**Washington,      D. C. 20549**

**FORM      10-Q**

**DELAWARE                                                             77-0313235**

**                    **

**550      S. Hope Street, Suite 2850**

**Los      Angeles,      California                     **
**90071**

**(213)      271-1600**

**Yes      **
** No **
**          **

**Large      accelerated filer ___ Accelerated filer **
** Non-accelerated      filer ___**

**Yes___      No **

**CADIZ      INC.**

**INDEX**

| ***For                the Three and Nine months ended September 30,                2007***                                             | ***Page*** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                                                   |       |
|                                                                                                                                   |       |
| **PART                I - FINANCIAL INFORMATION**                                                                                      |       |
|                                                                                                                                   |       |
| **ITEM                1. Financial Statements**                                                                                        |       |
|                                                                                                                                   |       |
| **Cadiz                Inc. Consolidated Financial Statements**                                                                   |       |
|                                                                                                                                   |       |
| Unaudited                Statements of Operations for the three months ended September 30,                2007 and                2006 | 1          |
|                                                                                                                                   |       |
| Unaudited                Statements of Operations for the nine months ended September 30,                2007 and                2006  | 2          |
|                                                                                                                                   |       |
| Unaudited                Balance Sheets as of September 30, 2007 and December 31,                2006                                  | 3          |
|                                                                                                                                   |       |
| Unaudited                Statements of Cash Flows for the nine months ended September 30,                2007 and                2006  | 4          |
|                                                                                                                                   |       |
| Unaudited                Statement of Stockholders’ Equity for the nine months ended September 30,                2007           | 5          |
|                                                                                                                                   |       |
| Unaudited                Notes to the Consolidated Financial Statements                                                                | 6          |
|                                                                                                                                   |       |
| **ITEM                2. Management’s Discussion and Analysis of Financial Condition and Results                of Operations**  | 17         |
|                                                                                                                                   |       |
| **ITEM                3. Quantitative and Qualitative Disclosures about Market                Risk**                                   | 27         |
|                                                                                                                                   |       |
| **ITEM                4. Controls and Procedures**                                                                                     | 27         |
|                                                                                                                                   |       |
|                                                                                                                                   |       |
| **PART                II - OTHER INFORMATION**                                                                                         | 28         |

**CADIZ      INC.**

**CONSOLIDATED        STATEMENTS OF OPERATIONS        (UNAUDITED)**

|                                                                           |                                            |
|--------------------------------------------------------------------------------|-------------------------------------------------|
|                                                                           | **For                  the Three Months**  |
|                                                                           | **Ended                  September 30,**        |
| **($                  in thousands except per share data)**                    | **2007**                                        | **2006** |
|                                                                           |                                            |   |   |
| Revenues                                                                       | $                                               | 6 |   | $ | 37 |   |
|                                                                           |                                            |   |   |   |   |   |
| Costs                  and expenses:                                           |                                            |   |   |   |   |   |
| General                  and                  administrative                   |                                            | 3,284 |   |   | 2,085 |   |
| Depreciation                  and                  amortization                |                                            | 121 |   |   | 38 |   |
|                                                                           |                                            |   |   |   |   |   |
| Total                  costs and expenses                                      |                                            | 3,405 |   |   | 2,123 |   |
|                                                                           |                                            |   |   |   |   |   |
| Operating                  loss                                                |                                            | (3,399 |  ) |   | (2,086 |  ) |
|                                                                           |                                            |   |   |   |   |   |
| Other                  income (expense)                                        |                                            |   |   |   |   |   |
| Interest                  expense,                  net                        |                                            | (818 |  ) |   | (702 |  ) |
| Change                  in fair value of                  derivative liability |                                            | - |   |   | (2,919 |  ) |
| Other                  income                                                  |                                            | - |   |   | 23 |   |
| Other                  (expense),                  net                         |                                            | (818 |  ) |   | (3,598 |  ) |
|                                                                           |                                            |   |   |   |   |   |
| Loss                  before income taxes                                      |                                            | (4,217 |  ) |   | (5,684 |  ) |
| Income                  tax provision                                          |                                            | 1 |   |   | - |   |
|                                                                           |                                            |   |   |   |   |   |
| Net                  loss                                                      | $                                               | (4,218 |  ) | $ | (5,684 |  ) |
|                                                                           |                                            |   |   |   |   |   |
| Net                  loss applicable to common stock                           | $                                               | (4,218 |  ) | $ | (5,684 |  ) |
|                                                                           |                                            |   |   |   |   |   |
| Basic                  and diluted net loss per common share                   | $                                               | (0.35 |  ) | $ | (0.50 |  ) |
|                                                                           |                                            |   |   |   |   |   |
| Basic                  and diluted weighted average shares outstanding         |                                            | 11,906 |   |   | 11,331 |   |
|                                                                           |                                            |   |

**1**

**CADIZ        INC.**

**CONSOLIDATED          STATEMENTS OF OPERATIONS          (UNAUDITED)**

|                                                                   |                                     |
|------------------------------------------------------------------------|------------------------------------------|
|                                                                   | **For                  the Nine Months** |
|                                                                   | **Ended                  September 30,** |
| **($                  in thousands except per share data)**            | **2007**                                 |   | **2006** |
|                                                                   |                                     |   |   |   |   |   |
|                                                                   |                                     |   |   |   |   |   |
|                                                                   |                                     |   |   |   |   |   |
| Revenues                                                               | $                                        | 363 |   | $ | 446 |   |
|                                                                   |                                     |   |   |   |   |   |
| Costs                  and expenses:                                   |                                     |   |   |   |   |   |
| Cost                  of sales                                         |                                     | 348 |   |   | 341 |   |
| General                  and administrative                            |                                     | 6,415 |   |   | 5,954 |   |
| Depreciation                  and amortization                         |                                     | 197 |   |   | 117 |   |
|                                                                   |                                     |   |   |   |   |   |
| Total                  costs and expenses                              |                                     | 6,960 |   |   | 6,412 |   |
|                                                                   |                                     |   |   |   |   |   |
| Operating                  loss                                        |                                     | (6,597 | ) |   | (5,966 | ) |
|                                                                   |                                     |   |   |   |   |   |
| Other                  income (expense)                                |                                     |   |   |   |   |   |
| Interest                  expense, net                                 |                                     | (2,346 | ) |   | (1,679 | ) |
| Loss                  on early extinguishment of debt                  |                                     | - |   |   | (868 | ) |
| Change                  in fair value of derivative liability          |                                     | - |   |   | (2,919 | ) |
| Other                  income                                          |                                     | - |   |   | 373 |   |
| Other                  income (expense), net                           |                                     | (2,346 | ) |   | (5,093 | ) |
|                                                                   |                                     |   |   |   |   |   |
| Loss                  before income taxes                              |                                     | (8,943 | ) |   | (11,059 | ) |
| Income                  tax provision                                  |                                     | 9 |   |   | 1 |   |
|                                                                   |                                     |   |   |   |   |   |
| Net                  loss                                              | $                                        | (8,952 | ) | $ | (11,060 | ) |
|                                                                   |                                     |   |   |   |   |   |
| Net                  loss applicable to common stock                   | $                                        | (8,952 | ) | $ | (11,060 | ) |
|                                                                   |                                     |   |   |   |   |   |
| Basic                  and diluted net loss per common share           | $                                        | (0.76 | ) | $ | (0.98 | ) |
|                                                                   |                                     |   |   |   |   |   |
| Basic                  and diluted weighted average shares outstanding |                                     | 11,825 |   |   | 11,331 |   |

**2**

**CADIZ        INC.**

**CONSOLIDATED        BALANCE SHEETS        (UNAUDITED)**

|                                                                                                                                                                                  |                                   |                                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------|---------------------------------------|
|                                                                                                                                                                                  | ** September                30,** | **December                31,**  |
| ***($                in thousands)***                                                                                                                                                 | **2007**                               | **2006**                              |
|                                                                                                                                                                                  |                                   |                                  |   |
| **ASSETS**                                                                                                                                                                            |                                   |                                  |   |
|                                                                                                                                                                                  |                                   |                                  |   |
| Current                assets:                                                                                                                                                        |                                   |                                  |   |
| Cash                and cash equivalents                                                                                                                                              | $                                      | 2,340                                 |   | $ | 10,397 |   |
| Marketable                securities                                                                                                                                                  |                                   | 8,775                                 |   |   | - |   |
| Accounts                receivable                                                                                                                                                    |                                   | 29                                    |   |   | 301 |   |
| Prepaid                expenses and other                                                                                                                                             |                                   | 308                                   |   |   | 243 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Total                current assets                                                                                                                                                   |                                   | 11,452                                |   |   | 10,941 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Property,                plant, equipment and water programs, net                                                                                                                     |                                   | 35,982                                |   |   | 35,190 |   |
| Goodwill                                                                                                                                                                              |                                   | 3,813                                 |   |   | 3,813 |   |
| Other                assets                                                                                                                                                           |                                   | 587                                   |   |   | 382 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Total                Assets                                                                                                                                                           | $                                      | 51,834                                |   | $ | 50,326 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                                         |                                   |                                  |   |   |   |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Current                liabilities:                                                                                                                                                   |                                   |                                  |   |   |   |   |
| Accounts                payable                                                                                                                                                       | $                                      | 524                                   |   | $ | 444 |   |
| Accrued                liabilities                                                                                                                                                    |                                   | 1,282                                 |   |   | 380 |   |
| Current                portion of long term debt                                                                                                                                      |                                   | 9                                     |   |   | 9 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Total                current liabilities                                                                                                                                              |                                   | 1,815                                 |   |   | 833 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Long-term                debt                                                                                                                                                         |                                   | 28,639                                |   |   | 25,881 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Total                Liabilities                                                                                                                                                      |                                   | 30,454                                |   |   | 26,714 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Commitments                and contingencies                                                                                                                                          |                                   |                                  |   |   |   |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Stockholders’                equity:                                                                                                                                            |                                   |                                  |   |   |   |   |
| Series                F convertible preferred stock - $.01 par value:                                                                                                                 |                                   |                                  |   |   |   |   |
| no                shares authorized and outstanding on September 30, 2007; 100,000                shares authorized, 1,000 issued and outstanding on December                31, 2006 |                                   | -                                     |   |   | - |   |
| Common              stock - $.01 par value:                                                                                                                                           |                                   |                                  |   |   |   |   |
| 70,000,000                shares authorized; shares issued and outstanding - 11,903,611 at                September                30, 2007 and 11,536,597 at December 31, 2006       |                                   | 119                                   |   |   | 116 |   |
| Additional                paid-in capital                                                                                                                                             |                                   | 251,923                               |   |   | 245,206 |   |
| Accumulated                deficit                                                                                                                                                    |                                   | (230,662                              | ) |   | (221,710 | ) |
| Total                stockholders’ equity                                                                                                                                       |                                   | 21,380                                |   |   | 23,612 |   |
|                                                                                                                                                                                  |                                   |                                  |   |   |   |   |
| Total                Liabilities and Stockholders’ equity                                                                                                                       | $                                      | 51,834                                |   | $ | 50,326 |   |

**3**

**CADIZ        INC.**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS        (UNAUDITED)**

|                                                                                                                                   |                                        |
|----------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------|
|                                                                                                                                   | **For                  the Nine Months**    |
|                                                                                                                                   | **Ended****September                  30,** |
| **($                  in thousands except per share data)**                                                                            | **2007**                                    |   | **2006** |
|                                                                                                                                   |                                        |   |   |   |
| Cash                  flows from operating activities:                                                                                 |                                        |   |   |   |
| Net                  lossAdjustments                  to reconcile net loss to                                                         | $                                           | (8,952 | ) | $ | (11,060 | ) |
| net                  cash used for operating activities:                                                                               |                                        |   |   |   |   |   |
| Depreciation                  and amortization                                                                                         |                                        | 197 |   |   | 117 |   |
| Amortization                  of debt discount & issuance costs                                                                    |                                        | 1,383 |   |   | 400 |   |
| Interest                  expense added to loan principal                                                                              |                                        | 1,427 |   |   | 1,251 |   |
| Loss                  on early extinguishment of debt                                                                                  |                                        | - |   |   | 868 |   |
| Change                  in value of derivative liability                                                                               |                                        | - |   |   | 2,919 |   |
| Compensation                  charge for stock awards and share optionsChanges                  in operating assets and liabilities:   |                                        | 1,549 |   |   | 1,826 |   |
| Decrease                  (increase) in accounts receivable                                                                            |                                        | 272 |   |   | 154 |   |
| Decrease                  (increase) in prepaid borrowing expense                                                                      |                                        | - |   |   | 522 |   |
| Decrease                  (increase) in prepaid expenses and other                                                                     |                                        | (65 | ) |   | (532 | ) |
| Decrease                  (increase) in other assets                                                                                   |                                        | (250 | ) |   | - |   |
| Increase                  (decrease) in accounts                  payable                                                              |                                        | 80 |   |   | (43 | ) |
| Increase                  (decrease) in accrued liabilities                                                                            |                                        | 902 |   |   | (64 | ) |
|  Net                  cash used for operating activities                                                                          |                                        |  (3,457 |  ) |   |  (3,642 |  ) |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Cash                  flows from investing activities:                                                                                 |                                        |   |   |   |   |   |
| Investment                  in marketable securities                                                                                   |                                        | (8,775 | ) |   |  - |   |
| Additions                  to property, plant and equipment                                                                            |                                        | (990 | ) |   | (20 | ) |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Net                  cash used by investing activities                                                                                 |                                        | (9,765 | ) |   | (20 | ) |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Cash                  flows from financing activities:                                                                                 |                                        |   |   |   |   |   |
| Proceeds                  from issuance of long-term debt                                                                              |                                        | - |   |   | 36,375 |   |
| Net                  proceeds from exercise of stock options                                                                           |                                        | 140 |   |   |  - |   |
| Net                  proceeds from exercise of warrants                                                                                |                                        | 5,031 |   |   | 1,050 |   |
| Debt                  issuance costs                                                                                                   |                                        | - |   |   | (409 | ) |
| Principal                  payments on long-term debt                                                                                  |                                        | (6 | ) |   | (26,644 | ) |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Net                  cash provided by financing activities                                                                             |                                        | 5,165 |   |   | 10,372 |   |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents                                                                  |                                        | (8,057 | ) |   | 6,710 |   |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Cash                  and cash equivalents, beginning of period                                                                        |                                        | 10,397 |   |   | 5,302 |   |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Cash                  and cash equivalents, end of period                                                                              | $                                           | 2,340 |   | $ | 12,012 |   |
|                                                                                                                                   |                                        |   |   |   |   |   |
| Supplemental                  disclosure of non-cash investment and financing activities                                               |                                        |   |   |   |   |   |
| Reclassification                  of loan conversion option fair value from liabilities to stockholder’s                  equity | $                                           | - |   | $ | 15,160 |   |

**4**

**CADIZ      INC.**

**CONSOLIDATED        STATEMENT OF STOCKHOLDERS' EQUITY        (UNAUDITED)**

| ***For                the Nine months ended September 30, 2007***       |
|-------------------------------------------------------------------------|
| ***($                in thousands)***                                   |
|                                                                    | **Additional** |   | **Total** |
|                                                                    | **Preferred                Stock** | **Common                Stock** | **Paid-in** | **Accumulated** | **Stockholders’** |
|                                                                    | **Shares** | **Amount** | **Shares** | **Amount** | **Capital** | **Deficit** | **Equity** |
|                                                                    |   |   |   |   |   |   |   |
| Balance                as of December 31, 2006                          | 1,000 |   | $ | - |   | 11,536,597  |   | $ | 116 |   | $ | 245,206 |   | $ | (221,710 | ) | $ | 23,612 |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Warrants                exercised                                 |  - |   |   |  - |   |  335,440  |  |   |  3 |   |   |  5,028 |   |   |  - |   |   |  5,031 |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                Awards and Options exercised                       | - |   |   | - |   | 14,285  |   |   | - |   |   | 140 |   |   | - |   |   | 140 |
|  Series                F preferred stock converted to common stock |   (1,000) |   |   |   - |   |   17,289  |   |   |   - |   |   |   - |   |   |   - |   |   |   - |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                compensation expense                               | - |   |   | - |   | -  |   |   | - |   |   | 1,549 |   |   | - |   |   | 1,549 |
| Net                loss                                                 | - |   |   | - |   | -  |   |   | - |   |   | - |   |   | (8,952) |   |   | (8,952) |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                as of September 30, 2007                    | - |   | $ | - |   | 11,903,611  |   | $ | 119 |   | $ | 251,923 |   | $ | (230,662) |   | $ | 21,380 |

**5**

**CADIZ      INC.**

**NOTES      TO THE CONSOLIDATED FINANCIAL      STATEMENTS**

**NOTE      1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES      **

***Description      of Business***

***Basis      of Presentation***

**6**

***Principles      of Consolidation***

***Marketable      Securities***

***Goodwill***

**7**

***Series      F Convertible Preferred Stock***

***Recent      Accounting Pronouncements***

**8**

**NOTE      2 - PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS**

|                                         | **September                30,** |    | **December                31,** |   |
|----------------------------------------------|----------------------------------|---------|---------------------------------|--------|
|                                         | **2007**                         |    | **2006**                        |   |
|                                         |                             |    |                            |   |
| Land                and land improvements    | $                                | 21,998  |                            | $      | 21,986 |   |
| Water                programs                |                             | 14,274  |                            |   | 14,274 |   |
| Buildings                                    |                             | 1,714   |                            |   | 1,191 |   |
| Machinery                and equipment       |                             | 1,100   |                            |   | 726 |   |
|                                         |                             | 39,086  |                            |   | 38,177 |   |
|                                         |                             |    |                            |   |   |   |
| Less                accumulated depreciation |                             | (3,104) |                            |   | (2,987) |   |
|                                         |                             |    |                            |   |   |   |
|                                         | $                                | 35,982  |                            | $      | 35,190 |   |

**NOTE      3 - LONG-TERM DEBT**

|                                                                                                                                                                                      | **September                30,** |     | **December                31,** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|----------|---------------------------------|
|                                                                                                                                                                                      | **2007**                         |     | **2006**                        |
|                                                                                                                                                                                      |                             |     |                            |
| Zero                coupon secured convertible term loan due June 29, 2011, with interest                accruing at 5% per annum until June 29, 2009 and at 6%                thereafter | $                                | 38,743   |                            | $ | 37,316 |
| Other                loans                                                                                                                                                                |                             | 25       |                            |   | 31 |
| Debt                Discount                                                                                                                                                              |                             | (10,120) |                            |   | (11,457) |
|                                                                                                                                                                                      |                             | 28,648   |                            |   | 25,890 |
|                                                                                                                                                                                      |                             |     |                            |   |   |
| Less                current portion                                                                                                                                                       |                             | 9        |                            |   | 9 |
|                                                                                                                                                                                      |                             |     |                            |   |   |
|                                                                                                                                                                                      | $                                | 28,639   |                            | $ | 25,881 |

**9**

**10**

|   | Loan                balance available for conversion: | $36.4                million |
|--------|-------------------------------------------------------|------------------------------|
|   | Expected                term:                         | 5                years       |
|   | Cadiz                common share price:              | $17.01                       |
|   | Volatility:                                           | 46%                          |
|   | Risk-free                Interest Rate:               | 5.18%                        |
|   | Change                in control probability:         | 10%                          |

**11**

**NOTE        4 - STOCK-BASED COMPENSATION PLANS AND WARRANTS**

***Stock      Options Issued under the 2003 and 2007 Management Equity Incentive      Plans***

***Stock      Awards to Directors, Officers, Consultants and      Employees***

**12**

| -   | A                150,000 share award that vests in three equal installments on January                1,                2008, January 1, 2009 and January 1,                2010. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | A                400,000 share award that is available if the trading price of the                Company’s stock is at least $28 per share for 10 trading days within any                period of 30 consecutive trading days on or before March 12, 2009.                This                award would vest in four equal installments on January 1, 2008, January                1,                2009, January 1, 2010 and January 1, 2011. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | A                400,000 share award that is available if the trading price of the                Company’s stock is at least $35 per share for 10 trading days within any                period of 30 consecutive trading days on or before March 12, 2009.                This                award would also vest in four equal installments on January 1, 2008,                January 1, 2009, January 1, 2010 and January 1,                2011. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Risk                  free interest rate         | 4.74%                      |
|--------|--------------------------------------------------|----------------------------|
|   | Current                  stock price             | $19.74                     |
|   | Expected                  volatility             | 38.0%                      |
|   | Expected                  dividend yield         | 0.0%                       |
|   | Weighted                  average vesting period | 2.0                  years |

**13**

***Stock      Purchase Warrants Issued to Non-Employees***

**NOTE      5 - INCOME TAXES**

**14**

**NOTE      6 - NET LOSS PER COMMON SHARE**

**NOTE      7 - SUBSEQUENT EVENT**

**15**

**16**

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

*In      connection with the "safe harbor" provisions of the Private Securities      Litigation Reform Act of 1995, the following discussion contains trend analysis      and other forward-looking statements. Forward-looking statements can be      identified by the use of words such as "intends", "anticipates", "believes",      "estimates", "projects", "forecasts", "expects", "plans" and "proposes".      Although we believe that the expectations reflected in these forward-looking      statements are based on reasonable assumptions, there are a number of risks      and      uncertainties that could cause actual results to differ materially from these      forward-looking statements. These include, among others, our ability to maximize      value from our Cadiz, California land and water resources; and our ability      to      obtain new financings as needed to meet our ongoing working capital needs.      See      additional discussion under the heading "Certain Trends and Uncertainties"      in      Item 7 of our Annual Report on Form 10-K for the year ended December 31,      2006.*

***Overview***

*Record      of Decision (“ROD”)*
*** ***

**17**

**18**

***Results      of Operations***

***Three      Months Ended September 30, 2007 Compared to Three Months Ended September 30,      2006***

**19**

***Revenues***

***General      and Administrative Expenses***
*** ***

***Depreciation      and Amortization***
*** ***

***Interest      Expense, net***
** **

|                                           | **Three                Months Ended** |
|------------------------------------------------|---------------------------------------|
|                                           | **September                30,**      |
|                                           | **2007**                              |   | **2006** |
|                                           |                                  |   |   |   |
| Interest                on outstanding debt    | $                                     | 490 |   | $ | 464 |
| Amortization                of financing costs |                                  | 16 |   |   | 13 |
| Amortization                of debt discount   |                                  | 471 |   |   | 373 |
| Interest                income                 |                                  | (159) |   |   | (148) |
|                                           |                                  |   |   |   |   |
|                                           | $                                     | 818 |   | $ | 702 |

**20**

***Change      in Fair Value of Derivative Liability***

***Income      Taxes***

***Nine      months Ended September 30, 2007 Compared to Nine months Ended September 30,      2006***

***Revenues***

***Cost      of Sales***

**21**

***General      and Administrative Expenses***
*** ***

***Depreciation      and Amortization***
*** ***

***Interest      Expense, net***
** **

|                                           | **Nine                Months Ended** |
|------------------------------------------------|--------------------------------------|
|                                           | **September                30,**     |
|                                           | **2007**                             |   | **2006** |
|                                           |                                 |   |   |   |
| Interest                on outstanding debt    | $                                    | 1,428 |   | $ | 1,510 |
| Amortization                of financing costs |                                 | 45 |   |   | 27 |
| Amortization                of debt discount   |                                 | 1,337 |   |   | 373 |
| Interest                income                 |                                 | (464) |   |   | (231) |
|                                           |                                 |   |   |   |   |
|                                           | $                                    | 2,346 |   | $ | 1,679 |

**22**

***Other      Income***

***Change      in Fair Value of Derivative Liability***

***Income      Taxes***

**LIQUIDITY      AND CAPITAL RESOURCES **

***Current      Financing Arrangements***

**23**

| ·   | the                repayment in full of our senior secured term loan with ING; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | a                final maturity date of June 29,                2011; |
|--------------------|-----------------------------------------------------------------------|

| ·   | a                zero coupon structure, which requires no cash interest payments prior                to                the final maturity date; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                5% interest rate for the first three (3) years, with a 6% interest                rate                thereafter. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

**24**

**Cash      Used for Operating Activities**

**Cash      Used for Investing activities**

**Cash      Provided by Financing Activities**

***Outlook***

***Short      Term Outlook.***

**Long      Term Outlook**
*.      *

**25**

***Recent      Accounting Pronouncements***

***Certain      Known Contractual Obligations***

|                                       |   | **Payments                Due by Period** |
|--------------------------------------------|--------|-------------------------------------------|
| **Contractual                Obligations** |   | **Total**                                 |   | **1                year or less** |   | **2-3                years** |   | **4-5                years** |   | **After                5 years** |
|                                       |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long                term debt obligations  |   | $                                         | 38,768 |   | $ | 9 |   | $ | 16 |   | $ | 38,743 |   | $ | - |
| Interest                Expense            |   |                                      | 9,004 |   |   | 1 |   |   | 1 |   |   | 9,002 |   |   | - |
| Operating                leases            |   |                                      | 887 |   |   | 177 |   |   | 348 |   |   | 362 |   |   | - |
|                                       |   | $                                         | 48,659 |   | $ | 187 |   | $ | 365 |   | $ | 48,107 |   | $ | - |
|                                       |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |

**26**

**ITEM      3.**
**Quantitative      and Qualitative Disclosures about Market Risk**

**ITEM      4.**
**Controls      and Procedures**

**Disclosure      Controls and Procedures**

**Changes      in Internal Controls Over Financial Reporting **

**27**

**PART      II - OTHER INFORMATION**

**ITEM      1.**
**Legal      Proceedings**

**ITEM      1A.**
**Risk      Factors**

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

**ITEM      3.**
**Defaults      Upon Senior Securities**

**ITEM      4.**
**Submission      of Matter to a Vote of Security Holders**

**ITEM      5.**
**Other      Information**

**28**

**ITEM      6. **
**Exhibits      **

**29**

**SIGNATURE**

**Cadiz      Inc.**

**30**