,279 Non-recurring compensation expense 2,584 2,953 - 5,537 Depreciation and amortization 288 546 - 834 -------- -------- ------- ------- Total costs and expenses 4,416 13,690 (515) 17,591 -------- -------- ------- ------- Operating profit (loss) 3,991 (6,322) 40 (2,291) Interest expense, net 812 3,914 (38) 4,688 -------- -------- ------- ------- Net loss 3,179 (10,236) 78 (6,979) Less: Preferred stock dividends 113 - - 113 Imputed dividend on preferred stock 73 - - 73 -------- -------- ------- ------- Net loss applicable to common stock $ 2,993 $(10,236) $ 78 $ (7,165) ========= ======== ======= ======= CONSOLIDATING BALANCE SHEET INFORMATION MARCH 31, 2001 Sun Elimi- Consoli- Cadiz World nations dated ----- ----- ------- ----- ASSETS Current assets: Cash and cash equivalents $ - $ 335 $ - $ 335 Accounts receivable, net 3 5,859 - 5,862 Due from affiliate 6,774 - (6,774) - Inventories - 22,374 (162) 22,212 Prepaid expenses and other 211 512 - 723 -------- -------- ------- ------- Total current assets 6,988 29,080 (6,936) 29,132 Investment in subsidiary 9,972 - (9,972) - Property, plant, equipment and water programs, net 41,113 125,866 - 166,979 Other assets 4,154 7,400 - 11,554 -------- -------- ------- ------- $ 62,227 $162,346 $(16,908)$207,665 ========= ======== ======= ======= LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,297 $ 6,293 $ - $ 7,590 Accrued liabilities 406 7,374 - 7,780 Due to affiliate - 6,976 (6,976) - Revolving credit facility - 3,625 - 3,625 Long-term debt, current portion 23,992 916 - 24,908 -------- -------- ------- ------- Total current liabilities 25,695 25,184 (6,976) 43,903 Long-term debt - 121,606 (38) 121,568 Deferred income taxes - 5,447 - 5,447 Other liabilities 159 299 - 458 Redeemable preferred stock 4,024 - - 4,024 Stockholders' equity: Common stock 357 - - 357 Additional paid-in capital 148,227 38,278 (38,278) 148,227 Accumulated deficit (116,235) (28,468) 28,384 (116,319) -------- -------- ------- ------- Total stockholders' equity 32,349 9,810 (9,894) 32,265 -------- -------- ------- ------- $ 62,227 $162,346 $(16,908)$207,665 ========= ======== ======= ======= CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION QUARTER ENDED MARCH 31, 2001 Sun Elimi- Consoli- Cadiz World nations dated ----- ----- ------- ----- Net cash provided by (used for) operating activities $ 4,411 $(10,285) $ - $(5,874) -------- -------- ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (16) (463) - (479) Proceeds from disposal of property, plant and equipment - 7 - 7 Additions to water programs (439) - - (439) Additions to developing crops (44) (761) - (805) Increase in other assets (43) (129) - (172) -------- -------- ------- ------- Net cash used for investing activities (542) (1,346) - (1,888) -------- -------- ------- ------- Cash flows from financing activities: Net proceeds from issuance of stock 170 - - 170 Principal payments on long-term debt (250) (216) - (466) Borrowings from intercompany revolver, net (6,888) 6,888 - - Net proceeds from short-term borrowings - 3,625 - 3,625 -------- -------- ------- ------- Net cash (used for) provided by financing activities (6,968) 10,297 - 3,329 -------- -------- ------- ------- Net decrease in cash and cash equivalents (3,099) (1,334) - (4,433) Cash and cash equivalents, beginning of period 3,099 1,669 - 4,768 -------- -------- ------- ------- Cash and cash equivalents, end of period $ - $ 335 $ - $ 335 ========= ======== ======= ======= CONSOLIDATING BALANCE SHEET INFORMATION DECEMBER 31, 2000 Sun Elimi- Consoli- Cadiz World nations dated ----- ----- ------- ----- ASSETS Current assets: Cash and cash equivalents $ 3,099 $ 1,669 $ - $ 4,768 Accounts receivable, net 7 7,879 (2) 7,884 Inventories - 15,405 (202) 15,203 Prepaid expenses and other 212 419 - 631 -------- -------- ------- ------- Total current assets 3,318 25,372 (204) 28,486 Investment in subsidiary 17,093 - (17,093) - Property, plant, equipment and water programs, net 38,842 125,982 - 164,824 Other assets 4,199 7,585 - 11,784 -------- -------- ------- ------- $ 63,452 $158,939 $(17,297)$205,094 ========= ======== ======= ======= LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,209 $ 8,170 $ (2) $ 9,377 Accrued liabilities 349 5,466 - 5,815 Due to affiliate 202 - (202) - Long-term debt, current portion - 859 - 859 -------- -------- ------- ------- Total current liabilities 1,760 14,495 (204) 16,051 Long-term debt 23,912 121,698 - 145,610 Deferred income taxes - 5,447 - 5,447 Other liabilities 107 206 - 313 Redeemable preferred stock 3,950 - - 3,950 Stockholders' equity: Common stock 357 - - 357 Additional paid-in capital 142,706 35,325 (35,325) 142,706 Accumulated deficit (109,340) (18,232) 18,232 (109,340) -------- -------- ------- ------- Total stockholders' equity 33,723 17,093 (17,093) 33,723 -------- -------- ------- ------- $ 63,452 $158,939 $(17,297)$ 205,094 ========= ======== ======= ======= CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION QUARTER ENDED MARCH 31, 2000 Sun Elimi- Consoli- Cadiz World nations dated ----- ----- ------- ----- Revenues $ 496 $ 7,915 $ (475) $ 7,936 -------- -------- ------- ------- Costs and expenses: Cost of sales 25 8,809 (343) 8,491 General and administrative 1,018 2,269 (375) 2,912 Special litigation 173 - - 173 Depreciation and amortization 300 400 - 700 -------- -------- ------- ------- Total costs and expenses 1,516 11,478 (718) 12,276 -------- -------- ------- ------- Operating profit (loss) (1,020) (3,563) 243 (4,340) Interest expense, net 888 3,614 - 4,502 -------- -------- ------- ------- Net loss $(1,908) $(7,177) $ 243 $(8,842) ========= ======== ======= ======= CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION QUARTER ENDED MARCH 31, 2000 Sun Elimi- Consoli- Cadiz World nations dated ----- ----- ------- ----- Net cash used for operating activities $ (1,022) $(10,955) $ - $(11,977) -------- -------- ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (158) (291) - (449) Proceeds from disposal of property, plant and equipment 2 36 - 38 Additions to water programs (297) - - (297) Additions to developing crops - (1,278) - (1,278) Increase in other assets (9) (109) - (118) -------- -------- ------- ------- Net cash used for investing activities (462) (1,642) - (2,104) -------- -------- ------- ------- Cash flows from financing activities: Net proceeds from issuance of stock 174 - - 174 Borrowings from intercompany revolver, net (2,697) 2,697 - - Principal payments on long-term debt (3) (174) - (177) Net proceeds from short-term debt - 10,100 - 10,100 -------- -------- ------- ------- Net cash provided by (used for)financing activities (2,526) 12,623 - 10,097 -------- -------- ------- ------- Net (decrease) increase in cash and cash equivalents (4,010) 26 - (3,984) Cash and cash equivalents, beginning of period 4,145 392 - 4,537 -------- -------- ------- ------- Cash and cash equivalents, end of period $ 135 $ 418 $ - $ 553 ========= ======== ======= ======= NOTE 4 - NON-RECURRING COMPENSATION EXPENSE - ------------------------------------------- In March 2001, the Company agreed to issue 564,163 deferred stock units to certain senior managers of Cadiz and Sun World. These deferred stock units were issued in exchange for the cancellation of 1,055,000 fully vested options to purchase the Company's common stock held by the senior managers. The number of the deferred stock units issued was calculated based on the average closing price for the 10 business days following the filing of the Company's Annual Report on Form 10-K on March 29, 2001. Each deferred stock unit is exchangeable for one share of the Company's common stock at the end of the deferral period elected by the holder. The Company recorded a one-time charge of $5,537,000 and no cash was expended in connection with the issuance of the deferred stock units. SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.) CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended March 31, ($ in thousands) 2001 2000 ---- ---- Revenues $ 7,368 $ 7,915 ---------- --------- Costs and expenses: Cost of sales 8,051 8,809 General and administrative 2,140 2,269 Non-recurring compensation expense (Note 3) 2,953 - Depreciation and amortization 546 400 ---------- --------- Total costs and expenses 13,690 11,478 ---------- --------- Operating loss (6,322) (3,563) Interest expense, net 3,914 3,614 ---------- --------- Net loss $ (10,236) $ (7,177) ======== ======== See accompanying notes to the consolidated financial statements. SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.) Consolidated Balance Sheet (UNAUDITED) March 31, December 31, ($ in thousands) 2001 2000 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 335 $ 1,669 Accounts receivable, net 5,859 7,879 Inventories 22,374 15,405 Prepaid expenses and other 512 419 ---------- --------- Total current assets 29,080 25,372 Investment in partnership - - Property, plant, equipment, and water programs, net 125,866 125,982 Other assets 7,400 7,585 ---------- --------- Total assets $ 162,346 $ 158,939 ========== ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $ 6,293 $ 8,170 Accrued liabilities 7,374 5,466 Due to parent 6,976 - Revolving credit facility 3,625 - Long-term debt, current portion 916 859 ---------- --------- Total current liabilities 25,184 14,495 Long-term debt 121,606 121,698 Deferred income taxes 5,447 5,447 Other liabilities 299 206 Commitments and contingencies Stockholder's equity: Common stock, $.01 par value, 300,000 shares authorized; 42,000 shares issued and outstanding - - Additional paid-in capital 38,278 35,325 Accumulated deficit (28,468) (18,232) ---------- --------- Total stockholder's equity 9,810 17,093 ---------- --------- Total liabilities and stockholder's equity $ 162,346 $ 158,939 ========== ========= See accompanying notes to the consolidated financial statements. SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.) CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, ($ in thousands) 2001 2000 ---- ---- Cash flows from operating activities: Net loss $ (10,236) $ (7,177) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 919 591 Gain on disposal of assets (6) (19) Stock earned for services (313) (313) Share of partnership operations - (31) Deferred stock compensation 66 - Non-recurring compensation 2,953 - Changes in operating assets and liabilities: Decrease in accounts receivable 2,020 1,436 Increase in inventories (5,741) (8,809) (Increase) decrease in prepaid expenses and other (93) 15 (Decrease) increase in accounts payable (1,877) 1,198 Increase in accrued liabilities 1,908 1,998 Increase in due to parent 88 161 Increase (decrease) in other liabilities 27 (5) -------- ------- Net cash used for operating activities (10,285) (10,955) -------- -------- Cash flows from investing activities: Additions to property, plant, equipment, and water programs (463) (291) Proceeds from disposal of property, plant and equipment 7 36 Additions to developing crops (761) (1,278) Increase in other assets (129) (109) ------- ------- Net cash used for investing activities (1,346) (1,642) -------- -------- Cash flows from financing activities: Principal payments on long-term debt (216) (174) Borrowings from intercompany revolver, net 6,888 2,697 Proceeds from short-term borrowings 3,625 10,100 ------ ------ Net cash provided by financing activities 10,297 12,623 ------ ------- Net (decrease) increase in cash and cash equivalents (1,334) 26 Cash and cash equivalents at beginning of period 1,669 392 ------- ------- Cash and cash equivalents at end of period $ 335 $ 418 ======== ======== See accompanying notes to the consolidated financial statements. SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.) CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (UNAUDITED) For the Three Months Ended March 31, 2001 ($ in thousands) Total Additional Stock- Common Stock Paid-in Accumulated holders' Shares Amount Capital Deficit Equity ----- ----- ------ ------ ----- Balance as of December 31, 2000 42,000 $ - $ 35,325 $ (18,232) $17,093 Non-recurring compensation - - 2,953 - 2,953 Net loss - - - (10,236) (10,236) ------- ----- ------- --------- ------- Balance as of March 31, 2001 42,000 $ - $ 38,278 $ (28,468) $ 9,810 ========= ====== ======== ========= ======= See accompanying notes to the consolidated financial statements. SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.) Notes to Consolidated Financial Statements NOTE 1 - BASIS OF PRESENTATION - ------------------------------ The Consolidated Financial Statements have been prepared by Sun World International, Inc. and its subsidiaries ("Sun World") without audit and should be read in conjunction with the Sun World Consolidated Financial Statements and notes thereto included in the Cadiz Inc. Form 10-K for the year ended December 31, 2000. The foregoing Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, which Sun World considers necessary for a fair presentation. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results to be expected for the full fiscal year. See Note 2 to the Sun World Consolidated Financial Statements included in the Cadiz Inc. latest Form 10-K for a discussion of Sun World's accounting policies. NOTE 2 - INVENTORIES - ---------------------- Inventories consist of the following (dollars in thousands): March 31, December 31, 2001 2000 ---- ---- Growing crops $ 18,317 $11,740 Pepper seed 166 257 Harvested product 58 528 Materials and supplies 3,833 2,880 ------- ------- $ 22,374 $15,405 ========= ======== NOTE 3 - NON-RECURRING COMPENSATION EXPENSE - ------------------------------------------- In March 2001, Cadiz agreed to issue 300,860 deferred stock units to certain senior managers of Sun World. These deferred stock units were issued in exchange for the cancellation of 565,000 fully vested options to purchase Cadiz common stock held by the senior managers. The number of the deferred stock units issued was calculated based on the average closing price for the 10 business days following the filing of the Cadiz Inc. Annual Report on Form 10-K on March 29, 2001. Each deferred stock unit is exchangeable for one share of Cadiz common stock at the end of the deferral period elected by the holder. Sun World recorded a one-time charge and a contribution to capital by Cadiz of $2,953,000 in connection with the issuance of the deferred stock units. No cash was expended in connection with the issuance of the deferred stock units. NOTE 4 - DERIVATIVE INSTRUMENTS - ------------------------------- In December 2000, in connection with a $5 million unsecured term loan to the Company, Cadiz issued certain warrants to purchase shares of Cadiz' common stock. Pursuant to Statement of Financial Accounting Standards No. 133 ("SFAS" 133), "Accounting for Derivative Instruments and Hedging Activities," the warrants meet the definition of a derivative instrument. The adoption of SFAS 133 effective January 1, 2001 did not have a material impact on the financial statements. CADIZ INC ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) RESULTS OF OPERATIONS The financial statements set forth herein as of and for the three months ended March 31, 2001 and 2000 reflect the results of operations for the Company and its wholly-owned subsidiaries, including Sun World International, Inc. ("Sun World"). A summary of the Sun World elements which management of the Company believes is essential to an analysis of the results of operations for such periods are presented below. For purposes of this summary, the term Sun World will be used, when the context so requires, with respect to the operations and activities of the Company's Sun World subsidiary, and the term Cadiz will be used, when the context so requires, with respect to those operations and activities of the Company not involving Sun World. The Company's net income or loss in future fiscal periods will be largely reflective of (a) the operations of the Company's water development activities including the Cadiz Groundwater Storage and Dry- Year Supply Program (the "Cadiz Program") and (b) the operations of Sun World. Sun World conducts its operations through four operating divisions: farming, packing, marketing and proprietary product development. Net income from farming operations varies from year to year primarily due to yield and pricing fluctuations which can be significantly influenced by weather conditions, and are, therefore, generally subject to greater annual variation than Sun World's other divisions. However, the geographic distribution of Sun World's farming operations and the diversity of its crop mix makes it unlikely that adverse weather conditions would affect all of Sun World's properties or all of its crops in any single year. Nevertheless, net profit from Sun World's packing, marketing and proprietary product development operations tends to be more consistent from year to year than net profit from Sun World's farming operations. Packing and marketing revenues from third party growers currently represent less than ten percent (10%) of total annual Company revenues. Sun World has entered into agreements internationally to license selected proprietary fruit varieties and continues to pursue additional domestic and international licensing opportunities. License revenues also currently represent less than ten percent (10%) of total annual Company revenues. The following discussion contains trend analysis and other forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those projected in the forward-looking statements throughout this document. Specific factors that may cause such a difference include, but are not limited to, price and yield fluctuations in the agricultural operations, seasonality, and timing and terms of various approvals required to complete the Cadiz Program. See additional discussion under the heading "Certain Trends and Uncertainties" in Item 7 of the Company's latest Form 10-K. THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED - ---------------------------------------------------------------- MARCH 31, 2000 - -------------- The Company's agricultural operations are impacted by the general seasonal trends that are characteristic of the agricultural industry. Sun World has historically received the majority of its net income during the months of June to October following the harvest and sale of its table grape and stonefruit crops. Due to this concentrated activity, Sun World has historically incurred losses with respect to its agricultural operations during the other months of the year. The table below sets forth, for the periods indicated, the results of operations for the Company's four main operating divisions (before elimination of any interdivisional charges) as well as the categories of costs and expenses incurred by the Company which are not included within the divisional results (in thousands): Three Months Ended March 31, 2001 2000 ---- ---- Divisional net income (loss): Farming $ (740) $ (859) Packing (56) (186) Marketing (316) (254) Proprietary product development 148 338 ------- --------- (964) (961) General and administrative 2,885 2,506 Special litigation (7,929) 173 Non-recurring compensation expense 5,537 - Depreciation and amortization 834 700 Interest expense, net 4,688 4,502 ------- -------- Net loss $ (6,979) $ (8,842) ======== ========= FARMING OPERATIONS. Net loss from farming operations totaled $(0.7) million for the three months ended March 31, 2001, compared to net loss of $(0.9) million for the three months ended March 31, 2000. Farming revenues were $5.8 million and farming expenses were $6.5 million for the first quarter of 2001. For the first quarter of 2000, farming revenues were $5.7 million and farming expenses were $6.6 million. Farming revenues and expenses generated in the first quarter of 2001 are primarily due to harvesting and sales of navel oranges and lemons. During the quarter ended March 31, 2001, the increase in farming results primarily resulted from (a) the elimination of the Mexico pepper program which was unprofitable in 2000, (b) increased F.O.B. prices and yields for navel oranges offset by (c) lower F.O.B. prices for lemons. PACKING OPERATIONS. For the quarter ended March 31, 2001, Sun World's packing and handling facilities contributed revenues of $2.6 million offset by $2.7 million of expenses for a net loss of $(0.1) million compared to a net loss of $(0.2) million for the quarter ended March 31, 2000. For the first quarter of 2000, Sun World generated revenues of $2.5 million and expenses of $2.7 million. Packing operations generally reflect a loss in the first quarter of the year as less than 10% of the annual volume is packed or handled during the first quarter which does not provide adequate revenues to cover fixed infrastructure costs associated with the packing and handling facilities. Units packed during the quarter totaled 0.7 million in 2001 and 2000. The increase in profitability was primarily due to the increased volumes of Company-farmed lemons that were packed at the Kimberlina facility during the first quarter of 2001. MARKETING OPERATIONS. Sun World's marketing operations include the selling, merchandising and promoting of Sun World grown products, as well as providing these services for third party growers. During the three months ended March 31, 2001, a total of approximately 0.8 million units were sold, consisting primarily of Sun World-grown lemons and navel oranges, and citrus from domestic third party growers in Coachella. These unit sales resulted in marketing revenues of $0.5 million offset by marketing expenses of $0.8 million resulting in a net loss of $(0.3) million for the first quarter of 2001. For the first quarter of 2000, Sun World marketed 0.9 million units and generated revenues of $0.7 million offset by expenses of $1.0 million resulting in a net loss of $(0.3) million. The decreased units marketed and revenues primarily relate to the elimination of the Mexico pepper program in 2001 due to the venture being unprofitable during 1999 and 2000. Similar to the packing operations, marketing operations ordinarily reflect a loss during the first quarter of the year as less than 10% of the annual volume of units marketed are sold during the quarter. PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long history of product innovation, and its research and development center maintains a fruit breeding program that has introduced dozens of proprietary fruit varieties. During the three months ended March 31, 2001, net income from proprietary product development totaled $0.1 million consisting of revenues of $0.5 million offset by expenses of $0.4 million. For the three months ended March 31, 2000, net income from proprietary product development was $0.3 million consisting of revenues of $0.7 million offset by expenses of $0.4 million. Revenues decreased in 2001 compared to 2000 primarily due to the timing of international royalty income from South Africa. While total royalty income from sugraone table grapes in South Africa increased from the prior growing season, a larger portion of the table grape harvests in South Africa occurred in December 2000 for the 2000/2001 season as opposed to January 2000 for the 1999/2000 season. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses during the three months ended March 31, 2001 totaled $2.9 million compared to $2.5 million for the three months ended March 31, 2000 due primarily to incentive bonuses for senior executives approved in February 2001. SPECIAL LITIGATION. The Company was engaged in lawsuits against Waste Management seeking monetary damages arising from activities adverse to the Company in connection with a landfill, which until its defeat by the voters of San Bernardino County in 1996, was proposed to be located adjacent to the Company's Cadiz/Fenner Valley properties. In March 2001, the Company and Waste Management executed a settlement agreement related to these lawsuits. Pursuant to the settlement agreement, Waste Management paid the Company $6 million in cash and granted to the Company an exclusive option to receive, at no cost to the Company, up to approximately 7,000 acres of real property in eastern San Bernadino County primarily adjacent to the Cadiz Program property. In April 2001, the Company exercised the option and as a consequence has acquired the subject property. The settlement resulted in net revenues recognized of $7.9 million for the three months ended March 2001. During the three months ended March 31, 2000, expenses including litigation costs and professional fees totaled $0.2 million. NON-RECURRING COMPENSATION. In March 2001, the Company agreed to issue 564,163 deferred stock units to certain senior managers of Cadiz and Sun World. These deferred stock units were issued in exchange for the cancellation of 1,055,000 fully vested options to purchase the Company's common stock held by the senior managers. The number of the deferred stock units issued was calculated based on the average closing price for the 10 business days following the filing of the Company's Annual Report on Form 10-K on March 29, 2001. The Company recorded a one- time charge of $5,537,000 and no cash was expended in connection with the issuance of the deferred stock units. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for the three months ended March 31, 2001 and 2000 totaled $0.8 million compared to $0.7 million. The $0.1 million increase is due to depreciation associated with capital expenditures made over the past year as well as due to the timing of crop harvests. INTEREST EXPENSE, NET. Net interest expense totaled $4.7 million during the three months ended March 31, 2001, compared to $4.5 million during the same period in 2000. The following table summarizes the components of net interest expense for the two periods (in thousands): Three Months Ended March 31, 2001 2000 ---- ---- Interest on outstanding debt - Sun World $ 3,559 $ 3,483 Interest on outstanding debt - Cadiz 463 490 Amortization of financing costs 696 602 Interest income (30) (73) -------- -------- $ 4,688 $ 4,502 ========= ======== The increase in interest on outstanding debt during 2001 is primarily due to (a) increased borrowings by Sun World in connection with the $5 million senior unsecured term loan obtained in December 2000 and (b) amortization of warrants issued for the extension of the Cadiz Revolver, Cadiz term loan and the Sun World senior unsecured term loan, partially offset by (c) lower interest costs for the Company's variable rate debt due to the reductions in interest rates during the first quarter of 2001. Financing costs, which include legal fees and warrants, are amortized over the life of the debt agreements. LIQUIDITY AND CAPITAL RESOURCES Current Financing Arrangements - ------------------------------ CADIZ OBLIGATIONS As Cadiz has not received significant revenues from its water resource activity to date, Cadiz has been required to obtain financing to bridge the gap between the time water resource development expenses are incurred and the time that revenue will commence. Historically, Cadiz has addressed these needs primarily through secured debt financing arrangements with its lenders, private equity placements and the exercise of outstanding stock options. As of March 31, 2001, Cadiz was obligated for approximately $10.1 million under a senior term loan facility and $15 million under a $15 million revolving credit facility (the "Cadiz Revolver") with the same lender. In December 2000, the Company completed an extension of both facilities to a maturity date of January 31, 2002. Currently, the lender holds a senior deed of trust on substantially all of Cadiz' non-Sun World related property under the term loan facility and a second lien on substantially all of the non-Sun World assets of the Company under the Cadiz Revolver. The Company and the lender have historically structured their financing arrangement with a view toward effective implementation of the Cadiz Program. While the Company currently anticipates repayment of these facilities with monies to be received under the Cadiz Program, the Company may, if it deems appropriate, replace or renegotiate the terms of these facilities to accommodate other developments such as delays in the timetable for regulatory approvals of the Cadiz Program. The Company retains the right to maintain $25.5 million of senior debt secured by the Cadiz Program area lands pursuant to the definitive economic terms for the Cadiz Program agreed with Metropolitan Water District of Southern California ("Metropolitan"). In December 2000, the Company issued $5 million of Series D Convertible Preferred Stock ("Preferred Stock"). The stock is convertible into 625,000 shares of the Company's common stock any time prior to July 2004 at the election of the holder. The Company also has the right to convert the preferred stock, but only when the closing price of the Company's common stock has exceeded $12 per share for 30 consecutive trading days. The Preferred Stock will be redeemed in July 2004 if still outstanding. As the Company continues to actively pursue its business strategy, additional financing specifically in connection with the Company's water programs will be required. Responsibility for funding the design, construction and program implementation costs of the capital facilities for the Cadiz Groundwater Storage and Dry-Year Supply Program will, under currently developed principles and terms, be shared equally by the Company and Metropolitan. The Company is analyzing various alternatives for funding its share of the estimated $125 million to $150 million cost of the program capital facilities. These funding alternatives include (a) long-term financing arrangements and (b) utilization of monies to be received from Metropolitan for its initial payment for 600,000 acre-feet of groundwater storage. Based upon the results of analyses performed by investment banking firms retained by the Company, management believes that several alternative long-term financing arrangements are available to the Company. SUN WORLD OBLIGATIONS Under Sun World's historical working capital cycle, working capital is required primarily to finance the costs of growing and harvesting crops, which generally occur from January through September with a peak need in June. Sun World harvests and sells the majority of its crops during the period from June through October, when it receives the majority of its revenues. In order to bridge the gap between incurrence of expenditures and receipt of revenues, large cash outlays are required each year, which are financed through a $30 million revolving credit agreement (the "Sun World Revolver"), which is guaranteed by Cadiz. Sun World obtained an extension of the Sun World Revolver in February 2001 for the 2001 growing season. As of March 31, 2001, $3.6 million was outstanding under the Sun World Revolver. Additionally, Sun World has an intercompany revolving credit agreement with the Company for seasonal working capital needs, as needed. $6.9 million was outstanding under the intercompany revolver as of March 31, 2001. In addition, Sun World has outstanding $115 million of First Mortgage Notes (the "Sun World Notes"), which will mature on April 15, 2004 and are publicly traded and registered under the Securities Act of 1933. The Sun World Notes are redeemable at the option of Sun World, in whole or in part, at any time on or after April 15, 2001. Interest accrues at the rate of 11-1/4% per annum and is payable semi-annually on April 15th and October 15th of each year. The Sun World Notes are secured by a first lien (subject to certain permitted liens) on substantially all of the assets of Sun World and its subsidiaries, other than growing crops, crop inventories and accounts receivable and proceeds thereof, which secure the Sun World Revolver, and certain real property pledged to third parties. The Sun World Notes are also secured by the guarantee of Cadiz and the pledge by Cadiz of all of the stock of Sun World. CASH USED FOR OPERATING ACTIVITIES. Cash used for operating activities totaled $5.9 million for the three months ended March 31, 2001, as compared to cash used for operating activities of $12.0 million for the three months ended March 31, 2000. The decrease in cash used for operating activities is primarily due to the $6 million in cash received in connection with the Rail-Cycle litigation settlement coupled with lower inventory balances compared to March 31, 2000, due to the removal or sale of approximately 1,300 acres of underperforming crops during the fourth quarter of 2000. CASH USED FOR INVESTING ACTIVITIES. Cash used for investing activities totaled $1.9 million for the three months ended March 31, 2001, as compared to $2.1 million for the same period in 2000. The decrease was primarily due to reduced capital expenditures for developing crops partially offset by increased expenditures for water programs. CASH PROVIDED BY FINANCING ACTIVITIES. Cash provided by financing activities totaled $3.3 million for the three months ended March 31, 2001, consisting primarily of $3.6 million of borrowings under the Sun World Revolver, compared to $10.1 million in 2000. Borrowings were down from prior year due to the monies received from the Rail-Cycle litigation settlement. Principal payments on long-term debt totaled $0.5 million for the three months ended March 31, 2001 compared to $0.2 million for the three months ended March 31, 2000. Net proceeds from the exercise of stock options totaled $0.2 million during the three months ended March 31, 2001 and March 31, 2000. OUTLOOK The Company is actively pursuing the development of its water resources. Specifically, in July 1998, the Company and Metropolitan approved the Principles for a 50-year agreement for the Cadiz Program. The Principles provide that Metropolitan will, during wet years or periods of excess supply, store surplus water from its Colorado River Aqueduct in the groundwater basin underlying the Company's property. During dry years or times of reduced allocations from the Colorado River, the previously imported water, together with additional existing groundwater, will be extracted and delivered, via a conveyance pipeline, back to the aqueduct. Subsequently, Metropolitan, following extensive negotiations with the Company to further refine and finalize the Principles, submitted definitive economic terms and responsibilities ("Definitive Terms") to its Board of Directors. Metropolitan's Board of Directors approved the Definitive Terms at their April 2001 board meeting. The Definitive Terms will serve as the basis for a final agreement to be executed between Metropolitan and the Company. Execution of this final agreement will be subject to completion of the ongoing environmental review process for the Cadiz Program. Key provisions of the approved Definitive Terms are as follows: * Over the 50-year term of the agreement, Metropolitan will store a minimum of 900,000 acre-feet of Colorado River Aqueduct ("CRA") water in the Company's groundwater basin and purchase up to a minimum of 1,500,000 acre-feet of existing groundwater for transfer during dry-years. The Cadiz Program will have the capacity to convey, either for storage or transfer, up to approximately 150,000 acre-feet in any given year. * During storage operations, Metropolitan will pay $50 per acre- foot for put of Colorado River water into storage and $40 per acre-foot for return of Colorado River water from storage, or a total of $90 per acre-foot to cycle water into and out of the basin. These fees will be adjusted by CPI. * As outlined above, Metropolitan's total minimum commitment for storage is 900,000 acre-feet. Metropolitan will pay for the initial 600,000 acre-feet of put and take activity upon final contract execution and completion of the environmental review ($54 million before CPI adjustment). Metropolitan will pay for an additional 300,000 acre-feet of put and take activity at the earlier of actual usage or 30,000 acre-foot annual increments during years 5-14 of Cadiz Program operations ($2,700,000 per year before CPI adjustment). * For transfer operations, Metropolitan shall purchase 30,000 acre- feet per year of indigenous groundwater for 25 years at $230 per acre-foot Transfer Fee, subject to a fair market value adjustment as described below. In addition, Cadiz may elect to either sell up to an additional 30,000 acre-feet per year of indigenous groundwater to third parties in Metropolitan's service area at fair market value, or require Metropolitan to purchase that amount of water at a fixed Transfer Fee of $230 per acre-foot. Accordingly, Metropolitan's total potential minimum commitment for the life of the Cadiz Program will be 1,500,000 acre-feet of indigenous groundwater. All transfers of indigenous groundwater, whether to Metropolitan or third parties, will be made in accordance with the terms and conditions of a Groundwater Monitoring and Management Plan ("Management Plan"). * The Transfer Fee will reflect a "fair market value" adjustment, which shall be determined up to once a year. The Transfer Fee will be adjusted by one-half of any increase or decrease in the fair market value, above or below the base $230 rate. For example, if the fair market value is $350 per acre-foot, then the adjusted Transfer Fee shall be $230 + 50% * ($350-$230) = $290 per acre-foot. Each increase or decrease in the transfer fee paid by Metropolitan may not exceed 15%. * Cadiz' right to sell to third parties within Metropolitan's service area includes scheduled access to Metropolitan's system at the wheeling rate charged for "as available capacity," plus power costs and any standard water stewardship fee that is uniformly charged to Metropolitan member agencies or third parties. Depending on availability of system capacity, Metropolitan may elect to exchange other water for delivery to Cadiz customers and "bank" the water Cadiz has sold. * If indigenous water supplies are determined to exceed 1,700,000 acre-feet, Metropolitan shall have the first right of refusal to purchase one-half of that excess yield. * Cadiz groundwater meets all existing federal and state water quality standards. Metropolitan's CRA water meets all existing federal and state water quality standards. Metropolitan shall be responsible to ensure, at its expense, that CRA water introduced into the Cadiz groundwater basin shall, at a minimum, meet all existing and potential future federal and state water quality standards applicable to the CRA. Cadiz shall be responsible to ensure, at its expense, that indigenous groundwater introduced into the Metropolitan delivery system shall at a minimum, meet all existing and potential future federal and state water quality standards. If both indigenous groundwater and stored Colorado River water exceed any future federal or state water quality standard, then the parties will share compliance with the new standard based pro rata on the contribution to exceeding the standard. * The Cadiz Program facilities, including spreading basins, extraction wells, conveyance pipeline and a pumping plant are estimated to cost between $125 and $150 million, and both parties will equally share these costs. Each party will be responsible for financing its portion of the capital costs. * Metropolitan will be responsible for operational costs of the Cadiz Program. However, Cadiz will assume pro rata operational costs associated with the sale of indigenous groundwater to third parties. * Metropolitan and Cadiz shall share equally the capital costs required for mitigation at outset of the Cadiz Program. Cadiz shall assume remaining mitigation costs, including the ongoing annual cost of operating the Management Plan. In addition to the development of its water resources, the Company is actively involved in further agricultural development and reinvestment in its landholdings. Such development will be systematic and in furtherance of the Company's business strategy to provide for maximization of the value of its assets. The Company also continually evaluates acquisition opportunities that are complimentary to its current portfolio of water and agricultural resources. Sun World currently services its indebtedness and meets its seasonal working capital needs utilizing available internal cash, the Sun World Revolver and, if necessary, through an intercompany revolver with Cadiz. Cadiz currently meets its ordinary working capital needs through a combination of available internal cash, quarterly management fee payments from Sun World, payments from Sun World under an agricultural lease whereby Sun World now operates the Company's 1,600 acres of developed agricultural property at Cadiz, California, and the exercise of outstanding stock options. Except for the foregoing, additional intercompany cash payments between Sun World and Cadiz are subject to certain restrictions under its current lending arrangements. In the event the Company requires additional cash beyond the foregoing to meet its working capital needs, the Company believes that additional debt and/or equity can be issued as needed for this purpose. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information about market risks for the three months ended March 31, 2001 does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2000. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS ------------------ See "Item 3. Legal Proceedings" included in the Company's latest Form 10-K for a complete discussion. In connection with the Company's settlement of its actions against Waste Management, as described in the Company's latest Form 10-K, Waste Management granted to the Company an exclusive option to acquire up to approximately 7,000 acres of real property at no cost to the Company in eastern San Bernardino County, California (the "Option"). In April 2001, the Company exercised the Option and as a consequence has acquired the subject property. Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS ----------------------------------------- During the quarter ended March 31, 2001, the Company agreed to issue 564,163 deferred stock units to certain senior managers of the Company and Sun World in exchange for the cancellation of 1,055,000 fully vested options to purchase Cadiz common stock. See Note 4 to Cadiz Inc. Consolidated Financial Statements. The issuances of these deferred stock units were not registered under the Securities Act of 1933, as amended (the "Securities Act"). The Company believes that such issuances were exempt from the registration requirements of the Securities Act by virtue of Section 3(a)(9) thereof as transactions involving securities exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange. Item 3 DEFAULTS UPON SENIOR SECURITIES ------------------------------- Not applicable. Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS -------------------------------------------------- A. The annual meeting of the stockholders of the Company was held on May 14, 2001. The stockholders took the following action at the meeting: 1. Elected Keith Brackpool, Anthony Coelho, Murray H. Hutchison, Dwight W. Makins, Mitt Parker and Timothy J. Shaheen to the Company's Board of Directors. Mr. Brackpool was elected by the vote of 29,220,052 in favor and 146,589 withheld and no broker non-votes. Mr. Coelho was elected by the vote of 29,361,241 in favor and 5,400 withheld and no broker non-votes. Mr. Hutchison was elected by the vote of 29,256,841 in favor and 109,800 withheld and no broker non-votes. Mr. Makins was elected by the vote of 29,256,841 in favor and 109,800 withheld and no broker non-votes. Mr. Parker was elected by the vote of 29,361,741 in favor and 4,900 withheld and no broker non-votes. Mr. Shaheen was elected by the vote of 29,220,052 in favor and 146,589 withheld and no broker non-votes. 2. Ratified the selection by the Company's Board of Directors of PricewaterhouseCoopers LLP to continue as the Company's independent auditors for fiscal 2001 by the vote of 29,355,190 in favor and 6,001 against, with 5,450 abstaining and no broker non-votes. Item 5. OTHER INFORMATION ----------------- Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- A. Exhibits None B. Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CADIZ INC. By: /s/ Keith Brackpool May 15, 2001 ----------------------------- -------------- Keith Brackpool, Date Chairman of the Board, Chief Executive Officer By: /s/ Stanley E. Speer May 15, 2001 --------------------- -------------- Stanley E. Speer Date Chief Financial Officer